B-schools to train startup investors

Recent instances of corporate governance lapses at large startups have also underscored the need to shore up measures to safeguard investors’ capital.
Recent instances of corporate governance lapses at large startups have also underscored the need to shore up measures to safeguard investors’ capital.

Summary

The Indian School of Business and the Indian Institutes of Management have developed courses to meet the needs of professionals appointed by private capital funds overseeing early to growth stage companies.

Mumbai: Growing risks for private equity and venture capital (PE and VC) investors and the rising complexity of business models have prompted top Indian business schools to focus on training fund managers and board members on the nuances of effective startup governance.

The Indian School of Business (ISB) and the Indian Institutes of Management (IIMs) have prepared courses to meet the requirements of professionals appointed by private capital funds to oversee early to growth stage companies.

Almost 7,500 listed and more than 20,000 unlisted companies will revamp their boards in March when the Companies Act of 2013 completes a decade. This transition will result in approximately 30,000 independent directors retiring after completing two terms, in line with the provisions of the law. Amid a growing economy and complexities of new-age businesses, a board comprising directors who can champion implementing the best corporate governance practices is crucial for young companies.

Recent instances of corporate governance lapses at large startups have also underscored the need to shore up measures to safeguard investors’ capital.

“Safeguarding such risky investments is a challenge, and it will be the key to determining the progress of the private capital market in India," said Karthik Reddy, co-founder of Blume Ventures and chairperson of The Indian Venture and Alternate Capital Association (IVCA).

IVCA, in partnership with the ISB’s Centre for Business Innovation, launched one such training programme for PE and VC fund managers last month.

“This programme is designed to address the needs of professionals appointed by private capital funds on the boards of early to growth stage companies. It attempts to strike an optimal balance between theory, practice, and real-world experience to help participants better understand the economic drivers of business performance and valuation by enhancing strategic thinking and critical analysis," said a joint release. The programme is sponsored by venture capital and private equity funds such as Accel, Ascent, Catamaran, Peak XV Ventures, Ski-Capital, T-Hub and TMF Group.

Prof. Rejie George Pallathitta at IIM Bangalore said board functioning is an important focus area in the B-school’s programme on corporate governance.

Apart from its flagship two-year MBA programme, IIM Bangalore offers a Post Graduate Programme in Enterprise Management (PGPEM) and an Executive Post Graduate Programme in Management (EPGP). For both PGPEM and EPGP, Corporate Governance and Ethics is a compulsory paper. In this, the B-school engages with participants in family business executive programmes and some industry-specific programmes wherein the issues about startups and their boards are discussed in the classroom. “NSRCEL, in their programmes and courses, has a specific focus on startups and their boards," Pallathitta said. NSRCEL is IIM Bangalore’s business incubator.

There have been increasing cases of board members and investors calling for forensic audits and taking the founders to task over alleged lapses in corporate governance and frauds. There are growing concerns over private capital being at risk if these startups go belly up.

In some cases, such as Byju’s, the most valued startup in the country, three board members resigned in June, alleging corporate governance did not evolve in the company in line with the growth it saw.

IIM Ahmedabad, at advanced levels, also offers specialized corporate governance courses that comprehensively explore various dimensions of board functions and responsibilities, said Anish Sugathan, associate professor of strategy at IIM Ahmedabad.

“The emphasis on startups and their boards is a relatively recent and emerging area of interest. Although we don’t have a dedicated course on the governance of startups, at IIMA, we provide training to students on compliance and ethical responsibilities for startup founders in relation to their investors and consumers," he said.

Educational institutions, particularly B-schools, play a critical role in this landscape, offering courses focused on board management to equip future leaders with the skills necessary to navigate these evolving dynamics, fostering strategic decision-making and adaptability crucial in leading boards effectively in this rapidly changing environment, said Prof. Himanshu Rai, director, IIM Indore.

At IIM Indore, several elective courses and executive education programmes on board management are offered. These executive programmes cover a spectrum of areas essential for strategic decision-making, organizational leadership, and boardroom effectiveness.

“Industries are undergoing significant transformations, propelled by technological advancements and shifting consumer behaviours, necessitating agile governance structures. Moreover, the covid-19 pandemic accelerated the need for swift decision-making and adaptive strategies, underscoring the pivotal role of board governance in times of crisis. The burgeoning startup ecosystem has further emphasized the significance of effective board management in attracting investments and guiding the trajectory of these ventures. Boards are experiencing a shift towards more diverse structures, recognizing the importance of varied expertise and inclusive decision-making," Rai said.

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