The recent unfolding saga at two of India’s most esteemed and triumphant startups have sparked widespread concern. Once hailed as the poster boy of fintech innovation, Paytm and Byju’s, a pioneering force in the ed-tech space, find themselves embroiled in significant controversies and self-inflicted value destruction.
In both instances, a glaring deficiency in establishing institutional checks and balances as these startups burgeoned over time has come to light. Paytm bank’s regulatory oversights, particularly concerning KYC norms, have plunged it into crisis. At the same time, Byju’s finds itself entangled in a web of accounting discrepancies and financial misreporting with a board comprised solely of the founder and his family members and a lack of independent oversight.
Having observed the trajectories of the two founders, albeit from a distance, it is evident that they are exceptional visionaries and trailblazers. They’ve effectively disrupted their respective sectors through innovative use of technology and successfully scaled their ventures to global acclaim, attracting premier investment and talent along the way.
Yet, despite their remarkable achievements, why have they found themselves facing such difficult circumstances? I have observed that Maverick founders, much like proficient athletes, require ongoing coaching and guidance to remain on course. Just as cricketers or sportspersons, despite being at the peak of their game, rely on continuous coaching, startup founders necessitate perpetual guidance on refining their business models and establishing robust governance frameworks.
At its zenith, Byju’s commanded a staggering valuation of USD 22 billion, backed by a string of marquee investors, including the Chan-Zuckerberg Initiative, Sequoia Capital, Tiger Global, Blackrock, IFC, and the Qatar Investment Authority. Similarly, Paytm, with its USD 20 billion valuation during its listing on the Indian bourses in 2021, has witnessed a dramatic plunge in its worth to a mere USD 2.1 billion. In the latter case, the weight of this monumental value erosion fell heavily on small and retail investors. It’s astonishing to see such informed investors pouring in funds without ensuring proper regulatory checks and balances for the founders.
The case of Paytm’s banking subsidiary underscores the significance of adhering to fundamental regulatory norms, while Byju’s debacle exemplifies the repercussions of neglecting financial accountability and stakeholder relationships.
When a startup experiences meteoric growth, it becomes imperative to implement guardrails swiftly. Equipping founders with a sturdy advisory board, compliance officers, and the support of professional coaches is crucial for navigating the fast lane of growth without encountering fatal missteps.
While I am optimistic that both Paytm and Byju’s will navigate their current crises successfully, Indian founders, startup boards, and investors must introspect on the underlying causes of these predicaments and contemplate whether they could have been pre-empted. As India matures into an entrepreneurial hub and a global economic powerhouse, we must avert such mishaps to foster a vibrant and accountable startup ecosystem.
A maverick founder requires a coach to guide them on when to accelerate and when to apply the brakes.
May this serve as a valuable lesson for future generations of Indian founders and startups, illustrating the importance of navigating growth with entrepreneurial spirit while establishing the institutional mechanisms befitting that of a mature organization.
