To address the critical need for corporate governance and enhance internal controls, the Indian Venture and Alternate Capital Association (IVCA) and EY, in collaboration with Pratithi Investments, introduced the "Start-up Governance Navigator" report.  

The report is structured on EY's Integrity and Compliance framework and follows a three-pronged approach: Prevent, Detect, and Respond. It also identifies specific fraud risks in industries integral to the start-up ecosystem, including e-commerce, fintech, healthcare, manufacturing, and EdTech. The report was launched at an online webinar event.  

The "Start-up Governance Navigator" Report aims to provide a robust integrity framework to empower organisations in cultivating a strong ethical outlook. By aligning governance policies with their vision, the report offers a proactive solution, reassuring investors and enabling businesses to address governance issues before they escalate.   

Commenting on the importance of a strong governance framework in the VC ecosystem Amit Pandey, vice president, IVCA said, "In the vibrant world of Indian start-ups, success orbits around the founder's mindset, investor strategies and board dynamics. Navigating the entrepreneurial roller coaster demands more than a mere governance formality—it's a strategic imperative. Timely reporting, internal checks, and ethical benchmarks aren't just corporate niceties; they form the bedrock of a flourishing start-up culture, fostering collaboration, trust, and sustained growth. Profitability, unit economics, and robust governance aren't mere features; they are the formidable pillars on which every start-up thrives. This emphasises governance's pivotal role in steering risks, luring investments, and ensuring enduring growth in the ever-evolving start-up landscape."    

Recognising the uniqueness of each organisation, the report emphasises the need to tailor integrity and compliance approaches accordingly. A sample integrity agenda for fund managers and investors is also presented, drawing from best practices observed while working closely with start-ups and investors nationwide.   

Commenting on the key attributes for investors to invest in early–stage companies Ashish Fafadia, Partner, Blume Ventures said, “There are 3 specific aspects that come into play when making an early-stage investment for an investor. The first factor is the entrepreneur’s curious mindset. Second is the grand vision which will be the driving force to build an organisation and the third factor is transparency. It is by the combination of these three aspects, that one can assess how deep an entrepreneur’s vision is to create an organisation for all the right reasons.”   

The report advocates for an integrated approach to due diligence and vigilance, reducing the incidence of poor governance. By promoting self-regulation and prioritising good governance, founders can navigate challenges posed by substantial financial reserves and prevailing geopolitical challenges, ensuring sustained success. 

“About one-third of the companies we invest in are in pre-launch phase. The founding team and the market opportunity are the only two aspects that can be assessed at such an early stage. We have always done reference checks for all our investments – what we are doing now is 10 times the number of blind reference checks. Even if we find the slightest of worry, we pass,” said Rajan Anandan, managing director of PeakXV Partners during a discussion at the online event.   

Highlighting the changing risk landscape, the report addresses the impact of digitalization and automation. Specific industries, such as fintech and e-commerce, face unique challenges threatening the sanctity of their sectors. For instance, the fintech sector's post-pandemic boost has led to the emergence of numerous start-ups, but incomplete or partial KYC processes often result in higher default rates. Similarly, e-commerce faces challenges like wrongful marketing expenses, misleading B2B sales, and fictitious orders.  

Speaking at the event, Siddarth Pai, co-founder of 3One4 Capital added, “At the heart of investment lies trust. Hence, corporate governance should not be seen as a cost centre but actually, something which can either make or break a company over time.”