Indian VCs and PEs highlight ERP as a governance factor in tech deals

Indian venture capitalists and private equity firms are increasingly emphasizing the role of enterprise resource planning (ERP) systems in evaluating tech startups. At a recent event in Mumbai, Krunal Patel, Managing Director and Member of the Board at NTT Data Business Solutions India, highlighted how ERP systems serve as a critical governance variable in investment decisions. He noted that ERP maturity provides transparency and builds confidence among investors, making it a key factor in assessing the financial health of a company.

The conversation around ERP systems has gained momentum as investors recognize their importance in managing back-office operations. Patel pointed out that many startups have overlooked the finance aspect of their operations, focusing instead on core tech solutions. This oversight can lead to challenges in scaling and managing finances effectively. ERP systems, when properly implemented, can address these gaps and provide a more holistic view of a company’s operations.

The financial implications of ERP adoption are significant. Patel mentioned that a 3 to 5 crore investment in ERP systems is relatively small compared to the overall investment in a startup. This figure underscores the importance of ERP in ensuring that companies have the necessary infrastructure to support growth and manage their finances efficiently. As startups scale, the ability to handle larger sums of money—such as moving from ₹10 crore to ₹100 or ₹1000 crore—becomes crucial.

In India, the focus on ERP systems is particularly relevant due to the regulatory environment and the need for compliance. Indian regulators, including TRAI, are increasingly emphasizing the importance of robust governance frameworks. ERP systems can help startups meet these requirements, ensuring that they are well-positioned to attract investment and scale effectively. The use of ERP systems also aligns with broader ESG goals, making them an attractive proposition for investors.

As ERP systems become a more prominent factor in investment decisions, their impact on the Indian tech ecosystem is expected to grow. Startups that integrate ERP solutions early on may find themselves in a stronger position when seeking funding or considering exits. This shift highlights the evolving role of governance variables in shaping the trajectory of tech companies in India.