Starting business is like getting married -- `Desh'

Starting business is like getting married -- `Desh'
ENS ECONOMIC BUREAU

MUMBAI, FEBRUARY 2: Why is starting a business similar to buying a house, getting married or having a child? Because, the odds are stacked against it. You need a strong conviction that it will work and it is this gut feeling that counts," Gururaj `Desh' Deshpande, founder, Sycamore Neworks. Apart from being a billionaire, serial entrepreneur and hi-tech wizard Desh Deshpande has a brilliant sense of humour. Using his trademark simplicity with a dash of humour, Desh explained the concept and importance of conviction in the new internet economy to a rapt audience at the Confederation of Indian Industry on Wednesday.

The market capitalisation (the total market value of shares) of Sycamore is now US $ 24.5 billion (Rs 1,06,820 crore). This is much higher than any Indian company - Wipro's market only recently touched the Rs one lakh crore mark.

"The way you get market capitalisation these days is not based on past performance but future possibilities. To base it on the P/E multiple or any other multiple isludicrous," he said. In the case of his own company, the Sycamore IPO was initially to be priced at $ 18. It was later revised to $ 38. When the got company listed it opened at a whopping $ 270, creating a record for the largest single-day dollar gain for a US IPO. "Maybe in the next five years there will be a way to evaluate these companies," he added.

According to Deshpande, conviction is the most important quality an internet age entrepreneur needs to possess. Conviction in the idea and faith that it will work. "Because things are moving so fast, you don't have time to gather data and proof to back it up." Sometime back, an aspiring entrepreneur approached Deshpande with an idea. He was looking for advice on whether the idea would work. Deshpande's answer was no. If the entrepreneur lacked faith in his own idea and needed reassurance from someone else, the answer was most certainly a 'no'. Deshpande may be mild mannered but his convictions are like reinforced concrete - unshakable. He quit Coral, thefirst company he founded, because he believed the direction his partner had set was incorrect.

Like many of his peers and his famous brother-in-law N R Narayana Murthy of Infosys, Deshpande is a strong believer in ethics. To him, even success is governed by ethics. "If you start a company and it fails because you haven't worked hard enough or because you weren't ethical, then you deserve to be punished. But if it fails because the market hadn't evolved and you made a wrong gamble, then even your competitor will hire you immediately," according to Deshpande.

His mantra for success has three prime ingredients one of which is, naturally, transparency. The decision-making process should be open and transparent to all employees right from the start and throughout. "The gamble (likely risks and rewards) should be clear." The other two ingredients for success are team and speed. Sycamore's start-up team was more or less the same as that of Cascade Communications, Deshpande's second company which he sold toAscend Communications for $ 3.7 billion. "It's team, team, team all the way," he replied when asked to prioritise the three ingredients for success.

In Deshpande's view, the entrepreneur urge is very similar to that of a small boy waiting to ride his new bicycle: can't wait to started. After selling Cascade, Deshpande planned to retire and spend time mentoring or coaching start-ups. But the entrepreneur bug had bitten him and he was restless. And that's how Sycamore was founded with two scientists from Massachusetts Institute of Technology.

He believes Sycamore is a sign of the times more than anything else. Just like oil and petrol in the industrial revolution, bandwidth will fuel the economy for the next 25 years. "It is hard to understand why the markets give a much higher valuation to Priceline.com than to British Airways. But it was a similar issue when the industrial revolution happened. People wondered why companies which made tractors should be valued higher than agriculture.

" Deshpande alsobelieves people are the key in the IT revolution and India will play an active role in it. "India didn't have a chance to participate in the industrial revolution. The IT revolution will be on a bigger scale and much faster."