India

Purvi Asher – Partner -MHCO India’s startup ecosystem has matured rapidly over the last decade. Founders are building businesses across artificial intelligence, ecommerce, fintech, health technology, logistics, renewable energy, and digital services with ambitions extending beyond domestic markets. Yet while startup formation continues to increase, long term survival remains uncertain. Many ventures fail within early growth phases despite promising products and strong market opportunities. Conversations surrounding startup failure frequently focus upon inadequate funding, weak product market fit, or competitive pressure. Such factors certainly influence outcomes. However, an overlooked issue often exists beneath visible business challenges. Early business structuring. Decisions made during formation stages involving ownership models, governance systems, incorporation methods, contractual frameworks, intellectual property allocation, and compliance planning frequently shape whether startups remain sustainable over time. Business structuring should therefore be understood as more than procedural formality. Increasingly, it functions as a survival mechanism. Startup Stability Depends Upon Systems Rather Than Ideas Alone Innovative ideas may attract investors and customers, yet sustainability usually depends upon internal systems. Startups often experience pressure once operations expand beyond small founding teams. New employees arrive. Investors seek transparency. Clients require contractual certainty. Regulators impose obligations. Businesses without organised frameworks may struggle responding to such complexity. Long term survival frequently depends upon whether operational foundations evolve alongside growth. Businesses built with stronger systems generally absorb uncertainty more effectively. Founder Disputes Commonly Begin During Informal Stages Several startups originate through friendships, shared ambitions, or professional partnerships. During early stages, founders often avoid detailed discussions regarding equity, authority, voting rights, or exit mechanisms. Optimism replaces documentation. Problems emerge when businesses gain commercial value. Questions arise concerning ownership percentages, strategic control, and future rewards. Formal agreements addressing founders’ roles, vesting structures, dispute resolution processes, and shareholder rights help reduce ambiguity. Startups maintaining internal clarity frequently preserve continuity during expansion. Equity Allocation Influences Future Organisational Health Poorly structured equity arrangements may create long term instability. Founders contributing unevenly over time may continue holding disproportionate ownership. Early team members occasionally receive informal promises without legal recognition. Such situations often produce tension during fundraising or scaling phases. Organised equity structures support transparency and fairness. Sustainable businesses usually establish ownership expectations before disputes arise. Governance Culture Begins Earlier Than Most Entrepreneurs Expect Governance is often associated with large corporations. In practice, governance habits begin during startup formation. Decision making procedures, financial approvals, reporting standards, and accountability systems shape organisational culture from inception. Businesses dependent solely upon founder personalities may encounter operational disruption during periods of growth. Structured governance encourages continuity beyond individuals. Long term resilience often reflects procedural discipline established early. Compliance Neglect May Become a Hidden Threat Regulatory issues rarely appear immediately. Startups occasionally postpone compliance responsibilities while prioritising growth. Tax obligations, corporate filings, contractual requirements, labour considerations, and sector specific regulations may receive limited attention. Problems accumulate gradually. Consequences often surface during investment rounds, acquisitions, audits, or disputes. Businesses integrating compliance awareness into early operations generally avoid costly corrective measures. Preventive legal planning supports stability. Financial Separation Protects Business Continuity Founders frequently finance operations through personal resources during initial stages. Without organised systems, personal and business finances become intertwined. Such arrangements may appear manageable temporarily. Growth increases complexity. Financial forecasting, accounting discipline, and risk assessment become difficult where boundaries remain unclear. Structured businesses often maintain stronger financial visibility. Survival frequently depends upon informed decision making supported by reliable records. Intellectual Property Ownership Influences Enterprise Value Modern startups derive considerable value from intangible assets including software, trademarks, proprietary processes, designs, and content systems. Ownership ambiguity surrounding such assets creates vulnerability. Questions involving creators’ rights or assignment mechanisms occasionally emerge during fundraising and acquisitions. Businesses organising intellectual property allocation early often preserve stronger control over enterprise value. Protection of intangible assets increasingly contributes to long term sustainability. Hiring Growth Requires Organised Foundations Businesses intending to scale eventually require teams. Recruitment introduces employment agreements, confidentiality obligations, compensation frameworks, and operational policies. Informal businesses may struggle maintaining consistency during expansion. Structured organisations generally manage workforce growth more effectively. Employees often prefer environments demonstrating procedural clarity and long-term stability. Team retention influences continuity. Continuity influences survival. External Crises Often Expose Structural Weakness Economic downturns, funding shortages, legal disputes, or sudden market changes frequently test startups. Businesses with documented processes and defined responsibilities tend to respond more effectively because internal systems support