Death Of The Entrepreneur
Venkat eFarm
For those who think
entrepreneurship is
all Fame,Fortune and Ferrari's.. a grim reminder . Lalith
seth , owner of Raj
travels , one of
India's well known Travel and Tourism company, committed
suicide in a dramatic
way by jumping off the Mumbai's scenic Bandra-Worli Sealink
bridge. ( Zee news: http://bit.ly/PA6pZE,
IExpress : http://bit.ly/PA6JYu)
For someone who sold
'Dream Vacations for
Happy Customers to beaches and hills' , it is sad to see his
life ending in a
Nightmare with a jump into the Deep Ocean.
Though there is lot of
speculation
surrounding the reason for his sudden act , the 'debt' word is
definitely
floating around. Though financial crisis is not new to the
Mumbai , one might
expect to see shady loan sharks and d-company behind such things
... but the
'debtors/lenders/agents' chasing him , this time are different.
Prestigious banks, MNCs, legal firms ( ICICI, HDFC, TATA Finance
?) - the white
collar 'loan collectors' rears its head again . Now the HNI's
and Page-3's are
getting same treatment ( like last year ) what the
the rural poor did
from some MFIs.
Though the specifics of this case is not known, but there are
critical lesson
for entrepreneurs, investors and people alike ... especially in
this recession
era.
In the eagerness to 'Please the customer' , and 'Delight the
Shareholders and
Investors', often the entrepreneur is expected to sacrifice his/her own personal
happiness and well being,
taking undue risks and excesses. In business or life - when the
wind is good ,
the ships sails are set on full speed , but when the weather
gets
stormy and starts rocking the boat , the captain is blamed and
often
sinks with his ship !
It is easy to 'Blame it all' on the entrepreneur , and his poor
management
abilities and failed business ideas ... it is also important to
ask the
questions ---
The bankers and VCs are professionals who are expected to
perform due
diligence and invest based on sound knowledge and insights . if
the owners
were bluffing in their statements or pitching nonviable business
ideas, why did
such seasoned professionals make gross errors in judgement ?
Were they also
following the herd , bypassing sound analysis , and just wanting
to jump into
the boat - just not to miss the big party ?
Often , the signs of failure or mismanagement in business is not
a sudden
activity - the Board , Auditors, Investors and mentors are
supposed to
act like the guardians and gate keepers to warn and shout when
necessary before
things go too off hand. But strangely, after the classic 'Rajat
Gupta' case ,
'Satyam computers fraud' , 'Barclays bank libor scandal' even
the
'gatekeepers are not trust worthy any more .... Insiders often
can see and know
the 'cracks' long before it becomes a gaping hole ... but often
'Greed'
silences everyone .
The relationship between the entrepreneur and the investor is
that of the 'race
horse' and the 'gambler'. Though the horse&jockey is making
its best
attempt to win the jackpot, it is against all odds that every
horse will be the
first to finish-line .. in fact many may never make it to the
end . But at least
lets not start 'killing' the horses , or there will be no more
races !
It is time we do away with the 'Lehman era' legacies like '10x
, IPO exit
, exponential scaling' etc., and sit eye-to-eye and start
talking simple , old
school metrics like TRUST, HONESTY, DEPENDABILITY, ETHICS ...
and give a
deeper look at 'NEED' v/s 'GREED'.
Or we will see more entrepreneurs like this in the Press - Not
in 'Page 1' but
in 'Page 13' (Obituary) !
venkat efarm
Posting response received from Mr. PN Vasudevan , MD Equitas Microfinance
Hi, this is one way of looking at things … trying to pass on the blame to everyone other than the entrepreneur. Having seen many entrepreneurs from close quarters and having seen how they negotiate tooth and claw with investors over ‘valuations’ has left me feeling, very often, deeply disturbed at the extreme greed of the entrepreneurs. The 10X multiple that you are talking of, it is often the entrepreneur who seeks such outrageous valuations when the going is good, in the supreme belief and confidence that he is the best in the world and so he is entitled to demand such atrocious valuations. And having seen a few s uch deals in the markets, every entrepreneur thinks that he is the next facebook or google and demands the heavens.
While investors can be blamed to the extent that they refuse deals at high valuations, but who is the person pushing the high valuation in the first place? Do the investors really want to give high valuations when they make an investment? Never! The 5 year projections are given by the entrepreneur and based on that, the investor determines what is the likely exit price 5 years down the line and discounts it by his expected rate of return and offers an upfront valuation. If the entrepreneur is not too greedy and accepts this, then he is only committed to deliver his original projections. However often, the entrepreneur demands a much higher entry valuation. The investor then says that if he has to invest at such a high valuation, then the exit valuation needs to be higher which means the projections need to be higher and the entrepreneur changes his original projection to reflect a higher scale. Once the investor invests on this changed projection, he naturally would like to hold the entrepreneur responsible to deliver this changed projection and if that change was done, more from getting high entry valuation than real on the ground confidence in delivering it, then the entrepreneur after sometime, would find himself in a tight corner and end up in the Arabic Sea.
So who is to blame? Sure, we can keep saying that when the entrepreneur demands high entry valuation and gives projections beyond reasonableness, the investor should caution the entrepreneur against such projections. But is the entrepreneur a kid? Is he a child to be protected against his own greed and aspirations? Are they not expected to be mature enough to know what they are committing to?
I am an entrepreneur myself and I have no pity for such ‘greedy’ and slothful entrepreneurs who are avaricious in their greed and incompetent to execute their over ambitious projects properly. While we can go around blaming the investors, bankers, lenders, governments, regulators, public, press, friends and relatives for piling pressure on the ‘poor’ entrepreneur, the real key issue lies with the ‘poor’ entrepreneur. For every one entrepreneur ending up in Arabic Sea, there are many entrepreneurs who have put out reasonable projections, been extremely fair and transparent to all the stakeholders involved, got reasonable valuations from their investors and who are leading very contented and satisfying entrepreneur lives and creating happiness and value for all the stakeholders involved. Let us learn to celebrate such entrepreneurs who display the old world characters of TRUST, HONESTY, DEPENDABILITY, ETHICS and through this, creating a sustainable happiness for one and all rather than be taken in by entrepreneurs who are greedy and whose needs are beyond the realm of understanding of normal people and who bring trouble to all including themselves.
Regards/vasu