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Startups And Strategy For Post-funding Leadership Hiring

While background screening does not guarantee business success, it does empower startups to have confidence in the integrity of the right candidate, which could make all the difference in becoming a unicorn!

The last decade in India saw a wave of new business models, changing how we live and conduct business. The entrepreneurial mindset continues to prosper with angel investors, VC firms, and crowdfunding platforms backing ventures exhibiting innovative ideas. In a joint report by NASSCOM and Zinnov, India is expected to have at least 12 more unicorns in 2021, taking the count to 50. 

COVID-19 has impacted startups in numerous method approaches. Surviving and growing in the new normal will depend on their abilities to execute renewed strategies. For any business, more so in early-stage startups, senior executives are its key drivers and one of the most critical assets. They are responsible for setting a strategic direction, motivating employees, and steering them toward success. The management team defines the philosophy of a thriving company, reflecting values and standards of conduct to enhance long-term shareholders by protecting their interest. 

Traditionally, candidates are subject to some form of background checks prior to recruitment. An informed background check helps mitigate operational risk and facilitate the entry of only those senior resources who are in sync with the values of the company. A few other reasons for senior hire checks are the impact of their responsibilities, the authority they are bestowed with, and their access to business-critical information, such as financials, technology, proprietary data, strategy, and client data. Leading startups are increasingly opting for in-depth, investigative background checks incorporating new parameters to proactively identify ‘the good, the bad, and the ugly’ of their senior resources.

So, now that we know that appointing the right senior team is mission-critical, how can a start-up embark upon this journey? For any prominent startup, or a funded entity, the C-Suite, Board of Directors, Operating Partners, KMPs and the IT head, should be subject to an independent third-party screening process.

The investment community is extra cautious regarding due diligence and background checks conducted before sanctioning funds to entrepreneurial ventures. Such assessments may determine negative listings regarding bankruptcy, credit issues, or even money laundering. Driving such reviews aggressively for senior appointees at the portfolio startup companies, more so when bringing an outsider onboard, is a way to augment protecting the investment.

A comprehensive screening encompassing the candidate’s profile, direct and indirect corporate associations, regulatory compliance and enforcement listings, PEP links and litigation, along with checking for possible conflicts, is a cost-effective measure being adopted. Due diligence on an individual should include confidential source inquiries with developed sources, especially where concerns are indicated or assessed. 

Examples include criminal litigation against or by the previous employer, indirect links with politically exposed persons – such as direct corporate associations or even through close family members, are part of new-age due diligence investigations. 

Regulatory compliance checks further reveal if a potential candidate has been prohibited, disqualified, or blacklisted by a financial regulatory body in the country of recruitment. At the same time, organizations seek clarity on whether a senior candidate is the ultimate beneficial owner (UBO) for businesses in the name of family members, while being employed full-time elsewhere. 

Investigating firms are requested to assess the history of professionals who have been involved in harassment complaints during their careers and leaders who had the authority but may have failed to respond to concerns of sexual harassment promptly. In recent times, fraud cases involving misuse of non-compete clauses have increased litigation. With many senior professionals having worked or studied abroad, it has also become increasingly important for employers to procure information on similar issues in international jurisdictions.

A contractual agreement with a specialist firm with international experience and senior experts facilitates the background screening process. The ability to check candidate credentials ethically and legally supports the process of senior hiring by obviating the need for negotiations as offers to such hires are, often, time sensitive.

While background screening does not guarantee business success, it does empower startups to have confidence in the integrity of the right candidate, which could make all the difference in becoming a unicorn!

Source: Business World

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