Governance Should Be Front and Centre for the Startup Ecosystem, Says Tata 1mg Co-Founder at Startup 2023

Governance Should Be Front and Centre for the Startup Ecosystem, Says Tata 1mg Co-Founder at Startup 2023

“Even the funds raised a lot of money during the spring or summer of startups. So while there is a lot of funding available, “the time cycles, scrutiny, valuations, and everything else are under pressure in companies that need Series C and D kinds of capital,” he added.

Prashant Tandon, a co-founder of Tata 1MG, said on Wednesday that startups must adhere to higher standards of corporate governance and that issues with ethics and morals are more important to address than commercial failure. He cautioned new businesses against succumbing to temporary temptations, emphasising that there is no quick fix to creating successful businesses.

“Businesses not working is not a problem; governance-related and ethics-related issues are not acceptable,” he said to PTI outside the IAMAI Digital Health Summit.

Tandon stated that excellent governance improves capital flow and that it should be “front and centre” for startups. He believed that better criteria would be met by the startup sector. He remarked, “As an ecosystem, we are waking up to a lot of issues around governance controls,” in response to the recent governance and financial failures experienced by businesses like Byju’s. He admitted that the environment for late-stage startups has become increasingly difficult.

“Even the funds raised a lot of money during the spring or summer of startups. Therefore, there is a lot of money around. The time cycles, scrutiny, valuations, and everything else are under strain in firms that seek Series C and D sort of money, he added. According to him, the “churn” in the startup industry is “good” for the ecosystem since it aids businesses in “belt-tightening” and business model reorientation.” I won’t be too harsh on any one person since that is just how the startup environment works.

There are times when cash is inexpensive and many investors are vying to participate in startups, and then there are times when things must be tightened up and corrected, and this is when a lot of core problems start to surface, according to Tandon. Out of 100 enterprises that arrive, 20–40% will fail, while the remaining 90% will grow and prosper. He said that the ecosystem of investors had an equal role in the procedure.

The entire ecosystem has a part to play, according to Tandon. “It starts with founder integrity, but the entire ecosystem also has a role to play because I think the investor ecosystem also needs to be thoughtful about who they back and when, as well as what systems and processes give them comfort and confidence,” he said. Regarding Tata 1MG’s global ambitions, Tandon stated that they are “fully focused” on India and would investigate global opportunities when the time is appropriate. “India is such a huge market, and there are so many opportunities and problems to be solved.

As a business, we are entirely focused on India, but I frequently receive outreach from other nations who say they would welcome models like the Tata 1MG in their nations.

In a candid conversation during the annual Startup 2023 event, Prashant Tandon, co-founder and CEO of Tata 1mg, one of India’s leading healthtech platforms, stressed the importance of governance as a central tenet for the thriving startup ecosystem. Tandon underscored the significance of startups maintaining robust and transparent governance mechanisms from their infancy as the sector continues to evolve in an era of rapid digital transformation.

Traditionally, startups have prioritised speed over strategy, which is understandable given their primary need to secure a niche in a competitive market. However, as they scale, the lack of governance infrastructure can lead to operational inefficiencies, regulatory infractions, and eroding investor confidence. As Tandon put it, “Establishing governance is not just about compliance; it’s about building a sustainable business.”

The startup ecosystem has always been dynamic and volatile. The rapid rise and potential fall of businesses have revealed a gap that urgently needs filling: the need for strong governance mechanisms. The emphasis on governance goes beyond merely ensuring compliance with the law; it’s about fostering a culture of accountability, transparency, and ethical decision-making within the organisation.

As Tandon asserted, “Governance isn’t a layer you add on once you’ve achieved a certain scale. It’s a mindset that needs to be ingrained from the start. It’s about having the processes, systems, and policies in place to ensure you’re not just building fast but building right.”

Tandon went on to elucidate the direct relationship between governance and long-term sustainability. “A startup that incorporates good governance practises from the get-go is essentially future-proofing its business,” he said. By laying down a robust framework of policies, procedures, and oversight mechanisms, startups can avoid regulatory pitfalls, manage risks better, and ultimately build a resilient and sustainable business.

Tandon also pointed out that a strong governance mechanism creates an environment of transparency, a factor that is key to attracting and retaining investors. He said, “Investors today are not just looking at your product or service; they’re looking at how you’re running your business, how you’re managing risks, and how you’re ensuring compliance. Transparency here is key. A well-governed startup builds trust and confidence among its stakeholders, and that is invaluable.”

Discussing his own journey with Tata 1MG, Tandon highlighted the organisation’s commitment to governance. He shared how having a well-defined governance structure from the beginning helped the company navigate complex regulatory landscapes and manage risks effectively. It also helped them build strong relationships with their investors, partners, and customers.

Concluding his talk, Tandon urged startups to reorient their approach to governance. He called upon founders to view it not as a regulatory burden but as a strategic tool that can give them a competitive edge in the long run. He emphasised, “In today’s startup ecosystem, good governance is not an option; it’s a prerequisite for sustainable success.”

The conversation at Startup 2023 underscores the evolving landscape of the startup ecosystem. As startups continue to push boundaries and redefine industries, good governance will play a key role in shaping their journeys. While the mantra for startups has often been “move fast and break things,” it might be time to amend it to “move fast, build things right, and sustainably so.”