We Must Create A Virtuous Positive Cycle: Kris Gopalakrishnan
Wealth creation leads to its accumulation and circulation within an economy. Domestic capital becomes important in this specific opportunity as it can trigger a cycle that creates sustainable and long-term growth, advises Infosys’ co-founder Kris Gopalakrishnan in a conversation with BW Businessworld’s Editor-in-chief, Annurag Batra. Edited Excerpts:
At present, domestic capital is lesser than 10 per cent of the overall available capital even in India even as more players come into the fray. How do you view this and how do you see this change in the future?
I am very optimistic about the medium to long-term vision for India. The country will develop to USD 5 trillion or USD 10 trillion, it is only a question of when. This will require new enterprises, especially large ones, to be created. They will start small, so we need a dynamic ecosystem for startups and entrepreneurship, all of which need investment.
Ideally, some of this must come from Indian entities so their ownership is Indian. When wealth is created from India’s growth story, it must accumulate in India so it can circulate in our economy and not somewhere else. The reason for domestic capital coming into this growth opportunity is that it creates a positive virtuous cycle -- the wealth comes to India, gets accumulated and invested back here.
We are working with bodies such as the Confederation of Indian Industries and the Indian Venture Capitalists Association to drive this message to entities, individuals, family offices, domestic funds and Indian businesses for them to invest in the ecosystem so that we can create large enterprises over time that will boost the Indian economy.
Some aspects are falling in place. For example, we have succeeded in creating an ecosystem for unicorns. It’s good to have 100 plus unicorns, created in the last six to seven years. Investors’ mindsets are slowly changing that Indian money must go into startups. We can see the transition and I am very glad that many family offices are considering investing 10-15 per cent of their monies into Indian startups.
For several reasons, including what you just mentioned, we have seen domestic capital in India grow multi-fold in the last five years. What can accelerate this?
It is a process. If you look at some of the people playing big in this, you will find it comprises founders who have had exits and encashed their equity to become angel investors, supporting startups. Till 2014, we did not have too many examples of first-generation entrepreneurs investing in technology or tech-led businesses in India. It was primarily family-owned enterprises, typically investing back in their businesses. But IT companies’ founders changed that, investing in other companies and startups. This was seen only in the last decade. This was the beginning of the positive cycle I mentioned but it is a very recent phenomenon.
From here, it will keep growing step by step. A few years ago, we would not be discussing Indian funds investing USD 20 to USD 50 million in a company. Now multiple funds are doing this. Now we must think about funds that can invest $100 million upwards. With experience and success, companies will have the confidence to do so.
We are taking time but we are moving in the right direction sustainably and carefully. It also helps that our Prime Minister has taken Startup India as his priority. When the support is visible from the top, it trickles down the conviction, leading to faster change.
Where will the domestic capital come from?
The money is there but it is locked up in family businesses, real estate and other investments. The wealth in India was never directed towards non-family businesses in the startup ecosystem. Today, India’s GDP is at USD 3 trillion but the wealth is estimated to be at least that much or more. My take is that 10-15 per cent of this money must go into creating new businesses. We have historical evidence to show that it augurs results.
In 1992, India was a USD 600 billion economy. In the last three decades, we have grown five-fold. Things are accelerating with multiple growth engines. Over the next decade or two, even if we grew three times, we would be at $10 trillion. I have seen this growth and hence I am confident about it. The need is to create a positive virtuous cycle to invest in India.
What can derail this?
In the short term, things can fluctuate due to mistakes such as backing the wrong companies or funds. There are also external factors at play but we need to continue to believe and move in the right direction. We need people with risk-taking abilities.
Therefore, education is part of the work we need to do so more informed decisions can be made and people are encouraged to invest. It is also important for larger family offices, businesses and industries to participate in this – everyone has a role to play. We should also do deep tech world-class research in India as that brings ideas to the table, creating our own IPs.
You have built a successful company, led it, and at present, you wear multiple hats including advisor to Chiratae Ventures but who are the other contemporaries in the space that you admire?
Everything in business and life will have good, average and not-so-good performers. I don’t want to judge anyone but I am happy many are joining and trying to grow this space.
