Why shouldn’t investors quote Infosys as an example today?

It is not uncommon today to find some star investor in some conference quoting Infosys/ HotMail etc. as an example of one of those early companies in India, who never approached VCs and yet are one of the most successful companies in the world. Even more, the access to funds for them was a meagre possibility then (not sure if this is the case really but if they say so, it may hold so)

And then there are non-star investors who pick up these thoughts and talk about it in closed rooms as if they are their own.

Is it to really prepare Entrepreneurs not to expect money at all?
Especially when early stage investors quote such a statement, does it really make any sense?

While it is absolutely wise to understand what they say and important to gauge the depth of their talks. I especially get disappointed when the conversation leads on to the diplomatic front, hearing such examples of the past make this disappointment even worse. Rather than being diplomatic, tell these startup folks the reason they aren’t fundable and leave them to accept it or not. Let me share some of the thoughts which have emerged out of such experiences.

I’d like to share an analogy here. Let’s try understanding this:

There is a computer, an Operating System (OS) and then there are software applications. Put all of them together and you get to do something constructive (something of common use).

While OS(es) are dependent on the Hardware of the computer, Software applications are designed for specific Operating System(s).
Let’s consider Windows 32-bit as the example OS and Visual Studio 2005 as an example application. Try running this VS 2005 on 16-bit OS, Will the software work?

Chances are that it will not. Because it is not backward compatible. Does that mean the application isn’t potential enough?

No, it doesn’t. What it essentially means is that the application is designed with the current OS specifications in mind. So, how much sense does it make to say that the softwares of today should be backward compatible?

Btw onus is one the OS designers as well to keep it backward compatible with the hardware in use.

The backward compatibility indeed makes an application better and guarantees more usage use-cases. However, the effort required vis-a-vis the size of the use-case remains be the one question. The hardware is getting advanced, OS(es) are getting advanced, so does hold true for the applications.

Let us synonymies OS to the Investment scenario and the applications to the Entrepreneurial ventures.

This means that the entrepreneurial ventures wantedly or unwantedly adapt themselves to the Investment scenarios of today and not that of the past. It would thus be little unfair to talk about the backward compatibility. The time and effort cost today is much much higher than the past. And this cost is rocketing high with time.

There are situations which never existed before. Number of leaders have increased, number of programmers have increased, number of entrepreneurs have increased, number of ventures have increased, number of dreamers have increased, number of successes have increased, number of investors have increased and they are keeping to increase at a phenomenal rate, No Matter What.

Therefore, the life-cycle to roll out a product and it’s marketing is also decreasing phenomenally.

It took a decade for Infosys to see the billion dollar mark, while the chances to do it today exists in one-third of the time. How? Because of some obvious reasons:

Today it is obvious that there are more investor shops than earlier. It is obvious that more FDI is in place. It is obvious that there are more acquisitions possible today, It is obvious that there are big time deals possible today (read YouTube, Skype). It is obvious that more people today have more money. It is obvious that more successful entrepreneurs are wanting to bet their money on potential entrepreneurial ventures. It is obvious that the market size is much bigger than anyone has ever identified (even Google). It is obvious that more people spend more of their time on internet. It is obvious that people today have more disposable income than yesterday. It is obvious that mobile revolution is on it’s way. It is obvious that technology is being adapted at a faster pace. It is obvious that there is a pradigm shift from the enterprise softwares to the consumer products, it is obvious that chances to succeed today are better and will improve with time … etc. etc.

Then why is it not obvious for the entrepreneurs to expect more funding and to get it at the early stage of their startup?

Why is it not obvious for the Entrepreneurs to talk about it more casually and more freely?

If Entrepreneurs are the applications, they are most suited for the current OS i.e. the current Investment Scenario and investment scenario has drastically changed from the past then what is so wrong about asking for funding?

In essence, more than technology it is the game of eye-balls, therefore, the time to market has decreased, product lifecycles have decreased, scalability is an issue from the day one, talent is scarce, salaries are touching the skyline, competition is like never before, exit lifecycle too is decreasing. To overcome all these challenges, entrepreneurs need funds and be optimistic about it.

Conditions Apply i.e. the startup is prepared to consume these funds appropriately, efficiently and constructively.

Important
– Infosys/ Hotmail are taken just as an example. No offenses to anyone.

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4 responses to “Why shouldn’t investors quote Infosys as an example today?

  1. Nice post. To make things even more interesting, I feel that investors should not quote any company for that matter, simply because not all the businesses are the same! (Unless you copy every damn thing).

    I know quite a few entrepreneurs in the US, who didn’t take any investment for their first venture, but approached VCs for the second venture, despite having a successful exit from the first.

    But yeah having said that we know the current state of investments in India. So need to bear that for a while.

  2. Usually, it is okay to relate businesses with each other and in fact their are lots of similarities between many different businesses. Therefore, certain strategies, certain execution aspects will match a lot. IMO, no harm in that.

    The Point I’m trying to make is that finding the relevance between today and yesterday is little catchy. Though, there could be a relevance between things happening today because the weather and surroundings for are them are similar.

    By no means I meant to go against the wisdom that investors imbibe. Just that they too need freshness in the approaches.

  3. Rajeev J Sebastian

    There’s another reason why Infosys did not get startup funding … its because its not a startup.

    infosys is a consulting company. They make money out of advising people and doing some projects. VC and Angels are more interested in people like Routeguru than Infosys – because a fixed amount of work can translate to nothing, *or* a HUGE amount – thats the essential difference between a startup and a consulting company – the scale of marketing a product.

    (Think Gmail, or Wikipedia … )

  4. Thanks Rajeev. I understand that.

    MindTree however was a venture funded consulting company :). So I was coming from the perspective that perhaps the VC/ Angel money itself wasn’t available those times in India or may be extremely difficult to receive for the first generation entrepreneurs.

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