I just returned from the eighth edition of the Future Investment Initiative, titled ‘Infinite Horizons: Investing Today, Shaping Tomorrow’, which took place in Riyadh. It’s an event I like to attend and speak at because it brings together some of the best minds from various fields, particularly the financial and tech sectors. As I listened to a discussion on Day One, a specific comment caught my attention. Jenny Johnson, CEO of Franklin Templeton Investments, said she expected several companies to be taken private to be able to make the necessary investments needed in AI without having to worry about short-term profitability, and she said she expected a lot of buyout activity around this theme. My mind went to the IPO markets in India.

You likely know how much the Indian public markets have been on a tear. Buoyed by significant liquidity from domestic retail investors and institutions, the markets have been hitting new highs. This has created tremendous momentum in the IPO markets, and this year is poised to hit new records for the number of fresh listings. Understandably, the conversations in every venture/PE-funded board room is about “taking advantage” of the public markets. And several companies are furiously preparing to catch the window.

All of this is well, except that no one warned us about the Buxton Index and we’ll be damned if we ignore it.

The Buxton Index of an entity, i.e. person or organization, is defined as the length of the period, measured in years, over which the entity makes its plans. It is named after Professor John Buxton and I learned about it on Shane Parrish’s podcast, in an episode featuring Patrick Collison of Stripe. It was made popular by computer scientist Edsger W Dijkstra in an essay titled The Strength of Academic Enterprise.

Here are examples to explain the concept: A politician in India may make decisions with a five-year view, assuming a full term in office; a fund manager considers the tenure of the fund and a family business owner plans for multiple decades or generations.

The importance of Buxton Index can be understood by the following lines from Dijkstra’s essay:

“The Buxton Index is an important concept because close co-operation between entities with very different Buxton Indices invariably fails and leads to moral complaints about the partner. The party with the smaller Buxton Index is accused of being superficial and short-sighted, while the party with the larger Buxton Index is accused of neglect of duty, of backing out of its responsibility, of freewheeling, etc.”

This brings me to an important topic: how to pick a partner. No, I am not talking about a life partner but I am talking about how you, as a founder or as a leader, can pick your investor or business partner. For this conversation, I am going to limit the discussion to how one thinks about choosing the right investor, particularly the important decision of whether to take the company public and onboard a different breed of public market investors.

At Peak XV, we’ve had the benefit of seeing more than a dozen IPOs in recent years, and hence, we have some observations about how the IPO process works and, more importantly, the trade-offs to consider when deciding to take a company public from a founder’s perspective. 

The most important change to get comfortable with is the notion of being measured on a quarterly basis versus what you, as a founder, may be used to as a private company. Your seed, venture or growth investor comes with a five- to seven-year timeframe (their Buxton Index is 5 to 7). You as a founder are building hopefully for several decades (Buxton Index >15). You already have a mismatch here to deal with, which hopefully you have been managing well so far to get to the privileged position of thinking about taking the next step in the journey toward the goal of becoming a publicly listed company. 

Now, with the public market investors, you have to become accountable on a quarterly basis and get measured every three months. While their Buxton Index, in theory, may be long because these funds have long cycles and some are open-ended and run for decades, the fact is that they are all measured on an annual basis and compensated mostly on an annual basis. This results in many of them having a substantially shorter focus and hence an overemphasis on quarterly results. This focus on quarterly results forces founders to start thinking differently about the decisions they make and drives more short-term thinking, which is stock price-focused (short-term results focus) versus making the right long-term decisions.

As a public company, one has to deal with being “valued” on an everyday basis, and I have often noticed how this drives the behavior of not just founders but also employees and affects their morale. Being private protects you from some of this pain; it gives you better control over your destiny by making you less susceptible to the volatility of investor behavior.

Speaking of investor behavior, the stock exchange regulator SEBI recently released a research paper detailing the behavior of different categories of shareholders post an IPO—retail investors, institutional buyers, banks etc. The TL;DR is that, as a founder, you should be willing to sign up with much shorter term investors (some are really traders, given how short they invest for!). Retail investors sell 63% of their IPO allocation within the first week and >80% by the end of one year and qualified institutional buyers (QIBs) sell 57.7% of their IPO allocation within the first year. So much for “long-only” investors! To be fair, there is a very wide dispersion in the quality of investors, and you will, as a founder, need to do some real homework while allocating your shares at the IPO. 

