Mohit Bhatnagar, Managing Director, Peak XV Partners, formerly Sequoia Capital India & SEA, has called for jail time for founders and entrepreneurs not adhering to corporate governance laws, as the venture capital firm faces scrutiny over the goings-on at some of the companies it is invested in.
“Ninety-nine percent of the founders out there are trying to build large, enduring companies the right way and they are equally worried about getting under this broad brush of governance or being wrong,” Bhatnagar said at Moneycontrol’s Startup Conclave on July 7 in Bengaluru. “For that 1 percent that decides to cross the line, well, they should see jail time.”
Several of Peak XV’s investments in India, and abroad, have gone sour. From Zilingo, BharatPe to Trell –founders and management have variously been accused of fraud and mismanagement, with Peak XV being hammered for poor oversight.
Sequoia Capital in June split into three entities: the United States, China, and India & Southeast Asia. The last one, rebranded as Peak XV Partners, will manage $9.2 billion across 13 funds and invest in startups using the $2.5 billion of uninvested capital that remains in Sequoia's corpus.
The venture capital firm is invested in startups like Razorpay, CRED, PineLabs, Truecaller, MamaEarth and Five Star Finance.
Governance across the startup ecosystem has been a big issue, especially after the alleged lapses at the country’s most valued startup Byju’s. The edtech firm is caught in legal wrangles over missed payments and not depositing EPF instalments.
“Governance is equal to reputation,” Bhatnagar said. “And when you have a good reputation, you're able to actually hire better people, you're able to get better investors, you probably get better value when you go public.”
“To me, it (governance) is actually not even negotiable. I mean, we will have to get better on this, whether it's a combination of better internal systems and policies, whether it's better capabilities on the board and within the companies.”
Bhatnagar, however, said things were changing. From not being discussed at all, governance was now a topic of discussion in every boardroom, which was the silver lining, he said.
His picks
When asked about the companies he was excited about especially those primed for listing or already listed, Bhatnagar didn’t name names but said he was excited about consumer internet companies.
“Historically, the best returns have come from consumer internet companies. But, actually, the opportunity set in India is changing very nicely that many people may not be aware that we made a couple of semiconductor investments. We made a space tech investment.”
He added that MamaEarth was one startup he was excited about. The cosmetics company was likely to come with its initial public offer soon, though there was no clear timeline from the company yet.
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