GoMechanic Sacks 70% of its Workforce, Admits to ‘Serious Blunder’ in Financial Reporting
GoMechanic, a car servicing startup, will sack roughly 70% of its workforce as it looks to reorganize its business after failing to raise funds for more than a year.
“The startup made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret,” said GoMechanic co-founder Amit Bhasin in a LinkedIn post.
“We take full responsibility for this current situation and unanimously have decided to restructure the business while we look for capital solutions.” “This restructuring is going to be painful, and we will, unfortunately, need to let go of approx. 70 percent of the workforce,” Bhasin wrote.
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The layoffs emerged after the Gurugram-based startup was unable to raise funds from investors due to allegations of inflating revenue. EY, an audit firm, had performed due diligence on the Sequoia-backed car repair company.
The startup will now recruit an outside firm to audit its operations.”While the situation is far from anything we could have ever imagined for Go Mechanic, we are working on a plan which would be most viable under the circumstances,” Bhasin wrote on LinkedIn.
“We were fortunate to get support from a large number of investors in this journey… 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,” says Bhasin.
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In a joint statement, the startup’s investors said, “The investors of GoMechanic 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 inflation of revenue, which the founders have acknowledged.”
The Sequoia-backed startup raised $42 million (approximately Rs 311 crore) in June 2021, led by Tiger Global. According to Bloomberg, it was in talks with investor Khazanah Nasional for a $100 million round in August 2022. Orios Venture Partners, Chiratae Ventures, and the Pawan Munjal family office are among its other investors.
Private equity (PE) and venture capital (VC) investments into Indian firms fell 29% year on year to $46 billion across 1,261 deals in 2022, according to market research firm Venture Intelligence. In 2021, local companies had received approximately $65 billion in PE-VC investments across 1,362 transactions. In the startup space, VC investments fell to $24 billion in 2022, compared to $35.4 billion in 2021 for new-age firms.
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