VCs double check corporate governance as lapses rise

economictimes.indiatimes.com:

corporate governance lapses across well-funded startups in India has already turned investors wary of writing big cheques when the sector is also facing a funding winter.

There's a domino effect of it now as there have been several instances of big-ticket investors conducting additional layers of checks and balances with late-stage startups, ET has learnt during conversations with almost half a dozen stakeholders in the ecosystem.

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A middle-eastern sovereign fund recently discussed with the founder of a unicorn to get its auditor's clearance for the company's revenue recognition accounting. The founder was taken aback as the investment fund had held early-stage talks for an investment in the company.

Another multi-stage investor is asking its portfolio companies to take submission of key business and operational metrics through the management information system more seriously. Sources said a Bengaluru-based fintech company saw its talks to raise funds fall apart after founders refused to share financials with potential investors.

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Multiple top-tier founders and investors said investors are bringing in stricter terms in shareholding agreements as well as term sheets and that's delaying the overall timeline for investments to close by several months in a number of instances.


“I know our accounting has been cleared by a Big 4 auditor but owing to some