The decade after the Global Financial Crisis produced an investment climate without historical precedent. Cheap money, global liquidity, and persistently low interest rates reshaped how capital behaved—and, more importantly, how institutions governed themselves. In this environment, speed became a virtue, restraint a liability, and governance an inconvenience. The rise and reckoning of funds like Tiger Global offers a powerful lens into how capital abundance can quietly corrode boardroom discipline, with consequences that surface only much later.
How post-crisis liquidity rewired investment behaviour
Following the Global Financial Crisis, central banks flooded markets with liquidity through quantitative easing and near-zero interest rates. Capital was not just cheap—it was impatient. Funds were under pressure to deploy quickly, chase scale, and secure exposure to “moonshot” growth stories before rivals did.
This environment rewarded velocity over verification. Mega-funds emerged that could write large cheques at speed, often bypassing the traditional rhythms of diligence. This was not irrational behaviour; it was perfectly aligned with the incentives of the time. But it altered something deeper than return profiles—it changed how governance was perceived.
When diligence becomes negotiable
As capital became abundant, governance safeguards began to soften. Term sheets grew lighter. Information rights were diluted. Vetoes were reframed as commercial irritants rather than fiduciary tools. What emerged was not recklessness, but what might be called “diligence-lite” investing, driven by fear of missing out rather than disregard for risk.
Each investor, acting rationally in isolation, relaxed governance norms to remain competitive. Collectively, this produced a FOMO-driven cascade in which safeguards were recast as friction. Over time, the market normalised weaker oversight—not by design, but by drift.
The quiet transformation of boards
Boards absorbed this shift almost imperceptibly. In late-stage private companies, the role of directors began to change. Oversight and stewardship gave way to validation. A strong funding round at a higher valuation became evidence that strategy, controls, and execution were sound.
Governance did not disappear; it became ornamental. Meetings were held. Minutes were recorded. Compliance boxes were ticked. But substantive challenge—the kind that slows momentum and forces uncomfortable recalibration—was often absent. When capital is impatient, governance still exists, but it no longer bites.
The marquee investor fallacy
One of the most persistent myths of this period was the belief that the presence of a blue-chip investor substituted for scrutiny. If a globally reputed fund was on the cap table, it was assumed that hard questions had already been asked.
Independent directors, consciously or otherwise, deferred to reputation. Challenge softened into consensus. What emerged was governance theatre—procedurally correct, substantively hollow. Yet reputation is not diligence, and pedigree is not a defence.
Fiduciary duty versus growth pressure
This dilution of governance is not merely a best-practice concern; it has legal implications. Under the Companies Act, 2013, directors owe duties of care, skill, and independent judgment. These are personal obligations. They are not discharged by passive reliance on investor prestige or market enthusiasm.
The tension is structural. Boards in hyper-growth environments are under constant pressure to enable momentum. Fiduciary duty, however, demands the opposite instinct at critical moments: to question, to slow down, and sometimes to resist.
Why private markets delay accountability
Public markets impose continuous discipline—quarterly disclosures, analyst scrutiny, shareholder activism, and regulatory oversight. Errors surface quickly and valuations correct, often brutally.
Private markets function differently. Price discovery is delayed. Accountability is postponed. Weaknesses can be buried under successive funding rounds at rising valuations. When reality intrudes, the sums involved are larger and the damage more diffuse. This delay is not a regulatory failure; it is a structural feature of private capital.
Law arrives after the fact
This is where courts and regulators eventually enter. The Supreme Court’s ruling involving Tiger Global reaffirmed a core principle: capital mobility does not dilute tax sovereignty, and treaty protections yield where transactions fail anti-avoidance scrutiny.
The message was unambiguous. Market convention and transactional form do not override legal substance. Courts are indifferent to what was fashionable or common at the time. They ask only whether conduct was defensible. Legal scrutiny arrives late, but it arrives on uncompromising terms.
India’s moment of choice
India’s growth story has been propelled by founder-led, capital-intensive enterprises heavily reliant on foreign institutional capital. This has delivered scale and speed, but it has also imported governance norms shaped in very different market conditions.
Domestic capital—AIFs, family offices, and pension-linked pools—is now seeking to emulate these strategies. The risk lies not in imitation, but in uncritical imitation. Replicating aggressive capital deployment without internalising the lessons of governance failure would erode trust across the startup-to-IPO pipeline.
Capital, influence, and responsibility
Large capital inevitably shapes behaviour. Institutional investors cannot retreat behind the fiction that governance is solely a boardroom concern or that their responsibility ends with cheque-writing. Their presence alters incentives, risk tolerance, and culture.
The duty, therefore, is not just to model cash flows, but to ask inconvenient questions—about controls, culture, and sustainability beyond the next funding round. These questions are rarely welcome in buoyant markets. They are invaluable in hindsight.
The underestimated virtue of restraint
There is a discipline markets periodically rediscover: knowing when to walk away. Insisting on governance terms that may cost a deal is not failure; often, it is judgment. Missing out is sometimes the price of prudence.
Liquidity will rise and recede. Booms will be followed by corrections. That is the rhythm of markets. What must not repeat is institutional amnesia.
What to note for Prelims?
- Impact of post-GFC liquidity on global capital flows.
- Role and duties of directors under the Companies Act, 2013.
- Differences between governance in public and private markets.
- Concept of anti-avoidance scrutiny in taxation.
What to note for Mains?
- How capital abundance affects corporate governance standards.
- Structural reasons for delayed accountability in private markets.
- Role of institutional investors in shaping governance culture.
- Lessons for India’s startup and private capital ecosystem.
The Tiger Global phase should not be remembered as a scandal, but as a lesson. Capital can forgive losses. Institutions are less forgiving of failure to learn. The real question is not what happened in the last cycle, but what governance standards we choose to institutionalise before the next one arrives.
