Startups: To Be Or Not To Be
Just as the global pandemic ravaged our lives, digital transformation accelerated. This migration to the virtual world was spearheaded by startups with innovative approaches that elevated our lives. The Garden City has been at the epicenter of this revolution, harboring several unicorns in the making — Big Basket, Cred, Groww, Razorpay. You are not alone in feeling the FOMO (fear of missing out) on the wealth creation opportunities around us.
With over 50,000 startups, India has emerged as one of the most attractive venture capital investing destinations on the planet.In the first eight months of 2021, we witnessed 21 Indian startups become unicorns (US$1 billion+ valuations), and this number is projected to cross 100 by 2023, according to several venture capitalists.
It is great to be studying in the startup capital of India. Over the past three years, Bangalore has been home to the most startups in the nation, and these companies have received the largest amount of funding — more than US$17 billion during 2018–20 — compared to those from other Indian cities.
To be or not to be in the startup world, is the question that sets the young minds racing. One could be a pathtaker, choosing a stable pathway to economic mobility through corporate employment. On the other side, there are newfound wealth creation opportunities through startups. Although being far more opaque than public companies, startups are lucrative in their own way. But how does a fresh college graduate enter such an exclusive — and elusive — domain?
Joining a rising startup might seem formidable. Nonetheless, the seemingly easy way to obtain shares in a private company is to be a pathmaker — launching one’s own startup. Emulate Mark Zuckerberg or Elon Musk as you elevate everyday lives and guide your team towards a unicorn status! A word of caution, over 90% of founders flounder on their way to stardom — mostly within the first year.
The second and just as unrealistic as it may sound, being an ultra-high net worth individual may pave your way to shareholdings in private companies. Imagine being able to pour crores of rupees into a company in exchange for shares — a pipe dream for 99% of college students!
The third and smarter way to participate in the private markets is to be a pathbreaker — joining a startup as an early employee. Are you wondering how an employee gets shares in a company that has not yet been listed in the stock markets? Well, that’s the magic of startups — while they skimp on salaries, they can be generous on issuing stock options. Most employees are awarded a set number of shares on top of their paychecks, to compensate for the uncertainties and relatively low salaries.
The equity pool for non-founder employees is about 15% in most venture-funded startups. for a newfound unicorn, that is about Rs 1,000 crores (US$130 million) worth of shares distributed among a few thousand non-founder employees. Once these private shares are awarded, they are often stashed away until the company IPOs. Once your company is listed on the NSE, those shares will be worth 10 to 100 times more than they did when you first joined as an intern; So to sum up, if the company’s value goes sky high so would your net worth! Think of the wealth created by the first thousand employees of Byjus, as the value shot up to 150,000 crores!
As unicorns breed in our own backyard, it’s a great time to explore internship opportunities at rising startups. Take the moonshot — accelerate learning, career progression and wealth creation!
Acknowledgement: I learned about India’s startup ecosystem through my internship at Indigo Capital
By Milan Michael
Edited by Sahana Suraj
**This article is a special issue, written by a member outside Unfiltered.
