Dynamic start-ups and the onerous requirements of corporate governance can often seem worlds apart.
Young high-tech ventures are often run on a shoestring by a tiny team, with some not even having established how they will actually make money. Many new entrepreneurs can only dream of an initial public offering, and the formal corporate governance requirements that can bring.
But the principles of good governance can still be of great value to start-ups, says the managing partner of one Dubai-based venture capital group.
Alvaro Abella, the managing partner at Beco Capital – which manages a portfolio of nine investments, including stakes in the taxi app Careem, the marketplace JadoPado and the auction site SellAnyCar.com – says governance principles such as having independent directors, regular reporting and diversity can all be useful to start-ups.
Here Mr Abella explains how good governance can be a boost to innovation:
What use is corporate governance in fostering innovation?
It can facilitate the flow of ideas, for instance, by having advisers and independent directors on the board who are subject-matter experts in areas where the company wants to innovate. That is a way to actually get fresh ideas, partnerships and contacts into the company. An up-and-coming start-up that is trying to do things in a different manner obviously requires some mentorship, some guidance and some advice.
Are there any other corporate governance guidelines – like on women being nominated to boards, or remuneration policy – that are relevant to young businesses?
Definitely. Incentives, and how incentives are created, can have a role in how a company moves forward in terms of innovation, how fast it can innovate. Diversity is always good. And I think reporting, and getting into a rhythm of reporting, for start-ups is something that will be required more and more. We generally think it’s good for start-ups to get into the discipline of reporting on a periodic basis.
Is this something that Beco Capital considers when it looks at businesses to invest in?
We definitely do that. And we not only talk the talk but walk the walk. We have an advisory board, we have people who are in attendance and whom we seek council from ourselves. And we definitely look to do that in any of the boards that we put together and establish in young companies.
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Governance in focus
■ Management: Know your requirements before you set up a board
■ Teamwork: The board is a team, and that's how it must work
■ Workplace Doctor: Abu Dhabi firm failing to maintain corporate governance principles
■ Awareness: UAE companies increasingly aware of gains to be had
■ AGMs: When annual meetings become forums for confrontation
■ Virtual AGMs: When the AGM is everything but personal
■ Editor's letter: An issue important to our well-being
■ History: Be good, because investors are watching more closely
■ Poll: Corporate governance in the UAE – have your say
■ Analysis: A good board brings right mix of knowledge and culture
■ Gender equality: 30% Club GCC chapter to boost women numbers on company boards
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