GoMechanic laid off 70% of its workforce as Sequoia India-backed startups faced funding shortages after existing and prospective investors realized the founders had misrepresented the facts. bottom.
The move comes as GoMechanic, a Gurgaon-based company that provides automotive services such as repairs and car washes, has been struggling to raise funds for more than a year, even though it has reached advanced stages of deliberations with multiple investors. You’re done for.
Earlier last year, GoMechanic was in talks to raise a funding round valued at more than $1 billion led by Tiger Global, TechCrunch previously reported. According to sources, negotiations fell short after several discrepancies were found during the due diligence process.
GoMechanic later raised a large round, working with a number of other investors, including Malaysia’s Khazanah. Khazanah was in a position to lead the round, and SoftBank was also considering joining.
The new round is no longer proceeding due to significant discrepancies in its books, two sources told reporters, asking not to be identified.
As part of its due diligence for a recent fundraising deliberation, EY’s investigation of the seven-year-old startup found a number of issues, including excessive revenue growth and some fictional garages. said two sources.
A source familiar with the matter said banks are running out of cash fast and startup failures that need new infusions soon to survive have been blamed on Sequoia India, India’s most influential venture investor. It’s a recent headache for South Asian market. Zilingo, BharatPe, and Trell, his three other Sequoia India-backed startups, have had governance and audit issues in the past year.
Another GoMechanic investor, Chiratae Ventures, was looking to sell a portion of its stake months ago at a $700 million valuation, according to another source familiar with the matter.
GoMechanic’s cap table, which raised $62 million and had a final valuation of $283 million post-money. (Data: Tracxn)
In a joint statement, GoMechanic investors said the startup’s founders recently informed them about “significant inaccuracies in the company’s financial reporting.”
“We are deeply troubled by the fact that the founders deliberately misrepresented facts, including but not limited to founder-acknowledged earnings inflation. The investor has jointly appointed a third party to investigate this matter in detail and we will work together to determine the company’s next steps,” they added. rice field.
In a LinkedIn post on Wednesday, GoMechanic co-founder Amit Bhasin said the startup “made a critical error in judgment as it followed growth at all costs, especially when it came to financial reporting.” (In his updated LinkedIn post, Bhasin edited out the word “grave.”)
“We have unanimously decided to restructure our business while taking full responsibility for this current situation and seeking a capital solution. About 20 people will have to be let go, 70 percent of the workforce, and a third party auditing the business, the situation is far from anything Gomechanic could have ever imagined, but this We are working on the most viable plan under the circumstances.”
The Gurgaon-based startup has also instructed its remaining staff to work without pay for three months, Indian news outlet The Morning Context reported on Tuesday.
The story has been updated with additional details, including comments from GoMechanic co-founders and investors.