decision making during uncertainty. Startups lacking structure may experience confusion precisely when stability becomes essential. Organisational preparedness often determines resilience under pressure. Investors Examine Organisational Maturity Alongside Potential Investment decisions increasingly involve detailed legal scrutiny. Investors review ownership structures, governance practices, compliance histories, and contractual arrangements before deploying capital. Operational maturity influences confidence. Startups with organised foundations frequently navigate due diligence more efficiently. Early structuring therefore affects access to future capital. Capital access may influence long term survival. Strategic Partnerships Depend Upon Legal Readiness Partnerships with vendors, distributors, technology providers, and institutional clients often require contractual certainty. Counterparties commonly evaluate legal identity and organisational reliability before engagement. Businesses lacking formal structures may appear less prepared despite possessing innovative products. Organised foundations strengthen commercial credibility. Opportunities occasionally depend upon readiness rather than capability alone. International Expansion Requires Early Preparation Indian startups increasingly enter global markets during early stages. Cross border operations involve contractual obligations, taxation considerations, intellectual property concerns, and regulatory expectations. Businesses with organised structures generally navigate international complexity more effectively. Preparation reduces friction. Long term survival increasingly depends upon ability to operate across multiple jurisdictions. Entrepreneurs Are Beginning To Think Beyond Immediate Growth A noticeable shift has emerged among founders. Businesses are increasingly designed with future investment, acquisition opportunities, international expansion, and institutional growth in mind. Such ambitions require durable structures. Interest surrounding company formation in India often reflects awareness among founders that organisation supports sustainability rather than merely fulfilling procedural requirements. Business Survival Often Depends Upon Foundations Built Before Growth Arrives Rapid growth can create an illusion of stability. Businesses may achieve visibility while lacking internal systems capable of supporting complexity. Expansion unsupported by structure may produce vulnerability. Long term survival frequently depends upon governance quality, ownership clarity, compliance discipline, and operational organisation. Rising interest in business setup in India illustrates growing recognition among entrepreneurs that sustainable enterprises require preparation from inception. Conclusion Startup survival in India depends upon far more than innovation, ambition, or funding. Businesses operate within environments shaped by regulatory obligations, commercial relationships, market volatility, and operational pressure. Early business structuring influences how effectively startups respond to such challenges. Strong foundations cannot guarantee success. Weak foundations, however, may increase exposure to avoidable risk. As India’s entrepreneurial ecosystem evolves, founders increasingly recognise sustainable businesses are rarely built through momentum alone. Enduring enterprises often begin with organised systems established long before growth becomes visible.  

Purvi Asher, Partner - MHCO India’s startup ecosystem has entered a phase of maturity where growth is no longer limited to early-stage innovation. Expansion, scalability, and global integration now define the trajectory of modern startups. Entrepreneurs are not only building businesses for local markets but are also positioning their ventures for international reach. Several economic, regulatory, and technological factors are shaping this evolution. This article explores the key trends influencing business expansion within India’s startup ecosystem and how these developments are creating new opportunities for entrepreneurs. Strong Economic Momentum and Market Depth India continues to demonstrate strong economic resilience. Its expanding middle class and increasing purchasing power have created sustained demand across sectors. Startups benefit from access to a large and diverse consumer base. Urban markets are witnessing rapid digital adoption, while rural markets are gradually integrating into the digital economy. This dual growth pattern offers startups the opportunity to scale across multiple segments. The expanding consumer base also supports innovation. Businesses are able to test and refine products in varied market conditions, which strengthens their competitive position. Regulatory Reforms Supporting Business Growth Government reforms have played a crucial role in shaping the startup ecosystem. Policies aimed at simplifying compliance and encouraging entrepreneurship have improved the ease of doing business. Digital platforms have streamlined processes related to registrations, filings, and approvals. Entrepreneurs exploring company formation in India now experience greater efficiency and transparency. Regulatory clarity has reduced uncertainty and improved investor confidence. This has contributed to increased participation from both domestic and international stakeholders. Rise of Sector Specific Innovation India’s startup ecosystem is witnessing diversification across sectors. While technology remains dominant, other industries such as healthcare, fintech, edtech, and renewable energy are experiencing significant growth. Sector specific innovation allows startups to address unique challenges and create tailored solutions. This approach enhances scalability and market relevance. The growth of deep technology ventures is particularly notable. Startups are investing in artificial intelligence, blockchain, and data analytics to build advanced solutions. Such innovation attracts global investors and strengthens India’s position as a technology driven economy. Expansion Beyond Metropolitan Cities Startup activity is no longer confined to major cities. Tier two and tier three cities are emerging as new hubs