Too Much Money Early On A Curse For Companies, Says Nilekani On Startups

Infosys Co-founder and Chairman Nandan Nilekani on Wednesday advocated for frugality and management of expenses while speaking on the current scenario of startups in India. He said having too much money early on for companies was a curse. 

Speaking at an event commemorating four decades of Infosys, Nilekani lauded the ambition of present-day founders. He said that he admired their business understanding and strategic thinking but worried if they were building for the long haul.

With a lot startups having easy access to VC and angel investors’ capital in the last few years, the ecosystem had been extremely conducive for raising big rounds and burning hard to pursue growth at all costs. But the ‘funding winter’ has brought in a correction lately. 

Nilekani said he fails to understand how startups burn a lot of capital early on in their journey despite having access to the capital. “Once you lose respect for capital and frugality, the game is over,” he said.

A Tracxn report indicates that startup funding in India has dropped by 80 per cent year-on-year (YoY) in Q3 2022. The funding has also decreased significantly quarter-on-quarter (QoQ). In Q3 2022, Indian startups clocked USD 3 billion in funding, which is 57 per cent lower than Q2 2022.

In the month of September 2022, Indian startups received USD 752 million in funding down by 15 per cent as compared to August 2022 and down by 83 per cent compared to the same period last year.

Reflecting on Infosys’ 40-year journey, Nilekani wondered if the young founders today had the ‘stamina’ to conduct business in the long term. 

“What worries me is - do they want to build an institution? I think, the hard part is to build an institution,” Nilekani said.

He likened the process of building an organisation to running a marathon race and said all the Infosys founders are as optimistic and working hard as they were 40 years back.

Nilekani concluded addressing the topic of startups by saying that he was still very bullish on the startup ecosystem.

Also Read: Infosys To Be Led By A Non-Founder After Nilekani