This is our 6th edition of the si100, top 100 high tech companies founded and managed by Indians in the U.S. Normally this is the time to celebrate the success of Indian entrepreneurs in the U.S. A couple of years ago, major business magazines in the U.S. were celebrating the success of Indian entrepreneurs in the U.S.—all those talks about Indian entrepreneurs’ association acting as a catalyst for funding. Only last week, the Wall Street Journal repeated a much quoted UC-Berkeley study: that as high as 25% of high tech concerns in Silicon Valley are managed by Indians or Chinese.

However, we at siliconindia have observed that the Indian founder of VC-funded firms are more likely to be removed from the CEO role in the name of bringing “professional management.” This is much more frequent than in the case of non-Indian founders. To get some real numbers, we looked at every company funded by VCs in the U.S. for 5 years (from 1998 to 2002). We only looked at U.S.-based companies—after they had received the first round of funding of at least $2 million and the Indian founder was CEO at the time of funding. We tracked the history of the company till it went out of business, was acquired or is still operating today. We expected some disparity in the Indian founder’s term as the CEO versus the non-Indian CEO, but what we found is amazing even to us. Indian founders who are CEO are about 4 times more likely to be replaced by someone else as compared to non-Indian founders who are CEO. This happens before the next round of funding, just before the company goes IPO or even in public companies. Even if the CEO is removed, he or she never ever admits it. The stated reason is always one of following: we wanted to bring professional management to take company to the next level, I wanted to spend more time with my family, or we are looking for better opportunities. I am sure in some cases one of the reasons is valid, but why are Indian entrepreneurs four times more likely to leave C.E.O. job than others?

Starting a company is like having a family. It’s a long commitment, you have passion for it, you are not in this only for money, you want to build a institution. You don’t leave your family to bring professional management to run it, or to find better opportunities. You only leave if you are forced to leave it. May be Indian entrepreneurs are over-qualified. Some of the biggest tech companies are being run by entrepreneurs who are college dropouts, I am yet to see an Indian college dropout get funding. Statistically, Indians have more education, have worked for more number of years, have gone up higher on the corporate ladder before starting companies—but they can’t be trusted to be CEO.

Companies are never run by single individuals, it’s always by a management team, board, and with advisors who help run the company. But the buck stops at the CEO’s desk. Imagine where would Microsoft, Oracle or Dell be if their founders—visionaries—did not stay as the CEO for such long innings. We always wonder where would Exodus have been if K.B. Chandrasekhar had remained CEO. At one time, Exodus had market cap of $22 billion, it created the majority of wealth creation that TiE used to boast; and K.B. inspired a legion of Indian entrepreneurs with his humble speeches heard by thousands of wannabe Indian entrepreneurs, “If I can do it, you can do it too”.

It’s even more disappointing that the advice being given to Indian entrepreneurs is always that “you should be open to someone else being the CEO.” Why? It’s a myth that you as an Indian can’t be a great CEO. Look at our public companies in the SI100. You don’t even need special training to be an entrepreneur or CEO—unlike what a number of our fellow wannabe entrepreneurs are led to believe in the Silicon Valley. We have to admit that there is still a bias against Indian entrepreneurs leading the companies they founded. You have to beware of it and fight it. When you think of a VC to fund your hot idea, look at their history with Indian entrepreneurs. How many could stay on as CEO and for how long? Past records of all angel investors and VCs speak for themselves.

siliconindia wishes you a belated happy Diwali and a happy new year.