In a recent Netcore Advisory Board meeting, one of the members remarked that Netcore had built a very interesting and different model – of profitable growth, without raising external capital. This needed to be talked about more, as an alternative to the “unicorn” growth model – where lots of capital is raised and burnt through quickly in the quest for rapid growth at all costs. As I was listening, a word came to my mind – “profi-corn”. I said it aloud, and everyone loved it. I spoke about this in a US visit earlier this year, and got a positive response – the word has a certain ring to it.
I defined a profi-corn as a company having four characteristics: profitable, private, promoter-funded and having a reasonable valuation (say, $100 million or more). Building a profi-corn means making a different set of choices than a venture-backed company. This is what I want to talk about in this series.
I have done two significant ventures in my life (IndiaWorld and Netcore), and in both I did not raise venture capital. Both were bootstrapped and became profitable early on, and so I was not desperate for raising external funds. Both have been profi-corns. In IndiaWorld, I got an exit which valued the company at $115 million in 1999.
Over time, I have come to realise that chasing valuation only gets you so far – if the focus is on building a profitable business with the right business model, one can survive through all ups and downs. It is not that I have never tried to raise venture capital or private equity – it is just that in all cases, I was in a position to quote my terms (which never got met). That did not slow me down. It just forced me to do the right things to ensure growth.
So, what does it take to build a profi-corn? Is it a binary choice between profits or growth, and between the short-term or long-term? Is it possible to ensure a balance? Why are profi-corns so rare?
Tomorrow: Building a Profi-corn (Part 2)
