Infosys founder N R Narayana Murthy on Thursday stressed that venture capital funds need to focus on profitability at start-ups as well, and warned that the focus on valuations is creating a "Ponzi" scheme.

Speaking at the annual  National Association of Software and Service Companies (NASSCOM) event here, Murthy said many start-ups are witnessing repeated rounds of funding at higher valuations, the last of the backers is "left with a tin box and added that blame for this does not lie with the young entrepreneurs at the helm.

"I would hold the VC (venture capital) who propounded the theory that what is important is only top-line (revenues) and not bottom-line (profits). I think that is completely wrong. In many cases, it became a Ponzi scheme," Murthy said.

The venture capital funds should instead settle for "deferred gratification" where they sacrifice in the short and medium term for long-term gains, Murthy said, adding that Infosys always practiced the same since its early days.

During a conversation with Kunal Bahl of the e-commerce company Snapdeal, Murthy said along with the "mature" venture capital funds, blame for such practices also lies with the board of directors of a start-up and also its advisors.

Meanwhile, Murthy said generative artificial intelligence (AI) platforms like ChatGPT will not impact human jobs, reminding that such concerns were expressed with the emergence of "programme generator" in 1977-78.

"This (ChatGPT) will not impact the coder. The human mind is the most flexible and can adapt very well," he said, adding that people will use the platform creatively and smartly for better purposes.

He said the current set of macroeconomic challenges is unlikely to impact demand for Indian IT companies because they bring in value for clients and past instances of stress have also demonstrated a rise in demand and revenues for such companies.

When asked about instances of IT companies delaying joining dates for freshers, Murthy said he cannot judge to make a comment without data but reminded that Infosys honoured all its commitments towards 1,500 freshers after the 2001 dot-com bust.

He said the top leaders opted to take deep pay cuts in order to honour all the commitments.

On the employability gap flagged by NASSCOM, where engineering graduates are found to be lacking necessary skills, Murthy said Infosys had identified this as a problem area way back in 1996 itself and invested in a facility that can train 30,000 people per annum in Mysuru.

A workplace needs to have a challenging work environment, a physical environment conducive to creativity, openness, meritocracy and justness to minimise the instances of staffers quitting, Murthy said.

Leadership which focuses on instilling optimism and leads by example is also necessary, Murthy said.

Companies also need to focus on protecting their core values and act swiftly the moment they notice a violation, he said.

He said entrepreneurs should quit the pursuit of a business idea only if they find a structural weakness in the business, recollecting that he himself folded up his first venture within months of starting it in 1976.