Knowledge Partners

 Economic Laws Practice       Avalon Consulting

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October 31, 2004

"Indian founders in Silicon Valley do not last long as CEOs post VC funding": report

According to a report in siliconindia magazine, "Indians who have founded technology companies - in hardware, software, or innovative biotech - are in serious trouble, once they land some venture capital".

Based on a study of over 62 Indian-founded companies that raised venture capital funding during the one year period spanning June 2003 to June 2004, the magazine discovered that more than 80% no longer list the founder as the CEO. "The founder or founders have either gone on to become board members, playing no active role or simply awaiting the vesting period to expire; or have become Chief Technology Officers and vice presidents of engineering, product development or technologies. In some devastating incidents, the founders have left the company in an acrimonious ending," the report adds.

The main question that popped up in my mind when reading this is whether the percentage of founders of Indian origin being replaced as the CEO unusually higher compared to other companies that receive VC financing?

The siliconindia report insisits that it indeed the case.

It provides the following as "comparison facts" to make its case:

· Israeli founders tend to retain their CEO titles, coming in at a whopping 54% of Israeli-founded companies still being led by the founders.

· Chinese founded companies do not list highly in seeking venture funds, and almost 90% of the companies are still headed by the founders.

· American founders remain CEO or play a very active role in the company even if an American CEO replaces them.