When You Start with the Intention of Exiting, You're a Trader, Not an Entrepreneur: Vaitheeswaran K

I started in 1999 and finally had to shut down in 2012, so it was a 13-year entrepreneurial journey. There were many moments when I felt things were not working and wondered whether I should step away.

But every time I came back to the same conclusion. As a founder, I always believed I was the person best equipped to understand the ethos and DNA of the organisation I was building. If I stepped away too early and expected someone else to carry it forward with the same passion, it was unlikely to happen.

On the surface, it might seem that stepping away would do the organisation a favour. But in reality, leaving too early could jeopardise the company’s future, and I didn't want to take that risk.

I also have a saying: if you're an early-stage entrepreneur, out of 365 days, five days will be great and 360 days will be difficult. Entrepreneurship is, by definition, a hard life. You cannot sign up to be an entrepreneur and expect an easy life with little emotional investment. That cannot be a reason to quit.

Having said that, no founder can continue forever. There comes a time when a professional leader should take over. I simply felt we weren't ready for that stage.

There are many obvious differences. A founder is emotionally and passionately invested in the business, whereas a CEO is doing a professional job for which they are appropriately compensated. 

There is one fundamental difference. A founder imagines a future that does not yet exist. A professional CEO comes in once that future begins to take shape and scales it with greater stability and execution. 

A founder looks at a blank slate and imagines what the world could look like ten years later. A professional CEO builds systems and processes to make that vision much larger. 

The emotional difference is also significant. Founders make emotional decisions about staying, leaving and remaining committed because the company is deeply personal to them. Professionals make professional decisions.

It's an interesting situation. A founder starts a company, so logically he is the owner. When VCs invest, they acquire a share in return for their capital. However, VCs worry that once founders receive liquidity through secondary sales or other means, they may lose interest and leave. To prevent that, investors sometimes require founders to earn equity through vesting over four or five years.

The problem is that founders are not ordinary professionals. They are wired differently. Money is useful, but it is not what keeps entrepreneurs committed. You cannot retain a founder simply by offering Esops in the company they themselves created.

Sometimes founders lose interest because they feel they no longer own the company. Initially, they determine the purpose, make decisions independently and have significant influence.

As investors come in, ownership gets diluted, boards expand and founders may feel that their autonomy and influence have diminished. That loss of ownership and purpose can become a reason to leave. Money alone can never retain an entrepreneur.

One reason is the reduction in ownership, influence and sense of purpose. Another reason is that entrepreneurs are naturally excited by building something from scratch.

Once a company reaches a certain scale, the work becomes process-driven and focused on execution.

Not every entrepreneur enjoys or excels at that stage. In fact, that is often the right time for a professional CEO to step in.

The third reason is financial independence. Many founders now accumulate substantial wealth very early in their journey. Financial freedom gives people the ability to experiment with their careers and make choices they otherwise wouldn't.

Ironically, secondary share sales are often introduced to keep founders motivated by rewarding them for their efforts. But financial freedom can sometimes have the opposite effect. Once founders have enough money, they may decide to pursue something new.

I think the answer is yes because the amounts involved today are enormous. 

Fifteen years ago, first-generation entrepreneurs could never have imagined the kind of wealth that start-up founders can create today. Some are making hundreds of millions of dollars at very early stages. Even $20-30mn is life-changing money anywhere in the world. In India, that is generational wealth. 

When founders achieve that level of financial success, their original motivation may decline. I have spoken privately to entrepreneurs who have admitted as much.  

Initially, they wanted to build a company, succeed and create wealth. Once they have achieved all of that, they sometimes feel less committed and begin looking for something new.  

The glamour surrounding entrepreneurship also plays a role. There is so much media attention, recognition and celebration of start-up founders that we have reached a stage where people sometimes look down on those pursuing corporate careers and compare them unfavourably with entrepreneurs.  

As a result, many people now feel that working in a company is somehow inferior to starting one.

Today we think of groups like Tata, Birla and Reliance as large, established business houses. But when they started, they were start-ups too. 

What they all did was create institutions that left behind a lasting legacy. None of those institutions were built with the intention of making money quickly and exiting.  

Of course, the ecosystem was different then. There was no venture capital. It's easy to argue that they may have behaved differently had those opportunities existed, but we don't know that because it's only a theoretical argument. 

The reality is that they stayed and built institutions. Today, however, exits have become a normal part of start-up conversations.  

I mentor founders and one question I always ask is, 'Why are you building this? What are your long-term plans?' Many founders tell me that their goal is to build something, sell it and exit within ten years. 

When you start a company with the intention of exiting, you're not really an entrepreneur, you are a trader. That worries me. 

Entrepreneurs should ask themselves whether they can build something that creates a legacy and lasts for generations. Over the last two or three decades, India has mastered the art of launching start-ups. But we have not mastered the art of building institutions. 

The last first-generation start-up that truly became an enduring institution is Infosys. Six founders came together, built a company, listed it, created a culture and built an institution that has lasted for decades. 

That is what India now needs. We need entrepreneurs who are not just interested in creating start-ups but in creating institutions that endure and leave behind a lasting legacy. I don't see enough of that mindset today, and that is the real challenge for India's start-up ecosystem.

It depends on the stage of the start-up. But for early-stage and new-generation start-ups, I don't think founders have the bandwidth to do many things simultaneously. 

Entrepreneurship requires relentless focus. Activities such as angel investing, taking up board positions or pursuing multiple external roles can become significant distractions. 

If a founder has built a company to a stage where it has scaled meaningfully and is being run by a professional CEO and a strong management team, then the founder may take on roles such as angel investing or serving on boards. 

But unless the start-up is fully protected by professional leadership and management, I don't think founders should be doing anything else.  

In fact, they should be spending ‘25 hours a day' thinking about their start-up. In most cases, these additional roles become a major distraction.

Yes. Today, we celebrate the wrong things in the start-up ecosystem. We celebrate fundraising. We celebrate exits. What we don't celebrate enough is profitability, longevity and sustainability. 

A founder can raise billions of dollars, continue making losses and eventually sell the company, and we still celebrate that journey. We also celebrate early success. There's a popular saying that I completely agree with: there is no such thing as overnight success; overnight success takes at least ten years. 

Building a real organisation takes time. It takes around a decade to build an institution, achieve profitability and create sustainability. In fact, profitability alone is not enough. The more important question is whether the organisation is sustainable. 

A company can make small profits and still not be sustainable. A sustainable organisation is one where revenues and profits continue to grow steadily year after year. A business with flat revenues and flat profits may be profitable, but it is not truly sustainable. 

The question every entrepreneur should ask is: Am I building something sustainable? Am I creating an organisation that will continue to grow in revenues and profits every year, even if I am no longer around? 

When you build an organisation that can outlast its founder and continue growing consistently, that is real success. Everything else is secondary.