The decline of 'Poster Boys' contributes to startup challenges, emphasizing the urgent need for good governance.

Recent governance issues with well-funded and prominent startups have compounded the existing bearish trend in the ecosystem amid the funding slowdown, industry leaders and experts remarked on Wednesday.

With startup giants like Paytm and Byju's facing scrutiny amid regulatory pressures, investors are exercising caution, prioritizing thorough due diligence processes.

Sanjeev Bikhchandani, a seasoned investor and Founder of Info Edge, stressed the importance of good governance as companies expand. He emphasized that sustainable and valuable enterprises require effective governance.

According to Shrijay Sheth, Founder of Legalwiz.in, instances of financial mismanagement and compliance-related concerns are increasingly prevalent. He highlighted the role of startup founders as custodians of investors' funds and urged investors to actively identify and address such issues, particularly those related to financial performance and fundraising.

Experts suggest that incubators, accelerators, and government-funded programs should focus on educating early-stage founders, especially first-time entrepreneurs, on compliance matters. Many founders struggle with compliance due to a lack of awareness, particularly regarding labor regulations, POSH policy implementation, and basic accounting practices.

Umesh Uttamchandani, Co-founder of DevX Venture Fund, emphasized the importance of due diligence and corporate governance throughout a startup's journey. At DevX Venture Fund, a strong emphasis is placed on corporate governance and organizational ethos. Regular communication with portfolio startups and transparency with investors are prioritized to ensure accountability and maintain clean financial records.