Start-ups attract our attention either when based on their rising valuations they are celebrated or when their valuations come crashing down. Three years ago, the music did not stop, and valuations kept soaring. Then, every other day a new soonicorn (a valuation of between US$ 500.0 million and US$ 1.0 billion/ Rs 40-80 billion) or a unicorn (a startup with a valuation of over US$ 1.0 billion, or Rs 80.0 billion) was anointed. And now just suddenly, it seems, that the chairs have all been removed.

Why has the mood soured? The uncomplicated explanation is that the valuations moved lockstep with the flow of funds. As the fiscal taps opened, money flowed and asset prices escalated, including those of start-ups. Once this tide turned, money became expensive, and valuations dropped. This is at best a partial explanation as it suggests that macro headwinds and tailwinds rather than the start-ups themselves, create their destiny.

Many factors explain the success and failures of start-ups, not all within the start-ups control. But one thing start-ups, as an asset class, should do is to is to increase focus on governance. Its absence, in large part accounts for the business breakdowns or governance missteps as seen in a string of entities - Siply, BharatPe, Trell, GoMechanic, Byju’s, Mojocare, Zilingo, ZestMoney to name just a few.

Read our blog on how start-ups can better prepare to deal with governance challenges and expectations here