Amitabh Kant: Startups’ focus on growth and valuation at all cost leads to misgovernance

Indian startups must adhere to a self-regulating ecosystem to bring transparency and ethical behaviour in business, said G20 Sherpa and Former CEO of Niti Aayog Amitabh Kant at the Startup Mahakumbh, indicating the challenges around regulations and financial management being faced by leading Indian startups such as Byju’s and Paytm.

“Valuation at all costs causes lapses in governance. We should not have lapses… All startups must focus on audit and have great mentors with professional board,” said Kant.

He called for creating benchmarks in corporate governance and financial management as India aims to become a global economic powerhouse.

Speaking further on the importance of governance, Kant noted that while Indian startups have recorded a 20x jump in funding, almost 12x growth in the number of investors and an 8x increase in the number of incubators, there is a need to focus on exits for venture capital investors.

“We must ensure orderly exits for venture capital. VCs invest for making money in startups. Money will always be available for startups. There will never be a shortage of money for startups innovating.

Sometimes VCs focus on quantity over quality, funding unicorns and sometimes on quick exits. It is important to focus on growth but growth and valuation at all costs lead to misgovernance,” he added.

Referring to Byju’s roping in celebrities like Lionel Messi earlier for endorsements, Kant said startups need not focus on excessive branding. “Today’s startups are tomorrow’s great companies of India and for that, we need to avoid headline-grabbing valuations,” Kant said.

In order to reduce dependence on foreign funding for Indian startups and encourage more domestic funds, Kant highlighted the need for insurance companies, family offices, and pension funds to put money into startups.

“75 per cent of funding in Indian startups is coming from abroad. Hence, it is time for insurance companies, family offices, and pension funds to put money into the startup movement. They must step in a big way that will give huge innovation push.”

Kant also highlighted the need to push for women-led development in Indian startups along with the need for VC funds headed by women.

With respect to skilled manpower, Kant suggested course curriculum in Indian IITs and ITIs focusing on producing product developers and data scientists as “there is a disconnect between what IITs and ITIs teach and what startups require.”