Points:
- Why did the Zoho CEO make this statement?
- Chinese companies focus on revenge but Indians companies don’t.
- Why founders aren’t interested in revenue.
- The approach Indian Startup must follow.
Why did the Zoho CEO make this statement?
He questioned the Indian startup system by tweeting on X: “The Indian startup system has the power to produce $100 billion tech companies in revenue, yet they are all spending time in auctions to get more valuation.”
Chinese companies focus on revenge but Indians companies don’t.
In his view, most Chinese companies in China have built their value by focusing on long-term vision and revenue generation. He believes India can achieve similar success by shifting its focus to building companies that generate real, sustainable revenue rather than being obsessed with stock prices and market speculation.
His concern is valid, as many Indian startups prioritise valuation over revenue or even have little to no focus on revenue despite having high valuations that often lack solid justification.
Vembu highlighted that an overemphasis on short-term stock price movements can distract companies from sustainable growth.
Instead, he recommended a balanced approach, combining innovation and disciplined cash management to ensure companies “pay the bills and keep the lights on.” Stock bubbles can shift the focus toward short-term valuation optimization, leading company management to obsess over increasing stock prices.
Why founders aren’t interested in revenue.
Indian founders today are increasingly focusing on valuation, akin to judging a book by its cover. While valuation determines a company’s perceived worth, some savvy founders use it to attract more investors rather than to drive revenue.
This focus can be risky, as valuation often represents a snapshot of what investors think a company is worth based on financial projections and market comparisons. However, it often overlooks qualitative factors such as mission, culture, customer relationships, and innovation.
The approach Indian founders must follow.
This focus on valuation impacts not only founders but also investors who have invested significant funds. Chasing higher valuations can lead to burning cash without true financial sustainability and engaging in behaviours that might not align with long-term success.
Founders should adopt an approach that not only attracts the right investors but also builds long-term success through revenue generation.
