Zoho CEO Sridhar Vembu has questioned the possibility of creating $100 billion revenue-generating tech companies in India. According to Vembu, India requires many companies that generate over $100 billion in revenue to raise people’s living standards.
“Can we build $100 billion (revenue, not valuation!) tech companies from India?
India needs a lot of them if we have to lift our people up. China has such world champions in plenty now, and they grew up in the last 20 years,” Zoho CEO Sridhar Vembu wrote on X.
He emphasised the need to focus on revenue growth rather than valuation and said the companies should be able to balance both short-term and long-term goals.
“I will tell you what won’t get us there. What won’t get us there is endless focus on valuation. What will take us there are visionary dreamers and builders who are in it for the long haul and are able to balance their long term vision while learning to pay the bills and keep the lights on short term,” Vembu said.
According to Vembu, a stock bubble often shifts a company’s focus to short-term valuation concerns. A stock bubble is a period when the price of a stock is determined by speculation rather than its own value.
“Stock bubbles actually distract us from the goal because the focus shifts to optimising the valuation short term – and company managements start to obsess about getting the stock price up,” the Zoho CEO said.
“An extremely loose funding environment also distracts us because we never learn the discipline of paying the bills,” he added.
Goodhart’s law
Vembu referred to Goodhart’s law and said that tech companies should focus on long-term valuation. According to Goodhart’s law, when a metric becomes a target, it becomes less effective as a measure.
“Valuation should be the long term outcome of a million things done right (along with a million other things that went wrong and taught us lessons along the way!) but when that valuation metric becomes the target, it becomes useless (Goodhart’s Law),” he said on X.
