Corporate Misgovernance? Info Edge’s Bikhchandani On Why Honesty Is The Best Policy For Startups

At a time when the fraud at GoMechanic and other issues and allegations at startups like Trell and BharatPe have hurt investor sentiment, Info Edge founder and chairman Sanjeev Bikhchandani has highlighted the importance of corporate governance and said that creating trust is a necessity for any startup to succeed.

“For any entrepreneur to succeed, you have to be able to create trust across the table with all your stakeholders. Honesty and ethical practices in business are important for long-term sustainability, making corporate governance really important,” Bikhchandani said at the 17th India Digital Summit, organised by the Internet and Mobile Association of India (IAMAI).

Apart from the fact that being honest is the right thing to do, Bikhchandani said that an entrepreneur cannot succeed by being dishonest.

The InfoEdge founder said that corporate governance begins and ends in a founder’s head. A “determined crooked founder” will find his way around all sorts of independent directors and auditors, he added.

“We have seen that happen in the past, both in private and public markets. And therefore, it’s important that the founder thinks this through and understands the importance of true and fair accounting, speaking the truth, giving bad news early, not disguising unit economics. Contribution margin 1, contribution margin 2, contribution margin 3 is all rubbish,” he stated.

The statement comes at a time when there has been a lot of debate, of late, about the use of ‘adjusted EBITDA’ and other such vanity metrics by startups such as Zomato, OYO, and Paytm.

Bikhchandani also deliberated on the importance of chasing profitability over growth for startups. According to him, customers’ money is better for startups than investors’ money, as it shows the value of the product. Getting enough customers also creates more chances to build a viable business.

Bikhchandani-led Info Edge operates companies such as online job portal Naukri, matrimony site Jeevansathi, proptech platform 99Acres, among others. Last October, it also invested nearly INR 135.4 Cr in Coding Ninjas to acquire a majority stake in the edtech startup.

Info Edge has been an early backer of many big names in the Indian startup world including Zomato and PolicyBazaar. Last year, Bikhchandani said that his company was not in a hurry to sell its stake in either of the two listed tech startups.

Info Edge’s consolidated net profit plummeted nearly 99% year-on-year (YoY) to INR 46.4 Cr in the quarter ended December 2022 as it wrote off its entire investment in 4B Networks, a venture of former Housing.com founder and CEO Rahul Yadav.