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Venture capital firm Sequoia Capital on Tuesday said there is a need to focus on corporate governance in Indian startups to build world-class companies. In a startup event hosted by Microsoft, Sequoia Capital and Surge Managing Director Rajan Anandan, said Indian startups have the potential to create 100 million jobs.
Sequoia Capital's statement comes after cases of corporate governance issues in new-age startups like BharatPe and Zilingo. Sequoia is an investor in both companies.
Anandan said, "The last thing that has really come to light over the last 3-7 months is corporate governance. The Indian ecosystem is now entering a new phase. To build world-class companies, you have to have world-class corporate governance," as reported by PTI.
Further, Anandan added, "We've been very focused on helping our founders understand what it takes to put in place the processes, the systems, the discipline, to actually have a company that will evolve into a company that has world-class corporate governance."
Also, Anandan raised concerns about changing market growth dynamics with high inflation and interest rates going up, however, he also added that it is the time for balanced growth for startups and the Indian digital ecosystem.
According to Anandan, public market valuation has always driven private market valuations and as a result gets massive amounts of capital that came into the startup ecosystems around the world -- in the US, India, and even China.
Despite the challenges, startup funding in the Chinese ecosystem reached over $130 billion last year, Anandan pointed out. Meanwhile, startup funding in India climbed to about $10 billion and it soared to $40 billion in the United States in 2021.
Anandan also stated that the environment has changed because inflation is at an all-time high, and the interest rates are going up. Thereby, he expects the Fed to pull back, adding, "the US government will pull back a lot of the USD 7 trillion that went into the economy."
Amidst the current risk scenario, Anandan said startups need to grow and firms have become cautious about raising capital and their valuations.
In April, following the controversy revolving BharatPe, the American venture capital firm said that it has zero tolerance toward proven wrongdoing and will take tough calls where needed in the interest of doing what is right.
Sequoia in its blog dated April 17, added, "We want great companies to be built that are not just valuable but also enduring – and that can only happen if the values are right and the governance is strong. We think it’s time for us, as an ecosystem, to sign up for better governance. “What" has been achieved is now clear – we think it’s time to improve on the “how"."
Highlight its role as an investor representative, Sequoia stated in the blog that "one serves on the board, and boards can only work with the information shared with them – the less transparency there is to the board the lesser their ability to truly unearth errant behaviors. The board is there to govern and help make decisions in the best interest of the shareholders."