Burn Money; GCG must be implemented from small and medium enterprises (SMEs) to start-up entities

In an era with increasingly developing technology and faster digitization, millennials are called young people between 25-40 years. They are competing in pursuing their careers. No longer dependent on the availability of job vacancies in giant dream companies, they began to realize their dream companies. Of course, it will not be easy and requires a very long time with a tiring process because the success of a Start-up has many factors behind it, such as financial support, business models, and organizational management. In general, start-up success can be determined from various aspects, such as customer, product, team, financial, and business models.

Along with the rapid development of the start-up world in Indonesia, based on data compiled from Startupranking.com, Indonesia ranks second after India in terms of the number of start-ups. However, in these developments, few Indonesians think that SMEs and start-ups are the same things. The above reality triggers a very fundamental question.

A start-up is a term that refers to any company that has not been in operation for a long time. These companies are mainly newly founded and are in the development and research phase to find the right market in the technology realm, of course. To answer the question of the difference between start-ups and SMEs, it can be seen from the product side. SMEs usually have products in physical form that can consume directly. At the same time, start-ups are companies built by applying technology in their business, such as software and applications. In addition to products, it can also be seen from the business scale between start-ups and SMEs. Start-ups have been designed so that later they can become big companies. The scale of the business is also not limited to the local or national level. Because all aspects of a start-up are designed to be ready to become a large company, the scale of its business is very likely to reach the international realm. Of course, many other things distinguish SMEs and start-ups.

Capital is one of the essential things when planning to set up a business, ranging from small businesses or SMEs for larger-scale enterprises such as start-ups. Start-up capital and SMEs can both come from personal funds. But in its development, start-ups will look for investors who can fund the growth they want to pursue. The goal followed by start-ups is rapid growth. To achieve this goal, start-ups do not hesitate to spend a lot of funds, whether for product development, acquisition of new users, or other things that support growth. That’s why start-ups are so generous in “burning money” and actively seeking investors.

The phenomenon of burning money is common and is increasingly happening in start-up businesses. Still, in practice, start-ups often dissolve in this phenomenon for a prolonged period and increase the number of losses they receive to attract potential consumers’ attention. Although it is considered to have many benefits and advantages, burning money still requires careful planning because many risks await if it is not planned properly. Such as failed start-ups, detrimental to investors, bubble economy, and damage the start-up’s reputation.

To overcome and plan this strategy, Good Corporate Governance (GCG) is needed. However, when discussing GCG or corporate governance and its implementation, we only focus on large, well-established companies. It is rare for GCG discussions to mention entrepreneurs and small companies as well as start-up companies. Actually, in principle, the implementation of GCG should be carried out in every business. Changes in the era in the 21st century today, the performance of Good Corporate Governance (GCG) has become an urgent matter for all organizations, both large and medium scale. In this case, large or medium-sized companies cannot be distinguished even though they have a GCG concept, although the implementation will be different. The implementation of GCG itself is related to the distribution or distribution of power and responsibility, as well as consequences and accountability on organizational performance or achievements.

In its implementation, using an effective and efficient way to realize the concept of Good Corporate Governance (GCG), there are at least 5 GCG pillars set by the National Committee on Governance Policy (KNKG), which we usually know as the concept of TARIF (Transparency, Accountability, Responsibility, Independence, and Fairness).

  1. Transparency (openness of information), transparency in carrying out the decision-making process, and transparency in presenting material and relevant information about the company.
  2. Accountability, namely the clarity of functions, structures, systems, and responsibilities of the company’s organs so that the company’s management is carried out effectively.
  3. Responsibility, namely conformity (compliance) in the company’s management to sound corporate principles and applicable laws and regulations.
  4. Independence is a condition where the company is managed professionally without conflict of interest and influence/pressure from the management that is not following applicable laws and regulations and sound corporate principles.
  5. Fairness (equality and fairness), namely fair and equal treatment in fulfilling the rights of stakeholders that arise based on agreements and applicable laws and regulations.

When a start-up is initiated, it is not always about how to be known and make a profit but also about the sustainability of the start-up itself. The phenomenon of burning money can be a bad thing and can hinder achieving the sustainability goal. However, with the implementation of GCG, it is hoped that this risk will be eliminated, and the start-up will reach its goals.


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