Look who’s leading now – how young CEOs can get their funding mantra right

Young CEOsBeing the Chief Executive Officer of a disruptive business venture sounds thrilling and exciting, more so when you are below 30 years of age. It is then not surprising to see young and dynamic individuals at the helm of businesses, raring to take the world by storm

The average age of CEOs in India is decreasing at a rapid pace. The India innovation story is wheeling on the advantage of ‘big’ ideas, acumen, agility and technological prowess. Unfortunately, everyone cannot be the next Steve Jobs or Mark Zuckerberg. So, do these CEOs have the maturity and foresight to build sustainable companies? Can they drive the right values among all stakeholders? More importantly, can they conduct business in an ethical way?

It is important for this new breed of entrepreneurial talent to brood over these questions, especially since they often rely on private equity (PE) and venture capital (VC) funding. Investors can often turn wary if the due diligence throws up any form of non-compliance, misstatement or fraud.

The CEOs of today, thus, need to safeguard themselves and their businesses. They need to put in place checks and measures to build robust ventures and minimize chances of any misstatements when exploring PE/ VC investments.

Here is a quick check list that could help them win the trust of their investors and other stakeholders:

1. Be ethical – Businesses tend to see troughs and crests, but it is important for CEOs to have an unwavering commitment to integrity. They must maintain the right tone at the top and propagate it among all employees. At a more granular level, the company needs to have basic policies such as a Code of Conduct (CoC) or Code of Ethics (CoE) in place, though these do not need to be 50 pages long. Companies at a nascent stage could have a five-pager CoC or CoE to set their ethical standards as a start. This could eventually be made into a more detailed document as the venture achieves scale.

2. Keep financials in order – Most entrepreneurial ventures, irrespective of their financial models, are in a hurry to kick-start their business and start bringing in revenue.  But, what is often missed is that transactions are not appropriately (or only a few are) documented in the books of accounts. It may not be mandatory for them to do so, but such a practice will be crucial when companies are looking to raise funds. Smaller businesses can start by investing in basic accounting software such as Taleo and move on to more sophisticated ways as their transaction base expands.

3. Compliance with the law of the land – Startups need to be compliant with laws related to business, tax-related matters, employment, labor, information technology, etc., at an initial stage. But being ambitious, young CEOs should go a step further and consider global laws to become truly international companies. For instance, regulations under the Foreign Corrupt Practices Act and UK Bribery Act would be some leading practices that start-ups can adopt. These would enable the creation of a strong anti-bribery and anti-corruption framework, particularly for companies focusing on markets such as the US and the UK.

4. Choose your vendors wisely – Setting up any business requires numerous licences and clearances. It has often seen that it is easier to get this work done through third parties or agents that charge a fee to obtain all necessary permissions. As custodians of the business, CEOs need to hold a tight rein over the activities of their vendors. They should advocate not taking short cuts, such as facilitation payments or resorting to bribery.

5. Stay focused but not rigid – Establishing a business requires as much expertise as the ability to think on your feet in testing times. As individuals, PE/ VCs will be drawn to companies led by spirited leaders who are open to new ideas, have the courage to take calculated risks and believe in working together as a team.

Recently, the Securities and Exchange Board of India has shown its commitment to the start-up community by propagating regulations that would enable them to thrive and scale more easily and rapidly in India. On their part, the CEOs of today should inculcate values that enable ethical sustenance – this would help forge stronger bonds and enable greater collaboration with the investor community.

 

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