Home / Opinion / Views /  BharatPe’s move could trigger a clean-up of startup ecosystem

Fintech unicorn BharatPe has sought up to 88 crore in damages from its co-founder and former managing director Ashneer Grover’s wife Madhuri Jain and other family members. The Grover family allegedly created fake bills, enlisted fictitious vendors to provide services to the company, and overcharged the company

for recruitment. According to allegations levelled by BharatPe, the Grovers had brazenly misappropriated funds for personal expenses. This is the latest development in the four-year-old company’s ongoing feud with Grover and Jain, which had led to their ouster from the company.

There is an adage that revenge is best served cold. While this may describe some of it, it’s perhaps best to view this move by BharatPe as a process that needed to happen coming closer to culmination. The victims, of course, go well beyond. While they may be choosing to stay silent, the ones truly injured are those who took decisions they now regret. The ones who paved the way are likely to see this as a vindication not only of their need for closure, but also of the need to pursue issues like this to the bitter end.

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The fact that the high-decibel, high-profile boss of BharatPe believed that he was beyond censure, let alone exposure, just makes this story so much more remarkable. And yet, this is clearly not the only such instance. The danger is that buccaneers like this also become sources of inspiration for the army of entrepreneurs gulping from the fire-hose of investable funds flowing into India. Airing the need for accountability in what is considered a Wild West period for investing is perhaps sometimes seen as an attempt to slow down a process that is beneficial to the country. But this isn’t about that.

In a season of epic scandals around the failure of FTX, the Bahamas-based cryptocurrency exchange company, global investors are looking for examples of the kind that BharatPe has set. While the general fiduciary controls globally are understood to be stronger, the FTX episode indicated that they were not as robust as made out. But what is far more chilling a message that needed to be sent out in India is that when failure happens, punishment for the guys breaking the rules follows swiftly. That alone is the kind of deterrence that our startup sector needs.

Given the fact that every entrepreneur backed by big money must have big ideas and audacious goals, giving them room for manoeuvre seems mandatory, But, when you unearth lies and embezzlement by a rogue top management that’s harming the company itself, then boards need to jump resolutely into action. The board being unquestioning is a bad enough fault, but the board allowing itself to be fooled is double jeopardy.

The kind of accounting practices that many of these swashbuckling startups indulge in, unfortunately, finds partners of a sort in the accounting firms set to keep a watch on them. And this is a whole new pain point that needs resolution.

Is BharatPe’s big, bold move a signal that the Indian startup ecosystem is maturing? Recent events in the United States, such as the action being pursued against FTX founder Sam Bankman-Fried or the sentencing of biotech ‘entrepreneur’ Elizabeth Holmes, show that global founders cannot get away with fraud. Germany is roiled by a €91.3 billion demand on Wirecard’s boss. For decades, the main reason top executives were ousted from their jobs was the firm’s financial performance. But, increasingly, misconduct and ethical lapses are the primary causes behind a high-flying executive’s fall from grace. Market manipulation is only a short step away, in many cases.

One big difference between India and perhaps the rest of the world is the debilitating perception that in India “sab chalta hai". Indians are apparently tolerant of aberrations, even those that verge on the illegal, by their heroes (even those funded by angels), unlike, say, in places like Japan, known for its zero tolerance. Here we have opted, so far, for a mindset that not only accepts such crimes, but equates them with stuff like a lack of work ethic, ineptitude, or inefficiency. So, founders or senior leadership often take governance lightly even while spouting soothing platitudes about good governance and transparency, etc, on ‘Good Governance Day’ or some such sombre occasion, while it is ‘business as usual’ the rest of the time.

Hope, however, springs eternal, and there is every reason to now believe that things may change if this current BharatPe example gets the attention it deserves and catches on. If everyone steps up to ensure this move is lauded and if we also see justice being served, then it will be a big move forward for the Indian startup ecosystem. The buck must stop at the top, and this clean-up must happen!

Dilip Cherian is founder of Perfect Relations, a member of multiple investment committees and sits on corporate boards.

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