GoMechanic has laid off 70% of its staff because the Sequoia India-backed startup grapples with investment crunch after the present and attainable traders discovered that the founders had misstated information.
The transfer comes because the Gurgaon-headquartered GoMechanic, which provides auto-services comparable to repairing and carwashing, has been suffering to boost price range for over a yr in spite of attaining complicated levels of deliberations with a number of traders.
GoMechanic was once in talks early final yr to boost a spherical of investment led through Tiger International at over $1 billion valuation, TechCrunch reported previous.
The talks didn’t materialize right into a deal after some discrepancy was once discovered throughout the due diligence procedure, a supply mentioned.
GoMechanic later engaged with various different traders, together with Malaysia’s Khazanah to boost a big spherical. Khazanah was once positioning to guide the spherical while SoftBank was once additionally having a look to take part.
This new spherical is not continuing thru as severe discrepancies were present in its books, two resources mentioned, inquiring for anonymity chatting with the clicking.
A probe into the seven-year-old startup through EY as a part of the due diligence for the new investment deliberation discovered rankings of problems together with inflated earnings and that some garages had been fictitious, two resources mentioned.
The startup is fast-running out of money in its financial institution and desires a brand new infusion quickly to live on, in keeping with a supply aware of the subject.
Chiratae Ventures, any other investor in GoMechanic, was once having a look to promote a few of its stocks a couple of months in the past at a valuation of $700 million, in keeping with any other supply aware of the subject.
In a joint remark, GoMechanic traders mentioned the startup’s founders not too long ago knowledgeable them of the “severe inaccuracies within the corporate’s monetary reporting.”
“We’re deeply distressed through the truth that the founders knowingly misstated information, together with however now not restricted to the inflation of earnings, which the founders have stated. All of this was once stored from the traders. The traders have collectively appointed a 3rd birthday celebration company to research the subject intimately, and we can be running in combination to resolve subsequent steps for the corporate,” they added.
In a LinkedIn publish on Wednesday, GoMechanic co-founder Amit Bhasin mentioned the startup made “grave mistakes in judgement as we adopted expansion in any respect prices, specifically in regard to monetary reporting, which we deeply be apologetic about.” (In an up to date LinkedIn publish, Bhasin edited out the phrase grave.)
“We take complete duty for this present state of affairs and unanimously have made up our minds to restructure the industry whilst we search for capital answers. This restructuring goes to be painful and we can sadly wish to let move of approx. 70 % of the staff. As well as, a 3rd birthday celebration company might be undertaking an audit of the industry. Whilst the location is some distance from the rest we may have ever imagined for Cross Mechanic, we’re running on a plan which might be maximum viable below the instances.”
The Gurgaon-headquartered startup has additionally advised the remainder group of workers to paintings with out pay for 3 months, Indian information outlet The Morning Context reported Tuesday.
The tale was once up to date with further main points together with feedback from GoMechanic co-founder and traders.