Why Startups Can Result in a Corporate Governance Crisis: The Case of Bharatpe, a Unicorn Fintech Startup in India

Abstract

BharatPe is an Indian unicorn fintech startup company, which reached a valuation of US$1 billion without being listed on the stock market. It appeared in the headlines of national newspapers when the corporate governance crisis of the company surfaced. At the time of its inception, the startup was fully funded by its cofounders. However, in <4 years it became a venture capitalist–funded startup with <20% stakes owned by its cofounders. The rift between the venture capitalist–dominated board and Ashneer Grover, cofounder and managing director of BharatPe, became public when the board charged Grover with misgovernance and misappropriation of company funds. The board instituted an independent internal inquiry against him. Grover, although he resigned from his position, denied all allegations against him. Now one of the most celebrated fintech startups in India, with more >8 million merchant-clients, was under the scrutiny of regulators and stakeholders for corporate governance lapses. This case will help the faculty instructors to explain unique aspects of startup governance. Students will be asked to identify various corporate governance challenges faced by venture capitalist–backed startup firms and the root cause of conflict between investors and founder shareholders.