for entrepreneurship. Improved infrastructure and digital connectivity have enabled this shift. Lower operational costs and access to untapped markets make these regions attractive for expansion. Startups can establish operations in smaller cities while serving national and global markets. This trend also contributes to inclusive economic growth. It creates employment opportunities and promotes regional development. Entrepreneurs are increasingly recognising the potential of these markets and incorporating them into their expansion strategies. Growth of Digital Infrastructure Digital transformation continues to shape business expansion in India. High internet penetration and widespread smartphone usage have created a robust digital ecosystem. Online platforms enable startups to reach customers across geographies. Digital payments and e commerce have simplified transactions and improved accessibility. Government initiatives aimed at digitalisation have further strengthened infrastructure. These developments support innovation and enable startups to scale efficiently. The integration of technology into business operations has become essential for growth and competitiveness. Increased Access to Funding and Investment Access to capital has improved significantly in recent years. Venture capital firms, private equity investors, and angel networks are actively investing in Indian startups. Global investors are showing increased interest in India due to its growth potential and market size. This has resulted in higher funding volumes and improved valuation of startups. Government backed funds and incentives have also supported early-stage ventures. These initiatives provide financial stability and encourage innovation. The availability of funding enables startups to expand operations, invest in research, and enter new markets. Focus on Scalable Business Models Startups are increasingly adopting scalable business models to support expansion. Technology driven platforms allow businesses to grow rapidly without proportional increase in costs. Subscription based services, digital marketplaces, and platform economies are gaining popularity. These models enable efficient resource utilisation and long-term sustainability. Scalability also enhances investor appeal. Businesses with clear growth potential are more likely to attract funding and strategic partnerships. Entrepreneurs are focusing on building flexible and adaptable models to navigate changing market conditions. Legal Structuring and Corporate Governance As startups expand, legal structuring becomes critical. Proper corporate governance ensures compliance with regulatory requirements and builds credibility. The preference for private limited company registration in India reflects the need for structured business operations. This form of entity offers advantages such as limited liability and ease of investment. Legal compliance is essential for maintaining investor confidence and avoiding disputes. Startups must adhere to statutory requirements and maintain transparent records. Professional guidance can assist in managing legal obligations and ensuring smooth operations during expansion. Globalisation and Cross Border Expansion Indian startups are increasingly exploring international markets. Global expansion provides access to new customers, partnerships, and revenue streams. Cross border operations require careful planning. Businesses must consider regulatory requirements, cultural differences, and market dynamics. Intellectual property protection and compliance with foreign laws are essential for successful expansion. Startups must adopt a strategic approach to manage risks and ensure sustainable growth. India’s growing reputation as a startup hub enhances its global standing and attracts international collaboration. Emphasis on Sustainability and Responsible Growth Sustainability has become a key consideration for modern businesses. Startups are integrating environmental and social responsibility into their operations. Investors are increasingly prioritising businesses with sustainable practices. This shift influences funding decisions and market perception. Startups focusing on clean energy, waste management, and sustainable products are gaining traction. This trend reflects a broader movement towards responsible business practices. Sustainability not only addresses environmental concerns but also creates long term value for businesses. Challenges in Business Expansion Despite significant opportunities, startups face several challenges during expansion. Regulatory compliance can be complex, particularly for businesses entering multiple markets. Competition is intense, requiring continuous innovation and differentiation. Access to skilled talent may also vary across regions. Infrastructure limitations in certain areas can affect operations. However, ongoing reforms and investments aim to address these challenges. Entrepreneurs must adopt a strategic approach and remain adaptable to overcome these obstacles. Future Outlook of India’s Startup Ecosystem The future of India’s startup ecosystem remains promising. Continued economic growth, technological advancement, and policy support are expected to drive expansion. Emerging technologies will create new opportunities for innovation. Startups will play a key role in shaping industries and addressing global challenges. Collaboration between government, industry, and academia will further strengthen the ecosystem. This integrated approach supports sustainable growth and development. India is likely to remain a leading destination for entrepreneurship and investment in the coming years. Conclusion India’s startup ecosystem is undergoing a transformative phase. Key trends such as digitalisation, regulatory reforms, and access to funding are shaping business expansion. Entrepreneurs are leveraging these developments to build scalable and innovative ventures. While challenges exist, the opportunities for growth are substantial. A strategic approach, supported by legal compliance and market understanding, is essential for success. As the ecosystem continues to evolve, startups in India are well positioned to achieve global impact.

