My Proficorn Way (Part 73)

To Raise or Not

As I look back to my IndiaWorld journey a quarter century later, I realise that my inability to raise capital created my eventual success. Had I raised either startup or growth capital, I would have expanded too fast too quickly – which could have been fatal in those days because the market was just not large enough. What investors want is high growth – followed by the next capital raise. That becomes a treadmill. Angel funding followed by Series A, B, C and so on. With each new fund raise, the entrepreneur’s stake diminishes. I have seen cap tables where the original entrepreneurs have a stake so small that the business is in effect owned by the investors and the once-entrepreneur is nothing more than an employee with limited decision-making powers.

While raising external capital is right when the business absolutely needs funds for growth, my belief is that most tech businesses are asset-light and thus do not need too much capital. While it is fashionable to become an entrepreneur in college, it must be recognised that the norm for most ventures is failure and not success. All experience is good so the earlier one gets it the better. But what the entrepreneur must ask  is: how can I maximise my chance of success? Creating a venture that is bound to fail is not the best way. (Of course, there are exceptions to every rule. There are many stories of college dropouts who have built successful ventures. That does not make my point invalid – it is just that 99.99% startups fail and entrepreneurs need to keep this mind. The job of an entrepreneur is not to take risk – it is to go to work daily to reduce the risk of failure.)

Entrepreneurship is not something just for 20-somethings, even though those are the stories we tend to hear. Age is irrelevant; the idea and execution is what matters for eventual success. Age is no bar for an entrepreneur. Experience working in other startups or mature companies can deepen one’s understanding of how to build a successful business. Also, the additional time spent working can create a pool of surplus capital which the entrepreneur can use for funding a new venture. This is exactly what I did – the 2 years I spent working at NYNEX gave me the necessary experience and $30,000 savings (in 1992) which I could use to start my entrepreneurial journey in India.

I am probably in a minority when I say that entrepreneurs should delay raising capital as much as possible – and ideally not even raise it. I have done it twice – IndiaWorld and then Netcore. While not raising capital in IndiaWorld was a mix of some luck and pluck, in Netcore it was much more of a conscious decision. I have talked to many VCs and PEs through Netcore’s 23 years – my ability to fund and our profits always give me the advantage in such conversations. While we may have grown faster with external capital, it would not have been without costs – either in operating freedom or stupid expansion decisions which I could later regret. As I look back, I tell myself and my team – we chose the path less taken. Only time will prove whether we made the right call or not. But we can all sleep easier with the belief that our destiny is very firmly in our control.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.

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