There seems to be an uncanny lull in the Indian start-up valley. It has been some time since the loud celebrations of funding and dizzy valuations mellowed. Whispers about valuation versus profitability of Indian start-ups are more rampant than the excitement around young entrepreneurs and their innovations. Sadly, it just took half a season of a funding slowdown and a few controversies for such a drastic change of scene; now euphoria has made way for suspicion.
Was our celebration of the meteoric rise of start-ups and the heady successes of young billionaires premature? From creating jobs to developing into intergenerational companies, immense hope rides on Indian start-ups for the potential they hold. Maybe the ecosystem needed more maturity in handling the young innovative minds racing against time and each other towards birthing the mythical unicorn.
At the heart of intergenerational companies is sound corporate governance, without which institutions cannot be created. It cannot be left to the young founders to set pillars of good governance in place; for that you need a professional and independent board.
Remember the goings on at Apple in 1985? Even the most celebrated of them all, Steve Jobs, was asked to step aside by the tech company’s board as it sided with the CEO against the founder.
The young founder of an Indian start-up is faced with wide-ranging complexities, severe dilemmas and massive pressures of aspiration. Their vulnerabilities are exposed as they are placed atop a billion-dollar unicorn. They cannot be without checks and balances. While monitoring should never come in the path of agility or growth of the start-up, concentration of power in the hands of a few (founders or politicians) is as detrimental to nation building as it is to company building. Democracy is key to both, and, in a start-up, it can be brought about by an independent board. The role of investors is crucial in it. Every time a start-up implodes with evidence of financial irregularity, the buck cannot stop with the founder who cooked books. While founders are not innocent bystanders and should be punished, the action has to go beyond making examples of sacked entrepreneurs. Investors should insist on sounder rules and governance.
In the maddening path to higher valuations though pivots, stopping churn and revenue maximisation, all in unnaturally short timelines, talk of governance might sound farcical to both founders and early- and mid-stage investors. But if Sequoia has to build intergenerational companies with lasting leadership in India, it has to find ways. Otherwise, it is a reputational risk for both the sector and its key investor.
