Corporate Governance issue wake-up call for startups; saddening to see any lapses: Bombay Shaving Co Founder Shantanu Deshpande

Corporate governance should be seen as a collective and unit responsibility of all stakeholders involved in a startup, Shantanu Deshpande, founder of Bombay Shaving Company has said.

He added that any lapses or deviations are a wake-up call for the ecosystem and are "deeply saddening".

On funding winter, Deshpande told PTI that good companies will continue to attract capital, although they may not get a "bullish valuation" at this stage as scrutiny increases and investors turn more careful with their bets.

Deshpande, who is also CEO of homegrown personal care brand Bombay Shaving Company, belongs to a growing tribe of outspoken founders scaling up new-age companies in India.

Asked about the cases of corporate governance lapses in the Indian startup landscape, he said 'bad form' in companies is also a unit, collective issue and not about doing postmortems on singular data points. Corporate governance issues are "critical to fix", and the onus cannot be on the founders alone.

"It is deeply saddening to see what has happened in a lot of companies... It is not just about the founders, by the way, it is the board, the investors, the leadership team. It is everyone...It cannot happen because one person decided to go astray," he said.

His advise to budding entrepreneurs: It is time to focus on the health of the company and to conserve capital. This period "will lead to a lot of good habits", he said.

Over the past decade, India's entrepreneurial ecosystem has seen remarkable transformation, and today it is the third largest in the world, with over 1,00,000 startups and 108 unicorns. However, cases of corporate mis-governance have surfaced in the startup ecosystem, shifting the narrative from deal flow and heady valuations to audits and reviews.

As the funding crunch hit the global startup universe and investors and VCs turned wary, some prominent startups GoMechanic, BharatPe, Zilingo, were in the eye of the storm over corporate governance issues.

Overall, the funding in Indian startups has fallen by 36 per cent in January-June to USD 3.8 billion, the lowest half-yearly number in the last four years, as investors are taking longer time in due diligence of every aspect of business, according to a recent PwC India Report.

Fintech, SAAS and D2C continued to be the most funded sectors in H1 CY23, the report said.

Asked about the funding winter in the sector, Deshpande pointed to cyclical trends often seen in business and markets and added that each bear cycle is followed by the next phase of boom and positive sentiments.

"It is a predictable situation...My advise to entrepreneurs is that private markets follow public markets by 6-9 months so it will take some time for funding winter to go away...But good companies will always get funded, you may not get the value you want," he said.

Bombay Shaving Company is "on track" to achieve Rs 260-280 crore topline in FY24, driven by its "big bet" on razors and trimmers, focus on hair removal products, and wider distribution network to grab a larger slice of the market, according to Deshpande.

In the recent interview, Deshpande talked about his expectations of breakeven this fiscal, a possible USD 60-80 million pre-IPO round in 3-4 quarters, and the game plan to scale up Bombay Shaving Company to Rs 2,000-3,000 crore, and Bombae (a line up of women's products) to Rs 1,000 crore businesses in his 5-year vision.

The brand -- which now bears an all-new look-and-feel after a refreshed brand identity -- is also looking to scale its presence from 65,000 stores to 3-5 lakh stores in 2-3 years, Deshpande said describing offline mode as the "belly of Indian retail market".