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Be aggressive but play by rules: Uday Kotak’s advice to start-ups

Be aggressive but play by rules: Uday Kotak’s advice to start-ups

Kotak Mahindra Bank Executive Vice-Chairman and Managing Director Uday Kotak packed in plenty of pearls of wisdom for entrepreneurs in his keynote speech for virtual event hosted by IIAS on Tuesday. Here are some snippets.

Be aggressive but play by rules: Uday Kotak’s advice to start-ups Be aggressive but play by rules: Uday Kotak’s advice to start-ups

Kotak Mahindra Bank Executive Vice-Chairman and Managing Director Uday Kotak packed in plenty of pearls of wisdom for entrepreneurs in his keynote speech on ‘Governance Matters’ at the 'Start-up Boardroom: Building for the Future’ virtual event hosted by Indian Institute of Advanced Study (IIAS) on Tuesday. The veteran banker and entrepreneur also shared his views on balancing between too much and too few regulations and on the need for private capital to assess their relationship with their investee firms. Here are snippets from his address: 

For entrepreneurs: 

Be aggressive but within the law: In the early stages, start-ups have the need to be aggressive, but being aggressive has to be consistent with following the law. Experiment, but ensure you are within four corners of law. 


Being entrepreneurial is not inconsistent with being professional: A lot of creative people get enterprises off the block, where they face challenge is in sustainability. The key to sustainable success is a professional entrepreneurial approach which enables you to be creative and at the same time have processes and systems along the way.  


Give support to control functions in early stages: Often, when there are tough calls between a business decision versus a control decision, support control functions in an early growth form because business people normally have the upper hand compared to the control functions. When control functions are not given a fair voice, we’ve seen many, many companies head for trouble. 


Ability to adapt to shocks is crucial: When the RBI stopped bill discounting by private companies and banks, it brought our bill discounting business to a stop overnight. But we reimagined and reengineered ourselves to build a more sustainable model.  


Hasten slowly: This is crucial if you want to come into public markets and raise capital. Have a thorough health check-up of your firm in every which way by getting an independent governance expert, investment banker or a lawyer to do a top-to-bottom checkup of how ready you are for coming to the public markets. Pre-mature launches run the risk of accidents along the way. 


Ensure post-listing sustainable growth: Make sure sustainable growth in value rather than just a pop and a flat or a negative pop at the point of listing. Compounded annual growth over a long period of time is what will endear you to investors, particularly from the startup world. 


Be cautious with equity you own: While you need funding, be careful with the preciousness of the equity you own. Once you give it up, you’ll never get it back easily again. If you are truly committed to your startup, protect as much equity as you can as founders. 


For regulators 

The concept of principles-based regulation has given way to more rules-based regulation because principles-based regulation has been misused by the system in many, many cases. Today, we are seeing an excess of rules and regulations to the extent that a public listed company or a regulated entity in particular has such a huge overbearing load of compliance and regulation that it does lead to a risk of losing opportunity in the marketplace. 

As enterprises grow, regulation should have the flexibility of adjusting itself to the realities and facts of the case rather than a rule-based regulation which has the risk of stifling entrepreneurship. 

For private equity and venture capital  

They are biggest boons for entrepreneurs in the last 10 years. But they should ask themselves how they are aligning themselves to the long-term interests of the firm they are invested in. When the time comes for them to exit, whose interests are they obliged to serve—underlying investee company or maximising the returns on their investments? Mature, long-term private equity will look at this more carefully than just maximising its profit on its exit. I would ask private equity to get this important conflict well resolved otherwise the residual investee company faces disproportionate disruption at a point of exit by private equity. 

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Published on: Jan 19, 2022, 4:23 PM IST
Posted by: Tarab Zaidi, Jan 19, 2022, 3:48 PM IST