CII tells startups to keep valuations ‘realistic’

The Confederation of Indian Industry (CII) on Sunday urged Indian startups to keep their valuation “realistic” and distinguish between the goals of the organisation and its founder.

“Startups may strive for long-term value creation rather than short-term valuations. The valuations of businesses should be kept as realistic as possible,” CII said in its Corporate Governance Charter for Startups.

The industry body explained that the charter for startups aimed to make them responsible corporate citizens and enable them a share it with stakeholders to establish themselves as being wellgoverned. “The needs of the business entity should be separated from the personal needs of its founder(s), but at the same time, the goals and needs of the founders, promoters, and initial investors should be aligned with the long-term goals of the business,” it added. The charter also stated that the startup should be maintained as a separate legal entity with the organisation’s assets distinct from the founders’ assets.

“Trust-based coherent working should be promoted between the founder, executive management, and the board,” it said, adding that it was important to maintain adequate internal controls and accountability to third parties. The charter emphasised the external auditing of startups.

“It is important to ensure the maintenance of proper books of accounts, establish transparent policies and procedures to ensure the independence and effectiveness of audit functions, and integrity of reporting,” it said.