Amitabh Kant, G20 Sherpa and former CEO of Niti Aayog, highlighted several points of concern plaguing the country’s startup community during his address on Monday at the Startup Mahakumbh event in Delhi.
Kant’s first point of concern was the necessity of corporate governance for long-term survival and prosperity of the country’s startup community. “I have seen startups growing, and have seen many of them collapsing as well. So my first point is that corporate governance is key in startups and the onus for this is on startups,” he said.
Explaining it further, Kant said, “Startups are innovators and risk-takers and as you grow and expand, you must ensure that there is proper financial management and a proper audit. Here, self-regulation is key. If there is no self-regulation, regulators will get in, the government will get it. He said to create a vibrant and creative Indian startup movement, there should be no government intervention.
He also pointed out that government regulations can stifle innovation. In his view, innovation will always be ahead of regulation. However, without corporate governance, regulators and the government will intervene, making this a critical reflection point for startups.
Highlighting India’s rise as a global economic force, the G20 Sherpa stressed on the importance of startups establishing benchmarks in corporate governance and financial management. By adhering to these best practices, startups can build trust, engage stakeholders, attract investors, and ultimately achieve sustainable growth. All startups must focus on audit, and have great mentors and a professional board, he said.
The second area of concern plaguing the startup community is ensuring orderly exits for venture capital, he said. “We must understand that VCs invest in startups to make money. Sometimes venture capitalists focus on quantity over quality, prioritising revenue or profitability. At times, they focus on funding unicorns that scale based on consumption, or they may prioritise excessively quick targets over sustainable growth and valuation at all costs, which can lead to mis-governance.”
As a solution, the former Niti Aayog CEO suggested that startups need to avoid headline-grabbing valuations. “There is no need for excessive valuation or branding,” he said, adding that if startups focus on good governance, long-term value creation will follow.
The country should also prioritise women-led development in startups and encourage the creation of VC funds led by women, said the G20 Sherpa.
Kant said the country’s startup ecosystem is heavily foreign-funded and that needs to change. “If you look at the total funding which is coming into the India startup movement, 75% of that funding is still coming from abroad … and therefore it’s time Life Insurance Corporation, insurance companies, the pension fund and individual family offices start putting their money into the Indian startup movement,” he added.
