What to do promoters in India fear the most. I think it is Dilution or the “D” word. It is obvious that if you can build a billion $ company and own 90% or even 30% of it then it is great. However, if you could build a billion $ company and own only10%. Would that appeal to Indian founders/promoters ?
My view is that founders/promoters should think big and to attract talent/capital be prepared to dilute. This is surely a controversial view and against most of the big successes we hear about in India.
What do people think? How many new billion $ market cap companies will emerge from startups in the next decade in India ? Of these what will be the average holding by founders/promoters when the market cap touches $1 billion ?
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Pontiflex,
A social networking play such as “Linked In” has a long gestation period and requires a lot of capital. A play like that in India could be angel funded if the entrepreneurs had done some boot strapping and had an idea about how they would attract serious capital from a VC and finally craft an exit.
Google attracted angel funding but the entrepreneurs had built a demo version which clearly demonstrated that they had some awesome search technology. The entrepreneurs/angels had no clue as to how they would monetize the user base. That came later but the thing that helped the entrepreneurs/angels was the timing ( dot com boom) and the availability of serious VC money if they reached the next stage.
In summary I think at the present stage of maturity in India it would be hard to get angel funding for such a venture because moving to the next stage and getting serious VC funding is tough.
Muthu, It is a wonderful dream that you have. I have been accused of thinking big but your numbers are staggering. 1000 companies, 18-30 months and 100% success. It seems utopian but I for one wish you great success in trying to make even one tenth of your dream a reality.100 companies, 10% success and 60-100 months.
On a more mundane note in my experience “greed”,”power” “recognition”etc. are powerful motivators and the noble notion of a selfless entrepreneur is rarer than a blue moon. My point in the initial post was that it may be a good idea for Indian entrepreneurs to think of getting a smaller share of a larger pie. .
An entrepreneur is satisfied more with the success of venture and not the share of market cap at the exit point.
Angel funding, VC funding have a common objective of a dynamic flow of capital that ensure success of a business model with the sharing of risk element.
I do have a dream that it is possible to cater at least 1000 early start up companies and guide them to become mature businessess within a period of 18-30 months with an average business size of more than a billion dollors per venture! I call this a trillion dollar dream.
It may sound odd. Technology, Capital, Management and Vision can enable that dream into a reality with 100% success rate. I sincerely believe. Where comes the question of an entrepreneur who shall measure one’s success by means of percentage of market cap at the time of exit.?
I do remember some data quoted in Saratoga venture tables for Silicon valley companies — the average for successful companies in silicon valley exited for $200 million (this is ’90s data i think), and the lead founder had 3% stake at exit (i.e. $6 million in value)…
Thanks Balaji. Noam’s blog followed by all the comments is indeed worth reading.
Cheers
Sanjay