Sequoia-backed GoMechanic inflates revenue, fires 700

BENGALURU: Gurugram-based car repair startup GoMechanic has fired around 700 employees, and admitted to “errors” in financial reporting. The startup is being audited for misstating facts which investors said is not limited to inflating revenues. Some media reports said EY is conducting the due diligence on the irregularities associated with the business.
Co-founder Amit Bhasin, in a LinkedIn post on Wednesday, said: “As entrepreneurs, we identify problems, come up with solutions, and explore every opportunity to grow those solutions to meet unmet needs. But in this instance, we got carried away. Our passion to survive the intrinsic challenges of this sector, and manage capital, took the better of us and we made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret. We take full responsibility for this current situation and unanimously have decided to restructure the business while we look for capital solutions.”
GoMechanic has raised $55 million, and was valued at a little over $300 million in its last round of funding. It employs over 1,000 people. Its investors include Sequoia, Orios Venture Partners, Tiger Global, Chiratae Ventures and others. The company was founded in 2016 by four friends — Bhasin, Kushal Karwa, Rishabh Karwa and Nitin Rana. Their platform connected customers with repair garages for automotive maintenance and service. The services are available across 60 cities, and 1,500 workshops in India. Customers had the option to choose from a portfolio of 500 services and avail of doorstep car pickup and delivery.
Bhasin’s note went on to say, “This restructuring is going to be painful and we will unfortunately need to let go of approx. 70% of the workforce. In addition, a third-party firm will be conducting an audit of the business. While the situation is far from anything we could have ever imagined for GoMechanic, we are working on a plan which would be most viable under the circumstances. Need the support of our well-wishers more than ever,” he said. TOI tried to contact the company for more details, but there was no response.
GoMechanic’s investors put out a joint statement where they said they were recently made aware by the company’s founders of the serious inaccuracies in the company’s financial reporting. “We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to the inflation of revenue, which the founders have acknowledged. All of this was kept from the investors. The investors have jointly appointed a third-party firm to investigate the matter in detail, and we will be working together to determine next steps for the company,” the statement said.
For Sequoia, this is the fourth company in its portfolio to come under the scanner for financial irregularities in recent times. The others are BharatPe, Zilingo and Trell.

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