Shomit Ghose, Partner at Onset Ventures, is also a veteran startup executive with multiple IPOs under his belt. During our conversation in 2018, he highlights the fact that 70,000 ventures received angel funding in 2014, but the number of companies receiving venture funding remains constant year over year at about 1,000 per year. Focusing on building value is of paramount importance, so that you can validate and prove your value proposition. You can listen to the podcast interview here and the roundtable recording here:
Sramana Mitra: Like you, I grew up in this Silicon Valley Kool-Aid drinking environment. I arrived here very young and jumped right into venture business and everybody had all these maxims like, “You have to quit your job. Otherwise, you’re not a serious entrepreneur.”
A lot of years have passed and, hopefully, I’ve gathered a bit of wisdom. This particular truism that you cannot start a significant company while you have a full-time job is a myth. Tell me what your thoughts are.
Shomit Ghose: I agree with that, but I have never seen any actual validation of it. There was an HBR piece about four months ago that statistically proved that you’re better off starting a company while you’re employed rather than just jumping all in.
When you go all in, you put yourself under a lot of stress. Maybe the quality of your decision-making suffers. As long as you’re not compromising your confidentiality and intellectual property agreement with your existing employer, there should be no trouble starting your next company while you’re still employed.
Sramana Mitra: At least in the technology industry, the trend clearly is that employers want to have, employ, and support entrepreneurial employees. If you’re actually tinkering with an idea, the chances of the employer supporting you in that endeavor is quite high. Don’t you agree?
Shomit Ghose: I agree completely because the employer knows that they’re better off having you innovate within the company and keeping those ideas inside the company. One of the things that larger companies lack today is that innovation.
Sramana Mitra: We are doing a lot of projects in the corporate incubation area with corporate partners to foster intrapreneurship development right now.
Shomit Ghose: Right. Even Facebook is acquiring WhatsApp. Even the fat startups that become successful are still being acquired from without because it’s not often sufficient to go from within. There’s so much creativity outside the company walls.
Sramana Mitra: If you try to do innovation inside the company, it’s ad hoc. Only recently have I seen definitive efforts inside companies to try to create processes that offer real structure to the innovation process. The most famous of these is the Google 20% flexible time which is a total failure.
Google has abandoned that because that is a complete unstructured structure. That has gone nowhere. I think there are a lot more interesting and a lot more structured innovation processes that are being experimented with.
Shomit Ghose: Exactly. There are an increased amount of investments being done by these large corporations. They realize that there is so much innovation going on and if they don’t get involved actively, they will find themselves left by the way side.
Sramana Mitra: As an extension of that theme, I want to follow-up with a question about another myth that Silicon Valley has propagated internationally. Nowadays, whatever Silicon Valley thinks, the whole world starts to think.
Some of it is dangerous because if South Africa starts thinking the same thing as Silicon Valley without any of the infrastructure that Silicon Valley has, you are bound to fail. One of these myths is go big or go home. I don’t think innovation happens this way.
Shomit Ghose: The companies that get successful by going big are the ones who get highlighted. WhatsApp is a good example. For the past two years, they lost $200 million and had been the recipient of over $60 million in financing. Then here they’re a $20 billion acquisition.
The fact of the matter is 99.99% of companies don’t have exits such as that. Maybe the analogy would be, there are people who’ve gotten rich by buying lottery tickets but that’s not an employment strategy. You’re much better off pursuing the fundamentals in building a business that is valued by customers and has repeatable sales model. That’s much better than chasing the sirens of going big.