Where Is the Moral Compass for Indian Startups?

Byju Raveendran’s recent proclamation from Dubai to relaunch his edtech venture “at half the cost” after his legal trials may sound ambitious, but it reflects a deeper issue that goes beyond just one company. It is surprising that Indian media gave this interview extensive coverage, treating it as if it were one of the most critical issues facing the world, second only to climate change. This reflects the content-starved environment we inhabit—an irony that is further highlighted by the very existence of this OpEd.

Well, in the unreal world of private investing, where the pursuit of returns at times seems to eclipse transparency, it wouldn’t be surprising to see capital flow into Byju’s next venture—so much for morality in capitalism, where opaque bets thrive beyond the watchful eye of public scrutiny.

The very idea that Byju’s can erase the deep-seated mistrust among consumers, investors, and the market all through a cheaper reincarnation reflects a disregard for the core principles of entrepreneurship: governance, ethics, and accountability. While it’s fair to assume Byju’s innocence until proven guilty, he seems to have forgotten the core value of entrepreneurship: risk-taking must always be paired with accountability. The mismanagement of funds and poor business leadership remain inadequately addressed by the founders, leaving a persistent shadow of doubt over their intent and integrity.

By blaming investors for pushing him to create a company valued more than the combined GDP of a few Indian states while allegedly neglecting the needs of students and parents, founder Raveendran only deflects attention from his personal leadership failures. During the pandemic, Byju’s capitalised on the fear of missing out among parents eager to secure their children’s education. The company aggressively sold high-priced subscriptions, taking advantage of the heightened demand during lockdowns. While this strategy boosted revenues in the short term, it damaged consumer trust in the long run. The same consumers who felt compelled to overpay during a crisis are now disillusioned as allegations of misgovernance and improper practices continue to surface.

Coming from a founder who has most likely profited from secondary transactions of his shares much before their value plummeted, the talk of pressure from private investors sounds incredibly disingenuous. The fact that a first-generation young promoter can afford a luxurious lifestyle abroad does not cast him in a favourable light, particularly when he has failed to remain in India to address the concerns of various stakeholders. It raises questions about the sincerity of his concerns and highlights a troubling disconnect between his personal financial gains and the responsibilities he bears toward his company and its stakeholders.

It’s true that venture capitalists and private equity firms often prioritise rapid growth and high returns, but founders must balance these pressures with responsibility. Entrepreneurs are not mere actors in their investors’ playbooks; they are expected to be stewards of their companies’ long-term vision and integrity.

But this isn’t just about Byju’s. India’s startup ecosystem has been driven by the same forces that led to its rapid rise: venture capital funding, market exuberance, and the promise of innovation. Yet, in the rush to scale up and achieve eye-popping valuations, many startups have compromised on the very principles that should guide their growth. Governance, transparency, and accountability have often taken a backseat to the pressure of delivering fast returns to investors.

The influx of global venture capital into Indian startups, especially during the last decade, created its own FOMO—this time among investors themselves. The need to get in early on the next big thing often meant that due diligence was sacrificed. Startups that showed promise or an innovative idea were rushed into growth trajectories without the necessary guardrails in place. In this environment, corporate governance fell prey, as the pressure to “grow at all costs” forced companies to cut corners.

It is not as if private investors are immune from responsibility. Venture capitalists and private equity firms often play an active role in the companies they invest in, holding regular meetings, analysing performance, and exerting influence on key decisions. In cases where governance failures arise, investors cannot claim to be passive spectators. Their role goes beyond just providing capital—they are integral to ensuring that the companies they back operate with integrity. Investors with significant stakes in startups should act as conscious stewards, not just financial backers. Isn’t this a utopian expectation?

The broader lesson for India’s startup ecosystem is that no amount of capital or innovation can sustain a company that lacks a strong foundation of governance and ethics. India’s startups, driven by visionary founders and backed by billions in venture capital, are critical to the country’s economic future. But as they scale, they must do so with a sense of responsibility—not just to their investors but to their consumers and society at large.

Governance is not merely regulatory compliance. Startups that prioritise long-term sustainability must embed ethical leadership into their core. The drive for growth should not come at the expense of transparency, consumer trust, or adherence to basic principles of good corporate behaviour. Companies that fail to do so will ultimately face the same fate—a collapse in consumer confidence, market scrutiny, and an inability to recover despite their best efforts at rebranding or relaunching.

Investors too must rethink their role in this ecosystem. While venture capitalists and private equity firms are there to make profits, they cannot ignore the broader responsibilities that come with being significant stakeholders in a company’s success. Private investors need to act not just as capital keepers but as the conscious keepers of the companies they support. This shift in mindset is critical for fostering a startup ecosystem that values not just growth but sustainability, trust, and ethical leadership.

We have a highly valued startup that recently went public, yet its mercurial founder and CEO has made headlines again for a Twitter spat. This behaviour underscores a fundamental issue: leaders of listed entities must recognise the importance of exhibiting professionalism and accountability.

These stories are not just individual failures but reflections of systemic issues that can plague high-growth startups. It is a wake-up call for India’s startup ecosystem to realign itself with values-led leadership, where governance and responsibility are not afterthoughts but foundational elements of success. Without this, even the greatest ideas or the largest pools of capital will fail to build companies that last.

India’s future as a global startup hub depends on more than just innovation and investment. Entrepreneurs and investors alike must recognise that long-term success comes from building companies that not only create wealth but do so with a commitment to the people who make that success possible—employees, consumers, and society. It is time for India’s startup ecosystem to grow not just in valuations but also in values.