The evolution of India’s securities market has brought with it an increasingly sophisticated regulatory ecosystem. At the centre of this framework stands the Securities and Exchange Board of India (SEBI), tasked not merely with punishing violations, but with preserving market integrity and investor confidence. Among the many enforcement tools available to SEBI, perhaps none has generated as much debate as the settlement mechanism. For instance, SEBI concluded proceedings against four entities linked to the former Indiabulls Real Estate Ltd. by accepting a settlement amount of ₹10.49 crore. The investigation focused on alleged diversion of funds from Albasta Infrastructure Ltd, a subsidiary of Indiabulls, to entities connected to promoters between fiscal years 2010 and 2017. By entering into a consent order, the companies avoided contested adjudication proceedings under SEBI’s PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) regulations. The regulator clarified that the settlement order is without prejudice to its right to initiate enforcement action. It said such action could be initiated if any representation made during the settlement proceedings is subsequently found to be untrue, if any settlement condition is breached, or if any discrepancy is found in arriving at the settlement terms. The settlement for some represents regulatory pragmatism which is often viewed as an efficient way to resolve disputes, reduce litigation, and ensure faster compliance. For others, it raises uncomfortable questions about accountability, transparency, and whether financial penalties alone can adequately address serious market misconduct. The answer, perhaps, lies somewhere in between. The Philosophy Behind Settlement The settlement framework allows entities and individuals facing regulatory proceedings to resolve matters without admission or denial of guilt, usually upon payment of a settlement amount and adherence to certain conditions. The idea is not unique to India. Mature regulators across jurisdictions, including the U.S. Securities and Exchange Commission (SEC), routinely rely on negotiated settlements as part of modern enforcement strategy. Litigation is expensive, time-consuming, and uncertain. Markets, however, require speed and stability. SEBI’s settlement mechanism emerged from this practical reality. Not every violation warrants years of adjudication. Technical lapses, disclosure delays, procedural non-compliance, or interpretational disputes often lend themselves better to negotiated closure rather than adversarial proceedings. Over time, the mechanism has become deeply embedded within India’s securities regulation framework. Where Settlement Has Worked Effectively One of the strongest arguments in favour of settlement is its ability to preserve commercial continuity while still ensuring regulatory compliance. For listed companies, prolonged proceedings can have severe consequences far beyond legal costs. Investigations may affect stock prices, financing opportunities, mergers, investor sentiment, and governance perceptions. In many cases, even unresolved allegations can become commercially damaging. Settlement offers finality Several large corporates and market intermediaries have used the settlement route to resolve disclosure-related proceedings, delayed filings, broker compliance issues, and procedural violations without prolonged reputational warfare. In such matters, settlement has often allowed businesses to undertake corrective measures while avoiding years of uncertainty. The settlement mechanism has also proved useful in cases where violations were not necessarily fraudulent but arose from ambiguity in regulatory interpretation. For example, disputes relating to takeover disclosures, inadvertent insider trading window violations, or delayed compliance reporting have frequently been resolved through settlement. In these situations, SEBI secures penalties and compliance commitments, while businesses avoid drawn-out litigation before the Securities Appellate Tribunal (SAT) and higher courts. The mechanism also benefits the regulator institutionally. SEBI deals with thousands of enforcements matters across intermediaries, listed entities, investment advisers, brokers, and market participants. Full adjudication of every proceeding would place enormous strain on administrative and judicial resources. Settlements allow SEBI to focus enforcement attention on more serious cases involving systemic fraud, market manipulation, or investor exploitation. The Cases That Triggered Criticism Despite its utility, the settlement framework has repeatedly come under public scrutiny particularly when deployed in high-profile matters involving influential market participants. Criticism tends to intensify when allegations involve insider trading, fraudulent disclosures, accounting irregularities, or market manipulation. In such cases, settlement is often viewed not as pragmatic enforcement, but as negotiated escape from accountability. The most commonly cited concern is the perception of “pay and move on.” This criticism became especially prominent in certain high-profile corporate matters where entities settled proceedings involving serious allegations without any formal admission of wrongdoing. While legally permissible, such outcomes often leave investors dissatisfied because the underlying factual issues remain unresolved. In some cases, involving