Fundamental laws don’t change.
You cannot violate them.
And then hope to thrive.
In venture capital, the first thing we do when we are presented something disruptive is to look at the fundamentals. Is this plan violating some fundamental laws. And if yes, we throw it out. We don’t say why we passed. Now what is fascinating is that most of these projects get funded. Mostly by some very marquee names in the industry. We watch the fun. The end result is known but what is hilarious is to see these projects getting flipped a few times before they finally go down. And mostly they blame it on the promoter rather than in the technology.
It is the investors mistake and incompetence. But it is presented as the promoters crookedness and failure. It is easy to hang the promoter. Because it is the investor who has the capital. Byjus, blue smart, log9, Paytm … are all examples of investor incompetence.
But how do they get away. They get away because of breach of trust.
Typically an investor will tell the promoter “you can do what you want but keep me in the loop”. So when a bribe has to be paid or a govt inspector handled, a fake bill goes to accounts and cash is generated. The cash may not be pocketed but has been created to meet a requirement. Every large group from Tatas to L&T do this. Yet there is no head in the Big4 audited accounts which says “bribes paid”.
Cyrus Mistry called this out in Tatas. He got thrown out. No one likes to get into fundamentals. Between heavy bribing, large political donations, corrupt lawyers, related party transactions and consultants like Nira Radia – governance has bid Tata to the house of Tatas. And will do so to may other marquee board run promoterless corporate houses. The likes of Adani and Ambani have matured. They pay the bribes personally. Usually out of personal tax paid salaries. Now the books are clean and corruption is limited to what the promoters can afford personally. Even of you see the FBI indictment on Gautam Adani – even though I am 100% sure it is false and politically motivated – just like Rajat Guptas case – there is no mention of the company bribing. The only allegation is SEC misrepresentation.
What holds for human health also holds for corporates. In the end, death is both inevitable and an equaliser. Second if you take hormonal treatment to grow too fast, the side effects will hasten death. It is the rust within that kills iron. The same is true of corporates. Family disputes and internal politics kills companies.
The basics are the hacks.
And no one seems to remember them.
Till we legalise bribery in India, we cannot have honest accounting. And if the Big4 are signing fake accounts as they are – they need to be closed.
