Is there Room for Family Businesses in the Information Age?

Is there Room for Family Businesses in the Information Age?
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The last hundred years has been an age of success for family businesses, as entrepreneurs build up their business empires and then passed down their legacy to subsequent generations. As a result of this tradition, the automobile, engineering, food and beverage, and pharmaceutical industries have experienced phenomenal growth. Some family businesses in these sectors became internationally powerful brands as they adapted to an increasingly globalised world. While many of these brands retained family control through the generations, some chose to transfer ownership from the controlling family to professional managers. The reasons for the transfers were diverse as the families themselves; sometimes the transfer was voluntarily made, as in the case with Unilever, or due to scale and growth, as seen with Ford. Others like Walt Disney made their transfers through the evolution of the business, or because of pressure from the board of directors, which was the case with Boehringer.

Enter the Information Age

However, the kind of businesses that are being created in the 21st century are significantly different from the businesses founded it the farther past. We are now in an IT age – and the business environment and traditions are at stark contrast to those that preceded it.

Entrepreneurs are younger than in the past. They are generally better educated, qualified, and achieve success at a much faster pace. Their attachment to the company is often tenuous, and is exemplified by the way in which they are willing to sell the business in order to start all over again with another enterprise, another success. This new breed of entrepreneur is now referred to as the “serial entrepreneur”.

The sectors in which these “serial entrepreneurs” operate are a contrast to the old ways as well. There was a time when most of the global GDP derived from agriculture; with the advent of the Industrial Age, it shifted to manufacturing. Now, much of the world’s GDP comes from the services sector. Even in a developing country like India, the service sector accounts for more than 50%! Consequently, it is in the IT-driven service sector that we are able to witness the rise of “serial entrepreneurs” like never before.

Snapdeal is a company founded in 2010 by Wharton alumnus Kunal Bhatia, and Rohit Bahl of IIT Dehli. Snapdeal began as a daily deal site (not unlike Groupon), and ultimately became an online marketplace for products similar to FlipKart, which started a few years earlier. In 2014, Snapdeal began expanding into online education, and expects to achieve a turnover of $1 billion, merely five years after the creation of the company. Currently, they have crossed the $500 million mark, against the $750 million of Flipkart, another e-retailer founded by Sachin Bansal. San Jose-based E-Bay, the early pioneer of online auctions, has already purchased a 10% stake in Snapdeal in 2013. Snapdeal’s investors also include American firms such as Bessemer and Nexus Venture Partners, Intel Capital, and even Russian fund Ru-net. Currently, they have all entered into fresh discussions led by E-Bay in order to raise another $200 million in capital!

Down the road, don’t be surprised should you read that Snapdeal has been sold, as Bahl and Bansal undertake new enterprises with billions of dollars in profit from the sale of their company. After all, we are all familiar with WhatsApp’s $19 billon sale to Facebook, having been created just five years earlier by an entrepreneur Jan Kuom, who had been turned down for a job in Google and Facebook prior to starting the company.

In the Age of Information Technology, when the world is undergoing change faster than at any other time, the emphasis lies in innovation, coupled with rapid and successful implementation. We see entrepreneurs with a passion for their creative enterprises, but demonstrate a willingness to sell and move on in the span of a few short years. Where does the vision for future generations come in? Are any of these serial entrepreneurs looking to nurture their business past the initial growth phase? Is there room for family businesses to thrive in the IT service industry? These are the questions that will need answering as the global march towards the Information Age thrusts us far into the 21st century and beyond.