Now, going back to Jenny Johnson’s comment, when something like AI, which is disrupting industries, needs to be invested in, having quarterly pressure will make it hard to do the right things needed to stay relevant in the long term. This is why it sounds logical that more companies may be taken private. 

As a private company today, you now have the choice to not “time the window” and instead to pick the right partners for the next leg of the journey. Going public may look attractive given today’s valuations in the markets, but it may not always be the right answer for your current stage of evolution, and it is a decision you want to take keeping the Buxton Index in mind!

While most of this discussion was in the context of picking the right investor with a reasonable match of Buxton Indices, you can use this concept for many different types of partnerships. The lesser the mismatch, the less the stress in the partnership—whether it’s when you are hiring your new key employee, picking a supplier, or even choosing your life partner! 

If you are a leader hiring for your company, understanding your potential employees’ Buxton Index could allow you to match people to the right roles. We hire young, very smart people as analysts, knowing fully well that they are likely to want to do an MBA in two to three years and their decision-making will be focused on that goal. But when we hire for the investment team, we look for people who are willing to give themselves a much longer time frame to prove their ability as investors as, in our business, results take very long to show. Matching the Buxton Index of people to roles improves the chances of an employee’s success in the organization.

On the personal side, understanding how your partner’s Buxton Index is influenced by their values, incentives, or life goals, you may be able to unlock the path to enduring partnerships with a higher chance of a strong, well-aligned relationship. Some people may be thinking in years while others think in decades, and that may make all the difference!

Recommended Reads

Three articles I found interesting: 

• Just when you think things like our blood groups have been figured out ages ago, this new finding solves a 50-year mystery, leading to the discovery of a new blood group. It’s amazing that we continue to learn so much about our own bodies. I’m excited for how AI will accelerate this process in the next few years!

• In The Trouble with Optionality, Mihir Desai critiques the concept of optionality—holding options without commitment—embraced by many career-driven graduates. He argues that endlessly acquiring options fosters risk aversion, delays true aspirations and leads to a life of unfulfilled dreams. Instead, he advocates pursuing “alpha,” or genuine fulfillment through focused, disciplined work aligned with one’s core values.

• The South African cricket team carried the label of ‘chokers’ because of several years of failing in high-stakes games, despite performing really well throughout the rest of the tournament. This article explains why some of us choke in high-pressure/high-reward scenarios. And it’s not unique to our species. Neuroscientists have found that “choking” under pressure in monkeys happens when high-reward scenarios decrease motor preparation activity in the brain, leading to underperformance. As rewards increase, neural readiness peaks, then wanes—a concept called the “neural-bias hypothesis.” 

If you have time for longer reads:

Don’t Sweat the Small Stuff by Richard Carlson 

This book is widely popular for good reason. In a series of super-short chapters, Richard Carlson encourages us to reflect on how we respond to things—bad news, disappointments, etc.—and points out how our reactions affect the quality of our lives. 

We often live our lives as if they were “one giant emergency,” which is why Carlson emphasizes the value of mindfulness and maintaining perspective—because many of the things we worry about are ultimately insignificant. As the author says, your life won’t be ‘perfect’ if you follow his practical tips for dealing with life’s troubles, but there will be a world of difference when you learn not to sweat the small stuff!

The Energy Advantage by Ricardo Sunderland 

I have been thinking about the concept of energy in the context of leadership for the last few years. In The Energy Advantage, Ricardo Sunderland addresses the idea of energy as a key resource that impacts our physical, emotional, and mental well-being. The author encourages readers to identify and address sources of energy drains in our lives—whether they are poor habits, stress, negative relationships, or unhealthy environments. Sutherland shares how successful leaders and companies can prioritize energy management to drive performance, productivity, and innovation. This is one of the top reads of this year and special thanks to Deepak Jayaraman for his podcast that led me to this book!

Do write in at gv@peakxv.com if my interests intersect with yours! Click here to read more articles on Peak XV’s blog. For more editions of Connecting the Dots, click here. I’m also on LinkedIn and Twitter.