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Capital is not a substitute for revenue, believes TV Mohandas Pai, former CFO and Board Member of Infosys.

Speaking to YourStory on the sidelines of the third edition of India Global Innovation Connect (IGIC) in Bengaluru, Pai reflected on how startups must focus on developing effective revenue models, with the edtech sector hitting troubled waters.

“What startups can learn from the edtech sector is that you have got to create a revenue model. Capital is no substitute for revenue. It should be used to create technology building blocks.. but you’ve got to generate revenue. And to generate revenue, you need to find a use case. People have been substituting capital for revenue generation, and that is where we are not seeing great success,” said Pai. 

Pai, along with Rajnish Kumar, former Chairperson of State Bank of India, recently decided to not renew their contracts as advisory board members at edtech firm BYJU’S, with their tenure set to end in June. 

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Mohandas Pai, Rajnish Kumar to depart from BYJU’S’ advisory council

“At a time where capital was flowing in, with more and more people joining, with apps and everything else, we saw a huge amount of upsurge in the valuation everywhere else. But ultimately, it has to be cash flows and revenues. And that’s where I think there needs to be better development,” he spoke in a session titled ‘India’s unique innovation model: Getting to the next level’. 

Rajeev Banduni, Co-founder and CEO, OpenI Partners and Sanjeev Gupta, CEO, Karnataka Digital Economy Mission (KDEM) also participated in the discussion.

Meanwhile, amid the ongoing dispute between BYJU’S and its lenders, certain term holders and a term loan agent have filed petitions in Delaware Bankruptcy Court, seeking to initiate involuntary Chapter 11 bankruptcy proceedings against its subsidiaries Epic, Tynker, and Osmo.

The industry veteran believes human capital is India’s true strength. 

“Any innovation system has three main ingredients: human capital, physical capital, and financial capital. Now in terms of human capital, there are seven million people in technology working in India today, out of which 5.6 million are in the export industry for software, R&D labs, and many multiple areas. As you look forward, the largest flow of human capital is coming here [India],” Pai noted.

“Human capital is India’s true strength. If you look at the CEOs of global companies in technology, the largest number of CEOs who expanded to America are Indians. Indians make up the largest number of non-US-born founders of tech companies in America,” he added.

IGIC is an annual global summit hosted by the Karnataka Digital Economy Mission in collaboration with US-based strategic advisory firm Smadja & Smadja.