To startup in India.

I was contemplating today on my priorities and what I wanted out of life. The one thing that I realized is that, I want to make money 🙂 . A ton of money. Money that will blow my brains out kind 😀 .

I see two ways to achieve that end.

1. Gamble.

2. Buy dozens of lottery tickets.

3. Startup.

4. Work and save money for decades and then buy the Bentley and let your kid drive.

The first two are possibly quick, but extraordinarily risky. I personally favor the Startup option. And I’m absolutely not swayed by the glam factor of starting up. I’ve come close to starting up once and in the process of coming closer again. I cannot say I’ve risked it all, but I can say I’ve suffered the pain, trauma and torture. Oh, its tough tough work.

This chap explains the mathematics of it well. I’ll reproduce it here.


The spoils go to those that take risks — the ones who work at startups, very early on.
Microsoft is the most successful technology company of all time (though Google is hot on its heels). The first guy at Microsoft made about $50 billion (Bill Gates). The second guy (Paul Allen) made about $25 billion. Steve Ballmer who was one of the early few and joined in a leadership role made about $15 billion. If you were in the first 50 people and got 1/10th of 1% (common for a startup today) you made about $200M. So the first guy made $50B, the 50th guy made $200M. Guess how much the 1,000th employee made, probably about $20M. And the 10,000th employee maybe made $2M. This is in the most successful technology company of all time.

If you want to make some serious money and you join a really good company (where the numbers will be 1% of Microsoft’s) as the 10,000th employee or even the 1,000th employee you are not making the right decision – the math just doesn’t work in your favor. If you want to make some serious money you have to take some risk and join something early, at least among the first 50 employees. I’m not saying that every job you take should be at a startup, but if you never do it, it’s going to be hard to make serious money in the tech industry, unless you work for 20 years and climb to the top of a big company.

In the same post, he also gives his perspective of the Indian mentality of looking for security. Most people around me have a very similar attitude. Everybody is sincerely focussed on making a good resume to get into their dream company or dream university. I am not saying it is wrong, but the major reason for this attitude is because of plush pay and security attached with the job or the possibility of a plush pay after masters in a foreign university. I think few people want to join IBM or Schlumberger to innovate or do a masters because they love research work. They want security and a little money. Do I sound hypocritical because three paragraphs before I said I want a lot of money and now I’m bashing people who want security. I forgot to add, I also want to do something I’m truly passionate about. I do not want to live somebody else’s life, worse a life thrust on me by the society.

The startup scene frustrates me. College startup scene frustrates me even more. VCs in India are closing shop because they do not have quality startups to fund. This makes the job tough for the few good ones too. GigaOM says, there is more money than startups. Its a vicious circle. VCs do not fund, startups do not start.

Reasons for the sad state of startups in India.

#1 In India, where the per-capita income is low, it makes a lot of sense for VCs to focus on seed funding and startups which require low investments. They typically come in from the US and look for similar sized investments, they had back there. In terms of a couple of million USD. And look for a promised ROI of a few hundred million USD in a decade. That is just a lot of money in Indian terms. Why not deal in million INR. Makes so much more sense. Typically startups will require a seed fund of less than 100,000 USD in India, to run for a year.

#2A major factor why people do not startup is also because people just do not want to invest their own money in it, nor are relatives. I can’t expect any investment or commitment from my own parents :). Also people with ideas do not seemingly realize how bad the Indian VC scene is. I’ve met tons of highly experienced people wanting to startup, who think only with an idea, they can expect a VC to just put his money into it. In their naivety, armed with a business plan, off they march to networking dinners to pitch.

Ok, I was one of them. I’ve written a few business plans in the past with the hope of getting funded. I now write them with the hope of winning business plan competitions which will give me seed money for my startup and not to pitch to VCs.

#3People are always assuming, they are not qualified to startup. Yes, I agree most small businesses are as a result of somebody noticing the client being unhappy with his company’s service, so he start ups with a solution. But, there are a lot of businesses which do not require experience which can be gained only by working at another company. You just need an eye for problems. Worst is when they say, they do not have an MBA, so cannot run a business.

#4 Not enough role models. When you have such few entrepreneurs around, it’s difficult to see what success or failure brings. I think stories of people succeeding are more important than failure stories. Though I need to come across more failure stories, because I am way too optimistic for my own good. 🙂

These are some points which are starkly obvious to me. If these points could be changed, lots of things would become easier for budding entrepreneurs here.

James Hong of HotorNot has a great post on startingup.
While writing this post I also read Lightspeed ventures blog on Failure.

4 Responses to “To startup in India.”

  1. September 20, 2007 at 8:25 am

    I think insecurity is the main reason. You should have a few people who beleive in you and then a few more people who can invest with you and then those who keep supporting you. But then those people dont pre-exist. You have to win them on ur own.

  2. 2 keki
    September 20, 2007 at 12:23 pm

    hey nice post…

    but i am still not convinced there is a lot of money for a startup in India.unless you put in a lot of money or wait for a long time(again your son will drive the bentley!). i haven’t seen enough companies in India who started from nothing and made it big. Even infosys and fortune group had to wait for long period of time struggling to sustain it and it was long time after that they made the big buck.

    what say?

  3. September 20, 2007 at 11:43 pm

    @Maverick. True. The people around you matter a lot. The other point about getting a few people to invest in you is about growing your network. In India, its an open secret that VCs do not fund with out the venture being recommended by somebody they trust or value.

    @keki. Its true, there are few examples in India of companies making it big quickly. I can barely think of any companies shooting up in the recent decades, other than the IT powerhouses.

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