Indian startups need to mature if they want to the Indian economy to grow: G20 Sherpa Amitabh Kant
Important for startup founders to adhere to best practices in corporate governance at the grassroots level and not consider those as an afterthought: Kant
The comments come at a time when multiple Indian startups like Zilingo, GoMechanic and BharatPe have been in the news for corporate governance lapses
As more and more cases of corporate misgovernance are coming to light in the world’s third-largest startup ecosystem, G20 Sherpa and the erstwhile CEO of Niti Aayog Amitabh Kant called on Indian startups to build strategies to improve corporate governance and create new benchmarks not only for India but also for other G20 nations.
Speaking at a conference organised by TiE Mumbai, Kant said that it was important for startup founders to adhere to best practices in corporate governance and financial management at the grassroots level and not consider those as an afterthought.
“Indian startups are great innovators. However, they often ignore the importance of good governance and financial management as there is a general lack of awareness in the initial phases. For India to emerge bigger and stronger, maturing of Indian startups is mandatory,” the Indian bureaucrat said while addressing the representatives of more than 30 unicorns, including UpGrad, MakeMyTrip, PayTm, Mobikwik, Purplle, Blume Ventures, and Avendus Capital.
Chiming in, a senior partner at McKinsey, Vivek Pandit, said, “The country attracted over $250 Bn in private alternative investments over the past five years, a vital source of our FDI. However, to continue to attract investment capital, it is important the ecosystem internalises that no amount of success compensates for governance failures.”
The comments of the senior diplomat, Kant, have come at a time when the Indian startup ecosystem is plagued with poor corporate governance practices.
The fall of supply chain technology platform Zilingo is the latest example. The startup’s cofounder Ankiti Bose faced a lash over unexplained payments of about $10 Mn, and showing disparate revenue figures to investors and shareholders between 2020 and late 2021.
We also have the example of GoMechanic, which cheated its investors for ‘growth at all costs’ in the grab of admitting to financial irregularities
Further, the never-ending BharatPe vs Ashneer Grover saga is yet another example of what happens to the fate of a startup when management resorts to misgovernance.
Not just Kant, other government Ministers and functionaries have also flagged concerns around lax corporate governance norms followed by Indian startups. Last year, Minister of Commerce and Industry Piyush Goyal, too, had advised Indian startups to practise self-regulation to strengthen corporate governance standards.
While addressing the Global Unicorn Summit, Goyal recommended that the Indian startups should develop corporate governance standards on the basis of which financial auditors can scrutinise accounts and report any wrongdoings. He had also urged the Indian startup community to take the issue of corporate governance seriously.