Only topline important, not bottomline being propounded by VCs is like a Ponzi scheme: NR Narayana Murthy

Infosys co-founder NR Narayana Murthy

The theory that only the topline matters and not bottomline, which has been propounded by venture capitalists, is “completely wrong,” said Infosys founder NR  Narayana Murthy.

“In some way, in many cases, this also became a Ponzi scheme,” he said.

In response to a question on balancing the aspirations of startups to grow as quickly as possible versus keeping costs in check, Murthy held the investors responsible.

These comments come amid a string of corporate governance controversies plaguing well-funded startups such as GoMechanic, Zilingo, BharatPe and Trell.

Also Read | GoMechanic fraud: How chasing growth at all costs brought down a rising startup

Murthy gave the instance of a Series B founder who may sell some shares in Series C, but said it is the Series Z fellow who will be left holding the tin box.

“I am not at all a critic of the younger people, but older people like me. The mature VCs, Board of Directors, and advisors who have to be open and honest in saying things they are. That is the only way,” he said.

Speaking of solutions, he spoke about building a culture, and he says he learnt to conduct himself by observing his parents, teachers, and bosses in India and Paris, etc.

“I learnt so much by observing how they conduct themselves, and I also saw how people around them respected them,” he said. The second way to build a culture is elders in the environment advising youngsters.

"Frankly, I don't hold the young entrepreneurs responsible. I think VC’s who provide money for them, the various advisors they have, the board of directors, they have to tell them to accept deferred gratification, to realise that sacrifice in the short and medium term will indeed lead to much bigger returns in the long term. That's been the story of Infosys,” he said.

He was speaking at the Nasscom Technology and Leadership Forum in Mumbai.