Startups must adhere to self-regulating ecosystem: Amitabh Kant

Indian startups must adhere to a self-regulating ecosystem to bring in transparency and ethical behaviour, G20 Sherpa Amitabh Kant said on Monday while observing that chasing valuation at all costs sometimes leads to misgovernance.

He also said that there should not be any regulatory intervention if India wants to create a vibrant startup movement as “government regulation stifles innovation”.

Speaking at the Startup Mahakumbh event, Kant said India has been able to create the third-largest startup ecosystem in the world, and the challenge for the country is to make it the number one nation of startups in the world in the next five years.

"Startups must adhere to a self-regulating ecosystem governance as this will bring in transparency, ethical behaviour in our statup ecosystem," he said.

Noting that startups are 'national assets', the former NITI Aayog CEO said they must bring in best practices, and by following these best practices, startups will trust their stakeholders, they will attract investors and ultimately achieve sustainable growth.

"It is very important that startups should focus on growth...(but) valuation at all cost sometimes leads to misgovernance," he noted.

Kant also spoke about challenges faced by some startups in India recently and emphasised that all leaders of startups must ensure that there is proper financial management and audit.

"In my experience, I have witnessed startups flourishing, while others like BYJUs, GoMechanic, Housing.Com and Trell faced challenges. There must be good corporate governance in place.

"All of you entrepreneurs are innovators. As you grow and expand, you must ensure that there is proper financial management and a proper audit. Self-regulation is the key," he said.
Kant noted that there should not be any government intervention if the country wants to create a vibrant Indian startup movement.

"There should be no regulatory intervention because government regulation stifles innovation. We must understand, that the innovation will always be ahead of regulation," he said.

Kant also stressed the investment of funds from Life Insurance Corporation (LIC), pension funds, and HNI's into the Indian startup movement.

He pointed out that Indian startups have recorded a 20x jump in funding, almost 12x growth in the number of investors and an 8x increase in the number of incubators, and said there is a need to focus on exits for venture capital investors.

Kant also suggested that India needs to learn from countries like Israel as they started innovating military tech, cyber security and defence equipment.

"By initiating procurement and aggregating demand, the Israeli government catalysed growth for startups, ultimately driving economic expansion. Growth comes when the government is the first buyer," he said.