GoMechanic Founder Admits To Financial Reporting Errors And Will Lay Off 70 Per Cent Workforce
Prior to this GoMechanic was in discussions to raise 75-80 million USD through funding led by SoftBank. The deal however was called off due to financial reporting errors.
The Sequoia backed car repair startup has stated that due to being cash-strapped they will lay off around 70% of their workforce, along with having their accounts audited by a third party. The co-founder of the car repair startup company, Amit Bhasin said that the co-founders take 'full responsibility' for the current situation.
Bhasin on a LinkedIn post 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." He further added, "Our passion to survive the intrinsic challenges of this sector and manage capital, took the better of us and we made grave errors in judgment as we followed growth at all costs, particularly in regard to financial reporting, which we deeply regret".
The co-founder also shared that they will be seeking "capital solutions." Before this, SoftBank and Malaysian sovereign fund Khazanah Nasional were to lead a 75-80 million USD funding for GoMechanic. The deal was later called off due to the accounting irregularities.
A close source said, "GoMechanic had reported overinflated numbers and fictitious garages. Some of its favored partner garages were found to be making disproportionately more money during due diligence".
The investors of GoMechanic issued a joint statement, "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 the inflation of revenue, which the founders have acknowledged. All of this was kept from the investors." They added, "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."
This will be the fourth Sequoia Capital-backed startup to report accounting irregularities. The financial service unicorn company BharatPe, e-commerce startup Zilingo and Trell the social commerce startup were also accused of accounting irregularities.
GoMechanic was founded by Kushal Karwa, Amit Bhasin, Rishabh Karwa, and Nitin Rana in 2016. The startup has a network of partner garages\workshops that provide car repairs and servicings at subsidized rates. The startup charges a commission from these garages.
Prior to this, GoMechanic was in talks to raise a funding round in 2022 with Tiger Global, at a valuation of approximately 1.2 billion USD which was also suddenly canceled.