Investors Raise Financial Irregularities at Healthtech Startup Mojocare The Bengaluru-based startup's financial problems, which include overstating revenues, have surfaced less than a year after it raised $20.6 million in its Series A round.
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Investors in Mojocare said they have discovered "financial irregularities" at the health and wellness startup and are taking steps to scale down operations.
The action comes after the Bengaluru-based startup, which is backed by Peak XV, B Capital, and Chiratae Ventures, fired 150 employees earlier this week, accounting for the majority of the workforce.
The investors claimed in a joint statement that they were reviewing Mojocare's financials and that their preliminary results revealed the startup's chosen business model was "not sustainable due to a variety of operational and market factors."
The investors didn't make it clear why they decided to look at Mojocare. According to a report published on Sunday by Morning Context, Mojocare has been exaggerating its income figures for some time by frequently working with and paying dubious vendor partners who are related to the founders. Mojocare issued a statement denying emphatically "all accusations of money being taken out of the company."
As per reports, major investors in Mojocare have already hired Deloitte to conduct a forensic audit at Mojocare, and the process has been ongoing for the past one to two months.
Earlier this week, the three-year-old startup, which has received about USD 24 million in total, admitted that its business fundamentals have fallen short lately.
A company official said earlier this week, "Facing difficult market conditions, we at Mojocare have had to make tough decisions to improve our unit economics."
The Mojocare incident is a repetition of the GoMechanic controversy, where the owners admitted to getting carried away and falsifying their accounts to display better sales statistics. In a similar vein, a few other businesses have disclosed some other financial irregularities over the past year or so, including Rahul Yadav's second startup, Broker Network (4B Networks), Trell, Zilingo, and BharatPe.
Peak XV Partners, formerly known as Sequoia India and Southeast Asia, last year pledged to take proactive steps to do more to drive increased compliance at its portfolio startups.
The firm, which is the region's most active startup investor, announced that it will focus on a number of initiatives, including governance trainings for senior management and founders, the implementation of whistleblower policies, increased independent board representation, and calls for more disclosures and a stricter implementation of internal audits and controls.
