Governance scandals across India’s startup ecosystem have eroded investor and public trust, said Snapdeal and Titan Capital cofounder Kunal Bahl, urging startup founders to adopt financial discipline and oversight from day one.
“In a society where trust is already fragile, governance failures hurt the entire ecosystem,” Bahl said at the TiE Delhi NCR iDay. “There’s no excuse for it.”
His comments come in the wake of controversies involving Gensol Engineering and its sister concern BluSmart, Byju’s, BharatPe, GoMechanic, Groyyo, Mojocare, and Zilingo over the past 12–18 months—cases that have triggered heightened scrutiny of internal controls at startups.
Investor caution rising
The fallout has been significant. Investors are inserting stricter clauses in shareholder agreements and term sheets, resulting in longer timelines for deal closures, multiple top-tier founders and investors told ET. Venture capital firms are also engaging large consultancies to independently audit portfolio companies. Some auditors, according to industry sources, have presented findings of inflated revenue and financial irregularities in earlier startup audits.
Amid this environment, Bahl noted a shift in founder behaviour. “The silver lining of recent scams is that they’ve prompted early-stage founders to adopt governance practices sooner—even at the seed stage. Many now voluntarily bring in auditors early,” he said.
Titan Capital, he added, has implemented statutory quarterly audits in its own businesses from inception. “Governance builds confidence not just for investors, but also for employees, vendors, and customers,” he said.
Not just fraud, but discipline
While identifying governance risks at the outset is difficult, Bahl said Titan conducts background checks on founders, looking at how they exited previous roles and treated their teams. “It’s not just about fraud—it’s about whether they care about discipline and detail. If the moral compass is right and they’re willing to learn, we help coach them along the way,” he said.
A sector-wide reset
Bahl’s comments reflect a broader reckoning within India’s startup ecosystem. India’s G20 sherpa Amitabh Kant recently said that for startups to become successful companies, good governance—including proper audits and competent CFOs—is essential. Over the past year, several early- and mid-stage startups have started hiring CFOs in response to rising investor scrutiny.
In a sign of formalised reform, the Confederation of Indian Industry (CII) has launched a corporate governance charter tailored for startups, with guidelines based on company maturity.
Infosys cofounder and chairman Nandan Nilekani echoed the call, seeking governance as a “strategic imperative” for sustainable success. Citing that 70% of investor demands relate to governance, Nilekani said the responsibility spans boards, CXOs, and founders alike.
Cautious optimism for 2025
Despite governance headwinds and recent IPO disappointments—FirstCry and Ola Electric are both trading well below their issue price—investor confidence is not dormant. According to ETtech’s annual State of Startups survey, nearly 60% of top founders and investors expect a pickup in private funding in 2025, and over 70% foresee increased tech IPO activity.
But Bahl was clear: any revival hinges on whether founders internalise governance from the outset. “Governance starts from day one,” he said. “It’s a mindset.”
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His comments come in the wake of controversies involving Gensol Engineering and its sister concern BluSmart, Byju’s, BharatPe, GoMechanic, Groyyo, Mojocare, and Zilingo over the past 12–18 months—cases that have triggered heightened scrutiny of internal controls at startups.
Investor caution rising
The fallout has been significant. Investors are inserting stricter clauses in shareholder agreements and term sheets, resulting in longer timelines for deal closures, multiple top-tier founders and investors told ET. Venture capital firms are also engaging large consultancies to independently audit portfolio companies. Some auditors, according to industry sources, have presented findings of inflated revenue and financial irregularities in earlier startup audits.
Amid this environment, Bahl noted a shift in founder behaviour. “The silver lining of recent scams is that they’ve prompted early-stage founders to adopt governance practices sooner—even at the seed stage. Many now voluntarily bring in auditors early,” he said.
Titan Capital, he added, has implemented statutory quarterly audits in its own businesses from inception. “Governance builds confidence not just for investors, but also for employees, vendors, and customers,” he said.
Not just fraud, but discipline
While identifying governance risks at the outset is difficult, Bahl said Titan conducts background checks on founders, looking at how they exited previous roles and treated their teams. “It’s not just about fraud—it’s about whether they care about discipline and detail. If the moral compass is right and they’re willing to learn, we help coach them along the way,” he said.
A sector-wide reset
Bahl’s comments reflect a broader reckoning within India’s startup ecosystem. India’s G20 sherpa Amitabh Kant recently said that for startups to become successful companies, good governance—including proper audits and competent CFOs—is essential. Over the past year, several early- and mid-stage startups have started hiring CFOs in response to rising investor scrutiny.
In a sign of formalised reform, the Confederation of Indian Industry (CII) has launched a corporate governance charter tailored for startups, with guidelines based on company maturity.
Infosys cofounder and chairman Nandan Nilekani echoed the call, seeking governance as a “strategic imperative” for sustainable success. Citing that 70% of investor demands relate to governance, Nilekani said the responsibility spans boards, CXOs, and founders alike.
Cautious optimism for 2025
Despite governance headwinds and recent IPO disappointments—FirstCry and Ola Electric are both trading well below their issue price—investor confidence is not dormant. According to ETtech’s annual State of Startups survey, nearly 60% of top founders and investors expect a pickup in private funding in 2025, and over 70% foresee increased tech IPO activity.
But Bahl was clear: any revival hinges on whether founders internalise governance from the outset. “Governance starts from day one,” he said. “It’s a mindset.”
Also Read: ETtech Explainer: why startup unicorns, other large unlisted companies may come under tighter scrutiny
