A couple of Michael Douglas’s movies standout in my memory & they cover two very deadly sins. The first one was about greed, while the other one was extremely popular for covering basic needs of a human being. I ain’t much of a religious man but according to Roman Catholic theology, the seven deadly sins are: pride, greed, lust, envy, gluttony, wrath, and sloth. My two cents – greed shouldn’t belong to the list. The reason is fairly simple – the more wealth you have, better the quantity and quality of the things it brings. How could a desire for wealth, and thus the quality of life it brings, be harmful? How can that be wrong? The desire for wealth has been tightly coupled with that of “progress” and “growth”, something that led to the eras of scientific discovery and world exploration. If early man wasn’t greedy about a more comfortable life, we would still be living in the caves. If our freedom fighters weren’t greedy for independence, we would still be hoping for series win by Kohli’s men so as not to give more lagan 🙂 Thus, although legal and religious lip service against greed have been in effect for millennia, the fact remains that deep down people believe “greed is good”. But not all greed is created equal, and it cuts both ways. Being greedy is different than being manipulative, vain and arrogant. There is good greed and then there is bad greed. Bad greed is all about fraud, illegal or immoral activities which we certainly abhor. Founders being greedy & doing the wrong things (a topic we covered in our last article). Or being overtly focused on keeping the pie to themselves rather than increasing the size of the pie. Such people have taken their eyes off the big prize by thinking small. Investors being greedy and trying to squeeze every bit from a founder rather than supporting them etc. are examples of bad greed. But done the right way, Greed is not only good for your own life but even for people around you. By elevating your life, you can radically elevate your family’s life, your community, your country and yes, even the world. But I am surprised to see our moral dilemma even about good greed. Is it about socialist leanings, is it about our middle-class upbringing? Money is one of those taboo topics in society that we don’t like to talk about. We’ll admire athletes and celebrities and envy them for the money they have, yet we get uncomfortable when the “M” word is brought up in our reference. Thankfully we are changing now, as a community, as a society, as a country. All this philosophical discussion about greed leads us to a very important point about the current investment climate and lays out the blueprint for our investors. It revolves around two things – Get in & Get out. Ok, so what do we mean by that? One, get into this startup ecosystem. Technology innovation is a Gold rush of our time. 5th Era is on us. A perfect storm of black swans is coming; There is NO returning back to the past normal. And this transition phase & arrival of fifth era represents the greatest wealth creation opportunities that the world has ever seen. And this wealth creation is being capitalized early, primarily by the entrepreneurs who are taking advantage of disruptive innovations and by the angels & venture capitalists who are backing them. You can’t afford to sit on the sidelines and not be engaged in this multi-generation wealth-creating, life-changing moment. Every industry is being transformed and wealth is shifting to new disruptive players and those who back them. Today’s most valuable companies are being built in the spirit of entrepreneurialism and technological innovation. And much of the value creation occurs before the companies go public, which means that most investors are not participating in this unprecedented wealth creation cycle. Correct that – Get in this game NOW! But ‘Buying right’ i.e. investing in the right opportunities using the right structures, is only half the story. You also need to focus on ‘Exiting well’ i.e. getting the money back at a good price and in a reasonable time frame. So the other part of this equation is to Get-Out. Startup funding is less about investment but more about exits. Organized angel investing is still quite new in India, we are still discovering the best practices but it is clear that you need a completely different template and model to make money compared to that of VCs. A focus on exits is healthy. Rotate the money. The profits investors make get ploughed back into the ecosystem to enrich it, to fund more budding entrepreneurs, thus kicking off a critical chain reaction which takes the entire ecosystem forward. Today, the optimum financial strategy for most technology entrepreneurs should be to raise money from angels and plan for an early exit to a large company in just a few years for $15-25 million. Downside of investing in larger deals is the long gestation period which delays the exit and increases the risk of failure. The payoffs for this strategy might not be as large as some of the earlier moon shots in the last few years of the 20th century, like Google, Skype or PayPal, but they come far more often—and with much less risk. It’s similar to a cricket team concentrating on hitting consistent singles and doubles rather than hoping for the big shots to put them in the win category. It’s old time ball playing— and investing—and it’s the complete opposite of the swing for the fences mentality that emerged over the past couple of decades. My premise is that startups and emerging companies should adopt this new, simple approach—start small, stay lean, raise only the funding you really need, grow the business judiciously and then execute an early exit. As India Accelerator, we have had a few exits ourselves. And we can
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BY: admin