Businesses Need To Be Mindful of Social Impact Going Forward, Says This VC
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Businesses would need to be mindful of social and environmental impact going forward, says Sandeep Murthy, partner at venture capital firm Lightbox.
"Either consumption patterns will change, or the government will regulate certain industries in a way that will allow for the earth to be protected," Murthy says, citing the example of the water crisis in Chennai last year. According to Murthy, who started Lightbox five years ago, start-ups need to think about building models that solve social problems.
Before investing in a start-up, he begins with two questions: Is it a big space or is it a big product? It is also important that the problems they are solving are substantially differentiated, he says.
The firm needs to ensure that "they're not just running with a fad at a time".
Explaining the rationale, Murthy says, "When you think about it, when we invest, since we invest early, we're usually invested in these companies for about a 10-year period. So it's got to be something that we believe will last for the long run and it will have a proposition that can be sustained not just today, while it's hot."
"It’s better to be bought than to be sold," he says when asked if he would suggest entrepreneurs to think about an exit and get a quick return on investment or wait for them to build an everlasting business.
The exit question solves itself if one builds the right kind of business, according to Murthy.
"I think it's a bad idea as an entrepreneur on where am I going to deliver the exit. And when's it is going to happen. The right idea is to say, look, I'm building a business that's going last long, it's going to create value and continue to grow. Because no matter where the exit comes from, someone's going to buy it and someone's going to want to make sure that there's continued value to be built," Murthy adds.
A Pinch of Luck and Timing
Back in the 1990s, Murthy started a digital music company, which, according to him was Spotify twelve years too early.
"I think there's a lot about timing and the importance of getting the timing right when you look at things," he says, adding, "often, certain businesses which haven't worked in the past come back and work again later because dynamics have changed, the marketplace has changed."
Luck, too, is a necessary ingredient, he says. "There's an element of luck that needs to come in that we're thinking about a space at the same time as somebody else is coming up with an interesting idea, and serendipity kicks in and we're able to work together to do it."
Lessons from Entrepreneurs
Murthy says the most important lesson that he has learned from all of the entrepreneurs that Lightbox has worked with is tenacity and the ability to stay on.
He has seen entrepreneurs sticking out through the tough times, and their ability to find solutions when there seemed to be none serves as inspiration.
"I think that's the reason why any of us does this," he says, adding, "you're going to live through some very difficult issues and to come out of it, the upside and joy that you feel, there's nothing like this in the world."