‘Decoding’ Starting Up with Vani Kola: Chapter 6 – What to do after a successful fundraise?

Startups are rarely prepared for regulatory scrutiny which comes inevitably once they start to scale operationally. While startups are born from ideas and innovation, their growth necessitates compliance.

Too often, early-stage founders push compliance, audits, board processes and other governance requirements to the back burner and face costly consequences later.

There are several examples of compliance failures and governance lapses around us that destroyed value for companies that exceeded growth metrics and value share, when trust and discipline was missing - reminding us that building a great company isn't just about hitting growth milestones, it's about establishing trust and discipline.

Founders today have a wealth of resources and understanding on fundraising strategies, market trends, competitive positioning and securing capital. However, that is just the first step in this long journey.

The 6th chapter of ‘Decoding’ Starting Up focuses on how startups should execute with discipline, ensuring compliance and managing governance.

In a simplistic summary, for startups to scale - transparency of timely information, disciplined processes and consistency is the key. While founders are enthusiastic to share their achievements, over communication is needed on potential risks, delays and setbacks.

Operating with Discipline: Planning for Success

Think of it like this - public companies operate under intense scrutiny, with earnings guidance, shareholder expectations, and price fluctuations shaping their discipline. While startups don’t face the same level of scrutiny, the mindset of disciplined execution should begin from the earliest stage.

A critical aspect of this is creating an engaged board and making compliance a part of frameworks. Sending timely board materials and having planned board meetings is something many startups struggle with.

Similarly, startups struggle with lapses in statutory and regulatory matters, which have serious penalties. Early adherence to best practices ensures smoother governance as the startup scales.

Maintaining a Strong Data Room

Prior to fundraising and engaging with investors, who will inevitably conduct due diligence – a founder should have the preparation in place. The ease and efficiency, transparency and comprehensiveness of the data room has an impact on the investors about the founder and their interest in investing.

A well-maintained data room is a sign of operational excellence that increases confidence in the team.

While many founders work on the pitch decks, they struggle to maintain their data room, leading to delays and prolonged diligence processes.

Key best practices for founders:

·?????? Swiftly responding to investor requests.

·?????? Keeping the data room regularly updated.

·?????? Having credible financial and legal vendors to assist with the diligence processes.

·?????? Ensuring quick completion of CP and CS to accelerate wiring process.

Creating an Annual Operating Plan (AOP)

Another significant part of the process is the business plan / Annual Operating plan.

A well-structured AOP that can be explained in detail by the management team as opposed to a banker or a junior member in the team creates a lasting impact on the investors.

An AOP should have the top down strategic objectives – translating into action and outcomes and also a bottoms up view of costs and resource allocation.

Key components of an AOP:

·?????? Revenue Targets & Growth Metrics: Clearly defined financial goals with quarterly breakdowns.

·?????? Budget Allocation: Expense planning across functions such as marketing, product development, and hiring.

·?????? Key Initiatives & Milestones: Strategic projects with defined timelines and accountability.

·?????? Team & Resource Planning: Headcount and hiring plans aligned with growth objectives.

What is an effective board meeting?

Effective board meetings are solutions focused, not just number reporting. Best practices include:

·?????? Sending detailed pre-reads with clear discussion topics.

·?????? Using meetings to address challenges and seek inputs.

·?????? Highlighting any potential future risks.

·?????? Ensuring alignment with management priorities.

·?????? Documentation on statutory compliances.

·?????? Following up with actionable next steps.

Founders who engage their boards strategically unlock valuable insights that can fuel growth.

Compliance, Governance, and Building for Scale

Execution thrives on consistency. Establishing monthly business reviews (MIS, financial statements, key updates) and quarterly board meetings ensures alignment and accountability.

Documenting these discussions provides a clear framework for decision-making.

Strong governance is the backbone of a sustainable business. Founders must go beyond simple compliance to demonstrate operational maturity.

Steps to ensure robust governance include:

·?????? Adhering to all legal and regulatory requirements.

·?????? Conducting regular internal audits to identify and mitigate risks early.

·?????? Keeping transparent records and decision-making frameworks.

·?????? Maintaining ethical business practices to reinforce investor and stakeholder trust.

Statutory Compliance: The Non-Negotiable

Startups must also adhere to statutory compliance requirements to mitigate risks and ensure smooth operations.

Key aspects include:

·?????? Tax Compliance: Timely filing of GST, income tax, and TDS returns.

·?????? Company Law Compliance: Adhering to the Companies Act, including annual filings and maintaining statutory registers.

·?????? Labor Law Compliance: Ensuring PF, ESIC, and gratuity contributions are up to date.

·?????? SEBI & RBI Regulations: For startups dealing with external investments, adhering to FEMA and FDI regulations is crucial.

·?????? Industry-Specific Regulations: Depending on the sector, businesses may need approvals from bodies such as FSSAI (for food startups) or RBI (for fintech startups).

Failing to meet these obligations can result in penalties, legal challenges, and loss of investor confidence.

Proactively setting up internal compliance tracking mechanisms will help startups stay on top of their statutory responsibilities.

Key Takeaways for Founders:

1.????? Maintain a real-time, organized data room.

2.????? Implement monthly business reviews and quarterly board meetings.

3.????? Build and review your AOP quarterly, aligning it with company goals.

4.????? Conduct solution-driven board meetings with detailed pre-reads.

5.????? Establish and maintain strong governance with proper documentation.

6.????? Over-communicate with your board, sharing both progress and setbacks.

7.????? Foster a company culture rooted in transparency, accountability, and learning.

8.????? Ensure statutory compliance across taxation, corporate governance, labour laws, and industry regulations.

Disciplined execution and strong governance are the most critical factors for building a successful company and founders must proactively make this a priority mandate.

Long term success will not be measured by the amount of capital raised or from which investor it was raised from. Success will be about the value created by the company, and by how the value was created.

Fraud is not always not about intentional stealing – gross negligence, inflating sales, missing regulatory deadlines and mismanagement also leads to a lot of value erosion and loss of credibility.

The fundraising chapter may be over, but a founder’s journey truly begins after fundraising!