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Startups need to live up to higher standards of corporate governance, and failure of a business is not as big an issue as ethics and morality-related concerns, Tata 1mg co-founder Prashant Tandon said on Wednesday.
He advised startups not to get swayed by short-term temptations, saying long-term enterprises cannot be built through shortcuts.
"Businesses not working is not a problem, governance-related and ethics morality-related issues are not acceptable," he told PTI on the sidelines of the IAMAI Digital Health Summit.
Tandon said that governance needs to be "front and center" for startups and that when governance is strong, capital flows better.
He hoped that the startup ecosystem lives up to higher standards.
Addressing the recent governance and financial lapses faced by startups such as Byju's, he said, "As an ecosystem we are waking up to a lot of issues around governance controls".
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He acknowledged that the late-stage startup ecosystem has become more challenging.
"With the spring or summer of startups, even the funds raised a lot of money. So there is a lot of capital around...in companies that need Series C, D kind of capital, the time cycles, the scrutiny, the valuations, everything are under pressure," he noted.
He said that the "churn" in the startup space is "good" for the ecosystem since it helps companies in "belt-tightening" and business model reorientation.
"I won't be too hard on any specific player...that's the nature of the ecosystem of the startup world. There are phases where capital is available cheap, a lot of investors are fighting hard to get into startups and then phases come of belt-tightening and correction and that's when a lot of fundamental issues start coming to light," Tandon said.
Of 100 companies that come, 20-30-40 will shut down, the rest will end up becoming bigger and stronger.
He said the investor ecosystem was equally responsible in the process.
"It starts with founder integrity, but the entire ecosystem also has a role to play because I think the investor ecosystem also needs to be thoughtful about who they back and when, and what systems and processes give them the comfort and confidence," Tandon said.
On Tata 1mg's international plans, Tandon said that they were "fully focused" on India, and will explore international avenues when the time is right.
"India is such a large market with so many opportunities and such so many pain points to solve. As a company we are fully focused on India, but I get outreach from various countries around the world that they would like to have models like Tata 1mg in their countries and it's very tempting.
