The recent events in fintech company BharatPe are a stark reminder of the underbelly of the start-up ecosystem. Amid the euphoria around big dollars coming into start-ups in India and, consequently, valuations going through the roof, it should not be lost on regulators as well as investors that corporate governance remains sacrosanct. The BharatPe saga, which began with Co-Founder and Managing Director Ashneer Grover entering into an ugly spat with a Kotak Wealth executive over the latter’s inability to make available Rs 500 crore for applying in an initial public offering (IPO) of a company has now become an issue of corporate governance.
All kinds of allegations—including that of fraud and favouritism in recruitment—are flying thick and fast. While Grover has been sent on voluntary leave after an audio clip of him and his wife abusing a Kotak Wealth executive went viral, there are reports that the co-founder may be in for bigger trouble and even face termination along with a few others. While the firm has maintained that no one has been sacked till now, it looks like there could be many heads rolling in the company. Whatever the fate of the BharatPe MD, one thing is clear: not everything is kosher as far as corporate governance in start-ups is concerned.
There have been stories of blackmailing, betrayal, frauds and fund diversions in start-ups that are manned by young tech entrepreneurs. They could easily acquire a God complex given the kind of money and attention they get at a very early age. Big egos and a lot of money could prove to be a heady cocktail for these entrepreneurs, who could end up on the wrong side of corporate laws. What complicates the equation is large investors with high expectations, putting these entrepreneurs under severe pressure to show results. India has a very vibrant start-up culture and a dynamic young population of entrepreneurs. However, regulators need to be vigilant lest these promising start-ups end in messy corporate litigation and frauds.