Top VCs discussed how corporate governance issues are now playing out in Indian companies and looked into ways for early-stage VC firms to implement effective controls that encourage adherence to ethical business principles.
The world’s third-largest startup ecosystem is going through one of the worst funding winters, so India’s top venture capital (VC) firms gathered in startup hub Bengaluru earlier this week to engage in discussions covering a wide range of topics, from investment strategies to corporate governance lapses and the establishment of sustainable, long-term companies.
According to several people familiar with the situation, Sequoia Capital India, one of the nation’s most aggressive startup investors, organized a gathering on May 17 at its Bengaluru office in Indiranagar that included partners from well-known domestic early-stage VC firms like Accel, Lightspeed, Matrix Partners, Fireside Ventures, Blume Ventures, Prime Venture Partners, A91, Stellaris, and Orios Venture Partners, among others.
According to the persons, who asked to remain anonymous, the discussions started at around 5:30 in the evening and were followed by a fun dinner and drinks session. This gave partners from various VC companies a chance to network. Additionally present at the event was Shailendra Singh, managing director of Sequoia Capital India and Southeast Asia.
One of the aforementioned individuals commented, “It was a long overdue industry catchup and Sequoia just so happened to be the host.”
“It served as a place for partners to communicate and exchange knowledge. They also discussed the group’s priorities and ambitions. A lot of attention was also paid to AI (artificial intelligence) and SaaS (software-as-a-service), where partners talked about how to create international SaaS businesses that also offer profitable exits for venture capital firms,” the source continued.
It’s interesting to note that SoftBank Group Corp., one of India’s top late-stage investors, mentioned at its results presentation last week how much money it expects to stake on artificial intelligence and the technologies it would power.
According to the second person quoted above, partners at the gathering also discussed corporate governance issues pertaining to Indian startups and looked into ways for early-stage VC firms to implement practical controls that encourage adherence to ethical business practices.
“Subjects included whether and how long venture capitalists should serve on startup boards. The individual quoted directly above stated that best practices for audit committees were also being discussed.
When Moneycontrol contacted Sequoia Capital with specific questions, the company declined to comment.
The timing of the gathering of VCs to discuss issues like weak corporate governance and accounting procedures is critical, especially in light of the recent scrutiny of some Indian startups over claims of misconduct, accounting irregularities, and fraudulent behavior. Businesses including BharatPe, Trell, Zilingo, and GoMechanic have come under fire for allegedly engaging in dishonest or fraudulent behavior.
Additionally, the negotiations take place at a time when VCs have become incredibly cautious as a result of the deteriorating macroeconomic conditions. According to data from Tracxn Technologies, funding to India’s startup ecosystem, which is currently the third largest in the world, has decreased by more than 60% in 2023 to $10 billion thus far compared to the same period in 2022.
Some of the most aggressive VC investors in India have also been quite cautious with their investments. For instance, Sequoia Capital India has only taken part in 11 investments as of the first week of May, compared to 28 during the same period in 2022.
