Infosys Co-Founder NR Narayana Murthy said startup CEOs could be overestimating the market opportunity.

Speaking to CNBC-TV18's Shereen Bhan at the inaugural India Innovation Initiative in Bengaluru, Murthy said, “We in India have not done a good job of estimating the market size. We have traditionally, or by habit, overestimated the markets. In mid-90s many corporations came from outside assuming there were 200 million middle class Indians who are willing to buy and they found that it was not not the case. The same story has taken place even today.”

Murthy said that many CEOs are looking at initial public offerings (IPOs) as the next round of financing due to pressure from venture capitalists and other lenders.

“We probably do not have good market research companies that can give us an accurate estimate of the opportunities. Having an IPO brings on onerous responsibilities. There are so many people who would put faith in us and put in whatever little or meagre disposable income they have. Therefore it is very important for us to give them suitable returns. However, today, entrepreneurs are in a jam with pressure from venture capitalists and so are looking at IPO as the next round of financing. So invariably the costs go up but the revenues don’t go up and therefore they make losses and market capitalisation comes down.”

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First Published:Jun 3, 2022 5:53 PM IST