The biggest killer for innovation is raising too much money: Ronnie Screwvala

At the Forbes India 30 Under 30 event, the entrepreneur and philanthropist spoke about building businesses for the long-term, and not for valuations

By Naini Thaker Forbes India Staff

Published: Oct 15, 2024 12:37:34 PM IST

Updated: Oct 15, 2024 12:44:28 PM IST

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Naini Thaker, assistant editor, Forbes India in conversation with Ronnie Screwvala, entrepreneur and philanthropist

Ronnie Screwvala learnt the importance of value creation very early. He started his first business with only Rs37,000. He came from a middle-class background and his father had a clear message for him: If you want to start something of your own, do it.

But if something goes wrong, we’re with you morally, but we can’t bail you out financially. “When you have no opening balance, it’s a different approach to life. It keeps you grounded for the rest of your life. And the more your feet are on the ground, the higher the chances of success,” he says.

Screwvala built UTV into a massive media conglomerate, which was eventually sold to global giant Walt Disney. Currently, he is the co-founder of edtech venture upGrad, and not-for-profit Swades Foundation. At the Forbes India 30 Under 30 event in Mumbai on October 4, Screwvala spoke to Forbes India about building for the long-term and more. Edited excerpts:

On not getting caught up in the numbers

Anyone who is building a business needs to remember that the money you have raised is not an asset, it’s actually a liability. It’s a great cash flow, and it is a positive, but at the end of the day, you have to give a return.

The biggest killer for innovation is raising too much money. What does it mean? Some investor told you about the four seasons, and stocking up for winter because nobody else is going to do that—that’s a complete disillusionment. It’s their agenda and how they want to run it.

Also, once you have raised funds, the first thing you want to do is spend and most of it then goes into what I would call low priority, low-pressure decisions. Suddenly you become a diversification king, instead of actually being a focus king.

When we were setting up upGrad, for the first five years, we didn’t raise any external funding. The beauty of that was that it allowed us to go completely with our vision. The minute you have investors, you are foxtrotting—since you need to be respectful of what they’ve come in for. In fact, some of the biggest failure stories today are not only about raising too much money, but also raising it from too many investors. It takes a mature founder to manage multiple investors.

On being passionate versus emotional

There's a small, but a huge difference between being emotional and being passionate about your business. I think we were much more passionate, but not as emotional. Emotional means you can't let it go, but being passionate means you would do whatever is right for the business. This difference comes over a certain period of time.

The sale to Walt Disney wasn't pre-planned. We had a great brand, a 100 times bigger brand than what we had created. They were investors with us, and one fine day they just popped the question. The other part to note is, if you are looking to sell your company to someone, you are going to get one-fourth the value. But if somebody finds you, you're going to get 10x the value. That's just the law of gravity. That's also the difference between value creation and ultra-value creation.

On assessing the health of a business

Valuation is a figment of five people's imagination in some form or the other, whether we like it or not. The problem is that three years back, India had 125 unicorns, and slowly that slowed down... thank God for that. I was clear that out of those 125 unicorns, not more than 25 will be unicorns three years later. I think we are one and a half years into that journey—and I think the statistics will hold out.

When you set yourself up for that, and then when you go into the real world, or a public market, you have to keep justifying that. Before that you did a lot of presentations and posturing, five people who had the money to disperse, valued you. You're building a serious business, and if you focus on that, you will get value.

So, there's no question about profitability. It can have a sense of timing. Service and new-age companies are bound to have higher losses in the beginning. There's nothing wrong with that, but as long as you know that you're not running a not-for-profit and you're not running a business based on five people who will judge you for your valuation, because you're at a high growth level.

If you can build those fundamentals, don't get stressed about valuation. I've had minus zero bank balances multiple number of times, but that's not the end... it's not the beginning, but it's also not the end.