Key facts
- Venture capital firms are increasingly implementing clauses that allow them to strip founders of vested and unvested shares if fired for cause.
- A study found that 76% of companies now include such provisions, often valuing the shares at face value or cost.
- Only 2.8% of companies studied permit founders to retain vested shares after a for-cause departure.
- This shift in investor terms is a direct response to recent governance failures at companies like Byju's, BharatPe, and GoMechanic.
- Former Paisabazaar CEO Naveen Kukreja is in talks to raise approximately $9 million for a new technology-led investment platform.
- Real estate technology company Opendoor is shutting down its India operations and relocating its India-based roles to the U.S.
Venture capital firms are adopting more stringent terms in their investment deals, particularly concerning founder equity, in response to a series of governance failures at prominent startups. A recent study indicates that approximately 76% of companies now include clauses that allow investors to reclaim both vested and unvested shares from founders dismissed for cause, often at a nominal value.
This shift marks a significant departure from previous practices, where founders typically retained earned equity even after departing under adverse circumstances. The move is a direct reaction to high-profile governance issues at companies such as Byju's, BharatPe, GoMechanic, Trell, and Mojocare, prompting investors to scrutinize founder conduct more rigorously.
Experts note that while such terms are becoming more common in term sheets, their enforcement can be complex. Founders are also becoming more aware and are increasingly pushing back against overly broad provisions that could be triggered by mere allegations.
In parallel, Naveen Kukreja, the former CEO of Paisabazaar, is reportedly seeking to raise about $9 million in initial institutional funding for his new wealthtech startup. The venture aims to build a technology-driven investment platform offering advisory and distribution services, with plans to secure necessary licenses and scale rapidly in a competitive market.
Separately, real estate technology firm Opendoor has announced its exit from India, laying off all its India-based employees as part of a broader restructuring. CEO Kaz Nejatian stated that the company is relocating these roles to the U.S. to better align teams with customers, citing a reduction in the need for large offshore operations due to system consolidation and AI advancements.
In other news, Karnataka's IT/BT department has approved initiatives valued at over Rs 27 crore to support startup acceleration, industry-academia partnerships, and advancements in medical robotics and genome editing. Meanwhile, Anthropic CEO Dario Amodei has cautioned that the rapid adoption of artificial intelligence could lead to significant economic disruption sooner than anticipated.