1Mby1M Virtual Accelerator Investor Forum: With Naren Gupta of Nexus Venture Partners (Part 3)

Sramana Mitra: What is your perspective of these global companies being started in various different places? India is just one of them. We are seeing companies coming out of Europe and Asia. There is a tendency or practice of them moving headquarters to Silicon Valley or somewhere in the US. What is your feeling about that? Is that something you require your companies to do? What’s your analysis?

Naren Gupta: The last few years, that has worked out well for companies. My belief in the long term is, that is going to be completely unnecessary. I think your headquarters will be in the cloud. Physical headquarters are going to become a thing of the past. Why do we move the headquarters to Silicon Valley?

The main reason is culture. The main reason is that cultural learning from here is absolutely remarkable. The good thing about Silicon Valley is not so much technology or even expertise. It’s a state of mind. Every company that I run into believes that they’re going to conquer the world. That kind of thinking is very hard to bring into Bangalore or Bangkok.

Sramana Mitra: At this point, it hasn’t gotten to that level yet.

Naren Gupta: I believe that every company should have its headquarters in the cloud. You are everywhere. You are where the customers want to you to be.

Sramana Mitra: We run a completely virtual company. Some of what I’m hearing from a lot of people who are making that choice is also talent. The talent to scale a company and get a really experienced VP of Marketing who has done this before is not as easy to find elsewhere.

Naren Gupta: That’s absolutely right. One often biggest issue is depth of talent. If you look at how the talent has come about in India or even in Europe, the technology talent is everywhere. The talent of building companies is not in other places. My point is you would need to, for a certain number of years, be in the Valley so you can build a sales and marketing organization, but the organization can still be in the cloud.

You will have a distributed workforce but can have sales and marketing based here. Development can be based in Bangalore. I absolutely agree with you. Silicon Valley is unparalleled in terms of depth of talent. Even in the short term, having the CEO move here is beneficial because they learn a lot. The state of mind is very difficult to replicate.

Sramana Mitra: The other thing that people are finding harder to access is capital. People can get the early stages of capital in some parts of the world. India now has a little bit of an early stage capital system. There is a bit of that in Europe. There is a bit of that just starting to develop in Latin America. Latin America is way behind.

Then when it comes to accessing the next round of funding, that’s when things start to get a bit murky. You look at what’s going on in this whole accelerator business, people are putting in $30,000 to $50,000 in all sorts of things. Some of it is rubbish. Obviously, they don’t raise the next round of financing. It’s a Series A crunch.

Naren Gupta: We, as investors, have a responsibility to make sure that what we are funding is in fact viable. The issue is that if I write a check for $100,000, or even $1 million, I lose my money when things don’t work out. Entrepreneurs lose two years of their life. That is something that we, as investors, should be taking very seriously. I can maybe get my million dollars back but the entrepreneur can’t get his two years of his life back.

The whole idea that you bring in a bunch of people and give them $50,000 is an irresponsible model. We have an obligation around that. On the point you raised earlier about raising future rounds of financing, India didn’t have any capital for product-oriented startups five or six years ago. Part of the reason why there are startups in India is that there is capital available. Google and Facebook have advanced development centers in India where people can leave those companies and start product-oriented startups.

The question is really future rounds of financing. I would say there is more awareness among late-stage funders that the whole entrepreneurship is global in nature. I get a call every week from some US fund who wants to invest in India in later stage companies. I think that people who see the future are aggressively investing into India, but the local capital to invest in later stages is not there. It’s the same situation in South America and Europe in many cases.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Naren Gupta of Nexus Venture Partners
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