One of the most prolific and successful investors in India and Southeast Asia, Sequoia Capital India, addressed the fraudulent practices allegations against some of its portfolio startups and pledged to take proactive steps to do more to drive increased compliance.
In a post published Sunday afternoon, the venture fund said that all players have to drive better accountability.
At a time when at least three of its portfolio startups have undertaken investigations, the post serves as the first official word on the matter.
Sequoia Capital India, which didn't identify any startup by name, said it will work on a wide range of things.
The post, written by the Sequoia team, said that it may appear that investors don't do enough due diligence, but reminded that when investments are made at seed or later stages, there is hardly. If there is willful fraud and intent, even later stage investors can face negative surprises.
The post adds something.
As an investor representative, one serves on the board, and boards can only work with the information shared with them – the less transparency there is to the board the lesser their ability to truly unearth errant behaviors. The board is there to govern and help make decisions in the best interest of the shareholders. The board is not responsible to investigate on an ongoing basis unless something formally is brought up with them, which is often through a whistleblower. Better corporate governance is a shared responsibility between founders, management and the board. And to get there the ecosystem needs to come together and commit to some changes.
At Sequoia India & SEA, we always have held ourselves to a high bar on integrity because we are in this for the long term. We will take a set of proactive steps as a responsible participant of this ecosystem and do more than our fair share to drive increased compliance across our portfolio companies including, but not limited to, governance trainings for founders and senior management, implementation of whistleblower policies, more independent board representation, asking for more disclosures and more rigorous adoption of internal audits and controls.
We will continue to respond strongly when we encounter willful misconduct or fraud. When whistleblowers call us to report on issues, we always take them seriously. We know in some cases they may turn out to be baseless – but we still have to look into them as it is a board member’s fiduciary duty. We will continue to have zero tolerance towards proven wrongdoing. We won’t hesitate to act to protect the interest of the company and employees, even if it costs us financially. We will take tough calls where needed in the interest of doing what is right.
We hope more people in the ecosystem join us on this pledge to greater governance. […]
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