The Indian Entrepreneur: Not CEO Material in the Valley!

By siliconindia staff writer   |   Friday, 29 October 2004, 07:00 Hrs
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SAN JOSE: The U.S. may be the land of opportunities. The Silicon Valley has been called the Valley of Victories for many—but not for Indians who have been playing the startup game. In a recent research, siliconindia reveals some startling facts about the venture game and CEO-upstaging by investors.

Indians who have founded technology companies—in hardware, software, or innovative biotech—are in serious trouble, once they land some venture capital. In a study of over 62 companies that have secured funds in various stages—seed, series A, B, and so on— in the period of June 2003 to June 2004, more than 80 percent do not list the founder as their CEO this current year. The founder or founders have either gone on to become board members, playing no active role or simply awaiting the vesting period to expire; or have become Chief Technology Officers and vice presidents of engineering, product development or technologies. In some devastating incidents, the founders have left the company in an acrimonious ending.

Leading the replacement trend are companies that have sought funds from flagship venture companies of the Valley—Sequoia Capital, Kleiner Perkins, Matrix Partners, and others. In the most recent of cases, Pankaj Manglik left Aruba Wireless, this despite a very strong vote for him as CEO from the investors when this magazine was featuring him on the cover. The list continues, including companies like Centrata, CXO Systems, Cast Iron Systems, Sarvega, Telesym, Encover, Oblix, and a host of others.

The research maps some interesting trends:
· CEOs with an MBA or who come with some product marketing experience tend to last out—startups like Fieldglass, Virsa Systems, and others have managed to retain the founders as their CEOs, numbering at a laughable 8%.
· The series B funding is the Gordian knot—most founders are levitated to glorious board positions or CTOs once this round is complete. Many Indian founders have failed to cut this knot successfully.
· The technology-in-place is another bridge to cross—founders need to show that they can sell their technology to customers, or face being replaced by a sale expert in the CEO chair.
· An overwhelming 95 percent show the new CEO to be a Caucasian American, who has been a product marketing lead at a public or private company. Rarely has an Indian with similar experience become a CEO, though companies like Zettacore have brought in an Indian to be the Chief executive recently.

In stark contrast, companies in the service business that have got some venture fund have been remarkably successful in retaining the Indian founder as the CEO. What does this portend for the Indian “techie” who aspires to develop that “hot” technology, and is seeking funds? “Beware the venture capital game,” says a startup veteran who wishes to remain anonymous. “Unless you have a pedigree of a successful IPO or a fabulous acquisition, don’t take your CEO position for granted. You will be in command only till your idea has become a usable technology—and then you are wholly dispensable. All those good things you read about managing a company—values, team spirit, relationships, and so on are just text-book statements. The investors will be interested only in ensuring that the technology sells a million licenses, and mapping their exit strategies. And yes, Indians are NOT favorites in the management cadre. We are considered good “techies,” and no more.”

Silicon India has also found some comparison facts:
· Israeli founders tend to retain their CEO titles, coming in at a whopping 54% of Israeli-founded companies still being led by the founders.
· Chinese founded companies do not list highly in seeking venture funds, and almost 90% of the companies are still headed by the founders.
· American founders remain CEO or play a very active role in the company even if an American CEO replaces them.

“It is our lack of peer networking and support from the community itself,” says Harvi Sachar, publisher of Silicon India, and a recent entrepreneur. “We frequently have seen pitches from PR firms who begin with, “Our client is a technology company, and it was founded by an Indian—now can we expect some coverage in your magazine?” Most times, the agency doesn’t even know what the magazine is about, and is blindly following the Indian founder’s suggestion. Whereas, if you notice mainstream media, the agency is only a paving force, and the CEO personally makes a pitch to the editorial. It shows our lack of maturity—as Indians, we tend to play down the importance of packaging ourselves as savvy, sophisticated business heads. How far is that going to get you?”

Silicon India has recently formed a CEO Forum, where it is inviting CEOs of Indian origin in the U.S. to informal networking sessions, where they could meet, share ideas and information, and play support roles to their businesses.

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