Top VCs meet in Bengaluru, discuss investment strategies, corporate governance lapses at Indian startups

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India's leading venture capital (VC) firms huddled in startup hub Bengaluru earlier this week to engage in discussions covering a wide range of topics- from investment strategies to corporate governance lapses and the establishment of sustainable, long-term companies as the world’s third-largest startup ecosystem is going through one of the worst periods of funding winter.

Sequoia Capital India, one of the country’s most-aggressive startup investors, organised a gathering at its Bengaluru office in Indiranagar on May 17, bringing together partners from prominent homegrown early-stage VC firms like Accel, Lightspeed, Matrix Partners, Fireside Ventures, Blume Ventures, Prime Venture Partners, A91, Stellaris and Orios Venture Partners, among others, according to several people familiar with the matter.

The discussions commenced in the evening at approximately 5:30, followed by a convivial dinner and drinks session, providing an opportunity for partners from these VC firms to network, the people said, requesting anonymity. Shailendra Singh, the managing director of Sequoia Capital India and Southeast Asia, was also present at the gathering, the people added.

“It was a long-due industry catchup and Sequoia happened to be the host,” said one of the people quoted above.

“It was a forum for partners to interact and share their learnings. They also talked about collective goals and priorities. A lot of focus was also on AI (artificial intelligence) and SaaS (software-as-a-service), where partners discussed how to build global SaaS companies that also provide good exit opportunities for VC firms,” the person added.

Interestingly, during its earnings presentation last week, SoftBank Group Corp, one of the largest late-stage investors in India, also discussed its plans to bet big on AI and the technologies built on AI.

Furthermore, partners at the gathering also engaged in conversations centred around the state of corporate governance matters within Indian startups and explored strategies for early-stage VC firms to implement effective checks that promote adherence to unquestionable business practices, a second person quoted above said.

“Topics like whether VCs should hold board seats at startups and for how long were also discussed. People also were talking about installing best practices for audit committees,” the person quoted right above said.

Sequoia Capital declined to comment when Moneycontrol reached out with detailed queries.

The timing of the gathering of VCs to address concerns such as corporate governance lapses and accounting practices is crucial, especially considering that certain Indian startups have faced scrutiny in the past 15 months due to allegations of misconduct, accounting discrepancies, and fraudulent behaviour. Companies like BharatPe, Trell, Zilingo, and GoMechanic have found themselves embroiled in controversies surrounding alleged misconduct and fraudulent practices.

Moreover, the discussions come at a time when VCs have become extremely conservative due to worsening macroeconomic headwinds. Funding to India’s startup ecosystem, currently the third-largest in the world, has dropped more than 60 percent in 2023 to $10 billion so far versus the same period of 2022, according to data from Tracxn Technologies.

Some of India’s most-aggressive VC investors have also gone extremely slow on investments. Sequoia Capital India, for instance, has participated in just 11 deals as of the first week of May versus 28 in the same period of 2022.