Tech legend John Chambers says startups need to stop shying away from IPOs, for the good of the country

• Tech legend John Chambers, the former CEO of Cisco, who is now an investor and mentor to startup founders, recently helped inaugurate the Silicon Valley headquarters of Uniphore, an Indian AI startup that is expanding to the US.
• He sat down with Business Insider to discuss his views on the tech scene, including his strong belief that the US needs more startups that go public.
• "It is in the best interest of this country to dramatically increase the number of IPOs," Chambers told Business Insider. "We've got to probably triple the number of startups, we need to have more IPOs. I would like to see them be earlier."
• Chambers was also critical of many startups that he said have been too focused on growth while not paying enough attention on strategies for profitability.
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Tech legend John Chambers was back at center stage recently. It was a smaller, more modest venue in Silicon Valley, but one that highlighted his new passion: startups.

The former Cisco CEO was certainly excited about the startup whose new office he helped inaugurate.

"Watch this company - I think it has a chance to light the world on fire," the former Chambers said after cutting the ribbon at the brand new US headquarters of Uniphore, a small but fast-growing Indian startup which uses AI to help businesses manage customer relations.

One of Uniphore's main backers is JC2 Ventures, which Chambers founded after leaving Cisco. In fact, Chambers has been designated as Uniphore's chief guru, and mentor to the company's 34-year-old founder and CEO Umesh Sachdev.

An intense focus on startups

Four years after stepping down as CEO of the networking tech behemoth, the 70-year-old Chambers now directs his energies to startups like Uniphore, advising and financing them and often serving as a mentor to young founders like Sachdev. This focus is based largely on a what Chambers considers a pressing need: more startups. Specifically, more startups that eventually go public.

"It is in the best interest of this country to dramatically increase the number of IPOs," he told Business Insider at the Palo Alto event. "We've got to probably triple the number of startups, we need to have more IPOs. I would like to see them be earlier."

In Chambers' view, operating in the public markets makes a company stronger, which ultimately leads to more sustainable innovation and job creation.

His comments come at a time when startups, particularly private firms with billion-dollar valuations, have been under scrutiny, following the IPO flops of companies like Uber, Lyft and Peloton, and the aborted public offering of WeWork. Then there's the trend of startups with no clear plans of going public buoyed by seemingly endless rounds of VC funding.

Asked if he thinks startups are staying private too long, Chambers was quick to reply: "Absolutely."

Some experts argue that weak disclosure requirements for startups led to the recent IPO flops. But Chambers sees other causes as well and cites everything from "shareholder activists to short-term thinking in the financial markets."

A focus on profitability

Chambers said startups stay private to avoid the regulatory hassles of being a public company and what they see as "interference" that's not conducive for growing a business.

"Without that interference, we make our decisions for what's right, three and five years out, not this quarter," he said. "We take risks, and some of them will work and some will not."

Chambers did point out a problem that's been raised in the startup scene: a lack of focus on profitability.

"So many of the startups are focused on purely growth, and they really don't even have a plan to profitability, much less free cash flow," he said.

It's a point Chambers has stressed to startup founders and entrepreneurs, and one that Sachdev, the Uniphore founder, has taken seriously.

Founded in 2008, Uniphore has been growing rapidly in Asia and is now pushing to expand in Europe and the US While the startup is in hyper-growth mode, he said, his team is constantly thinking about their path to profitability.

"Profitability is a word that has gone out of fashion for a bit and it's about time it comes back," he told Business Insider. "The last few companies that have gone public in the US, barring couple of exceptions, haven't had that. … We are determined to to be free cash flow positive and profitable as we keep growing."

Chambers said a renewed emphasis on startup profitability will be critical especially amid signs that there could be another recession. It's important not just for the tech industry but also for the broader economy. That's because startups are also a major force in creating jobs, he said.

Chambers has had his share of downturns, having led Cisco through several bad economic periods, including the dot-com bust in the early 2000s and the financial crisis in 2008 about a decade ago.

"We forget that's been the longest economic run in our lifetime," he said. "These teams have never seen a recession. It's going to happen. And the recession is where most companies get wiped out."

What he's hoping for, he said, are more startups with "very clear profitability goals, free cash flow goals, as well as growth and nothing will wipe out."

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