insider trading allegations, market observers questioned whether monetary settlements alone sufficiently deter future misconduct. Critics argued that when serious allegations conclude without detailed findings or admissions, the regulatory process may appear opaque or lenient. The criticism is not entirely misplaced. Capital markets operate heavily on trust. Investors expect regulators not only to resolve disputes efficiently but also to publicly establish accountability where misconduct affects market fairness. Excessive reliance on settlements in serious matters risks creating a perception that enforcement can be negotiated rather than adjudicated. The challenge becomes even sharper when settlements involve large corporations with substantial legal resources. Smaller market participants may feel that sophisticated entities are better positioned to navigate regulatory negotiations and secure commercially favourable outcomes. The Stiffness Between Speed and Accountability At the heart of the debate lies a deeper institutional question: What should securities regulation primarily seek to achieve? If the objective is administrative efficiency and speedy enforcement, settlement is an effective tool. It reduces pendency, secures penalties quickly, and encourages compliance However, if the objective is public accountability and development of legal precedent, settlements may appear inadequate. Since matters conclude without findings on merits, important questions of securities law often remain unanswered. This has broader implications. Detailed adjudicatory orders help shape jurisprudence, clarify compliance standards, and guide market behaviour. Excessive settlement may deprive the market of such regulatory guidance. At the same time, forcing every matter into litigation may itself weaken enforcement. Delayed proceedings often lose deterrent value, while prolonged uncertainty harms businesses and investors alike. The answer therefore cannot be absolutist. SEBI’s Attempt to Strike a Balance Recognising these concerns, SEBI has gradually tightened its settlement framework over the years. Certain serious offences particularly those involving wilful fraud, market-wide manipulation, diversion of funds, repeat violations, or matters with significant investor impact face greater scrutiny and may not easily qualify for settlement. SEBI has also introduced structured settlement guidelines, internal committees, and more detailed considerations while evaluating applications. Factors such as the gravity of allegations, stage of proceedings, conduct of the applicant, and impact on investors increasingly influence settlement decisions. In recent years, the regulator appears to have adopted a more calibrated approach: using settlement as a compliance tool in appropriate cases while reserving aggressive enforcement for egregious misconduct. This distinction is crucial. A delayed disclosure violation and a pump-and-dump manipulation scheme cannot be treated identically merely because both technically fall under securities law violations. Beyond Law: The Reputation Factor Interestingly, settlement itself has evolved into a reputational calculation for companies. Earlier, settlement was often viewed as a quiet commercial resolution. Today, public scrutiny, media attention, shareholder activism, and governance expectations mean that even settled proceedings can significantly affect corporate reputation. Many companies now weigh not only the legal consequences of settlement, but also the optics of settling. In some situations, entities have chosen to litigate precisely because they believed settlement could be interpreted as implied wrongdoing, despite the “without admission or denial” framework. This changing dynamic reflects the growing maturity of Indian capital markets. Conclusion The debate surrounding settlement with SEBI weighs heavily on context, proportionality, and regulatory judgment. When used carefully, settlement is an indispensable enforcement mechanism. It promotes efficiency, reduces unnecessary litigation, secures compliance, and allows markets to function without prolonged uncertainty. However, when applied mechanically or in cases involving serious misconduct, it risks undermining public confidence and diluting the deterrent force of securities regulation. Ultimately, the legitimacy of the settlement regime depends not merely on the existence of the mechanism, but on how transparently and consistently it is exercised. In modern securities regulation, efficiency matters. But accountability matters just as much. The continuing challenge for SEBI lies in balancing both without compromising either.   By Mr. Safir Anand, Senior Partner, and Ms. Ritu Bhargava, Lead Managing Associate

Argus Partners is pleased to announce that it has advised health and wellness platform, Cult.fit (Curefit Healthcare Private Limited), on its Series G fundraise of approximately INR 440 crore from Temasek, through its investment arm, MacRitchie. This transaction is significant as a late-stage investment in one of India’s leading integrated health and fitness platforms, reflecting continued institutional investor confidence in the consumer wellness and fitness sector. The team at Argus Partners advising Cult.fit consisted of Ashwin Krishnan (Partner) and Shivali Srivastava (Associate). Anindya Ghosh (Partner) provided strategic inputs on the transaction. Read more at: Entrackr, INC42.