IPOs are Not an Alternate Financing Route for Startups : Narayana Murthy

As they face pressure from venture investors to succeed as soon as possible, Startup Owners should not consider Initial Public Offers (IPOs) as another option for their next round of funding, according to NR. Founder of Infosys, Narayana Murthy

While speaking at an International Conference on Startups, he said, “IPOs have been taken as the surrogate for the next round of financing. It is not a good thing (for the ecosystem) as it comes with tremendous responsibility."

When Infosys went public in 1993, its co-founders were given the "onerous" task of providing reliable returns to stockholders, according to Murthy. Such commitments and ideals no longer exist, he claimed, and entrepreneurs are in a "bind" as a result of pressure from venture capitalists and early supporters who want to maximise profits or abandon the business.

He said, “Stock market is like a treadmill. Investors always expect the earnings or stock price to keep going up. Having an IPO is not fun. The billion-dollar net worth is all illusory. Think of the poorest retail investor before deciding on an IPO as you have the responsibility to redeem your pledge (by giving them returns)."