Technology czar John Chambers, founder and chief executive of JC2 Ventures, which has invested in 16 startups around the world, says it’s important to remember that cashing out early is not an ‘Indian trend.’ His former company, Cisco Systems, had acquired 180 companies while Chambers was at its helm. In an email interview with
Shelley Singh, Chambers takes a close look at startups , in India and abroad, and the issues founders face. Edited excerpts.

ALL ABOUT THE EXIT
Sixty to 70% of all startups, whether in the US, Europe, India or another part of the world, have an exit strategy of being acquired by another company (that is, cashing out early), or by a private equity firm that takes the company to a different level.

That said, what is currently missing in India are the ‘acquirers,’ if you will, which are often large technology giants or big enterprise companies. As the startup market in India becomes more robust and the business-to-business market continues to develop, I think you will see this change.

To build on that, a big driver of this ‘cash out exit strategy’ is likely founders feeling that going public is not achievable. They are struggling to scale, cannot get access to capital they need, do not have candidates coming in with the right skills because technology is changing so quickly –the list goes on.

Yet, I truly believe startups and micromultinationals will be the drivers of growth and innovation in the digital age — using technology to challenge traditional business models — rather than the large Fortune 500 companies that exist today. In fact, I predict that 40% of those big players won’t even exist 10 years from now.

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GOING AWAY FROM GOING PUBLIC
India’s startup scene is still relatively new. The country only recently started ramping up its focus on startups and changes the government has implemented in terms of regulations, tax policies, et al, have been very positive. But these things simply take time. Consider, a single startup usually takes seven to 10 years before it is really positioned to grow headcount or even think about going for an initial public offering (IPO).

In general, the biggest challenge for startups — and not exclusive to India — is scaling. If you look at the US, far fewer startups are going public than even five years ago. And in France, there are only a handful of unicorns, even with its laser-focused efforts to foster and encourage entrepreneurship. We need to grow this (entrepreneurship) exponentially in countries because startups will drive job creation and economic growth in the future.

I’m doing this at JC2 Ventures, helping startups grow and scale – and I strongly believe India is becoming a model for the rest of the world. The government has focused on fostering startups and entrepreneurship. It has made policy changes easing scaling up for startups and put a renewed focus on helping citizens become fluent in the language of technology.

Easy venture capital money actually delays the startup on its growth journey. It’s a lot easier to scale without an IPO and worrying about all the regulations that come with going public too early. Growth and change of any kind take time and startups are no different from a large multinational, or even an entire country, going through change.

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A TREND NOT UNIQUE TO INDIA
From the time a company is founded, it typically takes about 10 years to even be able to consider an IPO. Exit strategies along the way are often focused on acquisitions or taking the company private with a private equity firm. The thing to keep in mind is that this is not unique to India.

Even in the US, home to the famed Silicon Valley, there is no entitlement. Startups take time to grow and scale (such as Uber, which was founded in 2009 and has only started plans to pursue an IPO in 2019).

In terms of the US economy, I’m extremely focused on the low number of IPOs and the huge implications that has for us. Only 182 companies went public in 2017, down from 706 in 1996. This year’s forecast is around 230 companies would go public, which is better than last year but not nearly high enough.

In reality, we need this to increase 3-4x in order to create the number of jobs we need in future. We need to put renewed focus on innovation and startups in the US, otherwise others will surpass us as the ‘startup nations.’

FOUNDER’S OUT, INVESTORS IN?
The simple answer is, no. It is the startup founders who provide creativity, ideas and take risks at every stage of a startup. All those things are fundamental to growth of a company and the larger startup ecosystem. PE/VCs are simply enablers of this growth, providing funding and management expertise as appropriate.

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As a VC myself, I enjoy working with young chief executives and mentoring them. I believe startups will not only drive jobs in the future, but that they are also the key to economic growth and innovation in the digital age. After decades of leading a global giant in the tech industry, I like being able to pick and choose what I do now and where I focus my time, energy and, frankly, money. Startups are like grandchildren – they soak up ideas like sponges and I like being able to help them think out the strategy of a new idea and getting them excited about it before they implement and execute.





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