OPINION | The Hidden Compliance Cost of Good PR: A cautionary tale for regulated industries

Successful startups in regulated spaces treat media strategy as part of risk management.

Picture this: An MNC pharma's legal team arrives at their Mumbai office on Monday morning, coffee in hand, and opens a major newspaper to find their company named in a glowing profile of an AI healthcare startup. The piece cheerfully explains how the startup's technology helps the MNC “sell more” of its oncology drug by “broadening the funnel” for patient identification.

The coffee gets cold. The lawyers start making calls.

I don’t know if this exact scenario happened. But when a recent puff piece about an Indian AI healthcare startup casually dropped pharma partner names alongside commercial intent, it created exactly that risk. What founders likely saw as positive coverage was actually a masterclass in how to create legal exposure, regulatory risk, and investor red flags—all in one article.

The piece has since become harder to find online. Make of that what you will.

When Your “Co-Founder” Isn’t, Legally Speaking

The article repeatedly referred to a founding team member as “co-founder.” Inspiring, except if this person isn’t legally designated as a co-founder in incorporation documents, shareholder agreements, or cap tables. That creates a documentary trail of organisational confusion.

Here’s what happens next: Investors cross-check public statements against legal filings. They find the discrepancy. They don’t call to clarify; they quietly discount your valuation by 10–15% for “governance risk.” If you’re lucky.

If you’re not, the person you publicly called “co-founder” later disputes their role or equity and points to the article as evidence. Welcome to expensive litigation that can delay or derail your exit.

The absurd part? The fix is trivial: either formalise the relationship legally or correct the narrative. The gap between the two is where lawsuits live.

The Partnership Disclosure That Crosses Into Promotion

Back to our hypothetical Monday morning at the MNC. Why would their legal team care about a startup’s glowing press?

Because saying you partnered with a pharmaceutical company to help “sell” a specific prescription drug turns a technology collaboration into what regulators view as commercial promotion. And pharmaceutical promotion is tightly regulated by agencies like the FDA, EMA, and CDSCO.

Most pharma partnership agreements explicitly prohibit disclosing strategic intent, linking product names, or revealing commercial terms. This isn’t paranoia—it’s regulatory necessity. Even if it’s true that better diagnostics drive appropriate prescriptions, you can’t publicly say you’re helping sell drugs.

The damage goes beyond one partner. Every future pharma company now knows you might disclose sensitive information. In pharma, that’s the kiss of death. Trust around confidentiality isn’t negotiable—it’s the entire basis of partnership.

The WHO “Recommendation” That Never Was

The article claimed the World Health Organisation “recommended” the company’s technology. That’s the kind of error that makes regulatory affairs professionals wince.

WHO operates under strict neutrality protocols. It can prequalify products or endorse standards. It never “recommends” specific companies. It’s like claiming the Supreme Court “recommended” your law firm—technically impossible, factually wrong, and credibility-destroying with anyone who knows better.

Unfortunately for the startup, that includes every institutional buyer, health ministry, and serious investor.

When You Tell the World Your Valuation

The article also shared the company’s valuation. Unless that came from a recently closed, priced round already public, congratulations—you’ve just locked yourself into a number that will haunt future negotiations.

If inflated: evidence of hubris. If deflated: evidence of poor self-assessment. If accurate but premature: evidence of carelessness with confidential financial information.

During M&A, that number becomes an anchor—never in your favour. And if you’re heading toward an IPO, SEBI will scrutinise the disclosure. If unsupported or exaggerated, you’re looking at securities regulation violations.

The Partnership You Announced Before It Was Signed

The article also mentioned partnerships that weren’t finalised or were under embargo. That’s like announcing your engagement before your partner says yes.

Every NDA you’ve signed likely prohibits this. But beyond breach, it signals a deeper problem: you don’t understand the difference between a signed deal and an aspiration. You’ve chosen press coverage over strategic discipline.

Future partners will demand heavier confidentiality clauses, raising legal costs and slowing deal cycles. Ironically, the press coverage you gained costs you deals you’ll never hear about.

The Broader Lesson: Reputation Risk Starts With What You Say

Healthcare startups often treat media coverage as pure upside: more visibility equals more credibility equals more investor interest. Right?

Not in regulated industries. In healthcare, pharma, finance, or legal sectors, every public statement is potential legal exposure. Partner names are contractual landmines. Founding structure is governance evidence. Valuations are negotiation weapons.

Successful startups in regulated spaces treat media strategy as part of risk management. They run press through legal counsel who understands contracts and regulation. They know what can and cannot be said.

Reputation isn’t built on puff pieces. It’s built through disciplined, authentic communication—saying only what you can substantiate and letting achievements speak for themselves.

Reputation in regulated industries is often hurt less by operational missteps than by the gap between public claims and what holds up under scrutiny.

Unlike bad hires or pricing pivots, public statements live forever in archives. Every future investor, partner, regulator, and acquirer will find them. They’ll judge whether you’re trustworthy.

A permanent record of governance lapses, regulatory blind spots, and strategic indiscipline is not the legacy most founders want.

(Prachi Shrivastava is Founder, brand architecture and reputation management firm Lawfinity Solutions.)

Views are personal, and do not represent the stance of this publication.