During the two-week VilCap training that our cohort took, we went through an abbreviated version of the peer-review process that their accelerator companies undergo. Six students from the class gave pitches of their “dream companies” for which everyone in the class gave a score, and the top two scorers would have won a prize of a fake $50,000 round of seed funding. This process was intriguing because it helped the other students in the room relate their own company ideas to the merits of the ones being presented and it allowed students to earn respect among their peers. However, for such a system, what happens if people do not vote honestly? What happens if there is corruption within the ranks and the best companies do not end up getting funded?
There is a saying that says a good company will always get funded. The above scenario may not be the end of the line for the top companies, but it does pose a hazard to the investor who has pledged funding for the “winner” and ends up putting its money in something that might not truly be the top of its class and has dishonest founders at its core.
One of the most striking differences about business in India is the level of corruption and deception on so many levels. We are lucky in the US to know that we don’t have to worry about getting charged double for a cab ride or about an order of General Tso’s ending up being Beef with Broccoli when it shows up at your door. (I’ve had my fair share of these types of situations already in just my first week.) I’d be oversimplifying to imply that nothing in India is what it seems, but I have learned that there is a significant level of additional due diligence and attention to detail that is absolutely necessary when handling business here. From inconsistent financials to collusion between competitors, even the social impact space is at risk.
You would think that people who are trying to “do good” would be honest people, but when any Indian company marketing to the poor (a segment of the population that in itself is over twice the size of the entire US population) is labeled a social enterprise, you can see how things can get dicey. USAID, the World Bank, and other organizations have always dealt with this issue when dealing with governments, but I fear that a few rotten apples may leave a bad taste for foreign impact investing, which has thus far received a huge wave of idealistic support from all of us “change the world” types (myself included). There’s a lot of amazing work being done here in India, don’t get me wrong, but a discerning eye and perhaps a little tough love are in store for the industry. As it says in the quote above, as soon as you lose your phone connection, you start playing games.