SUMMARY
Sequoia reportedly plans to ramp up budgetary allocations to help strengthen corporate governance norms at its portfolio startups
However, a Sequoia India spokesperson rejected the report and said that the VC firm has not put any mandate for special audits
Besides GoMechanic, Sequoia India’s other portfolio startups such as BharatPe, Trell, and Zilingo also came under the spotlight for accounting irregularities
Hit by a wave of corporate governance issues at its portfolio startups like GoMechanic and Zilingo, venture capital (VC) firm Sequoia Capital is reportedly mulling ‘special audits’ of several of its investments in South Asia and Southeast Asia.
The VC firm is looking to onboard Ernst & Young (EY) for some of these audits and will shore up budgetary allocations to help strengthen corporate governance norms at its portfolio startups, Bloomberg reported citing sources.
Besides, the VC firm plans to replace junior staff members with senior partners on the boards of some of its portfolio startups. It also plans to be more selective while taking board seats at companies in the region, the report said.
However, Sequoia India denied the report. “As a matter of practice, Sequoia Capital India & Southeast Asia conducts due diligence ahead of new, first-time investments. We may conduct diligence ahead of a follow-on round; at this juncture, we have not put a mandate for special audits,” a Sequoia India spokesperson told Bloomberg.
The development comes days after GoMechanic cofounder Amit Bhasin publicly admitted to committing ‘errors in judgement’ with regards to financial reporting. The startup has fired 70% of its staff, and is reportedly looking for a distress sale by car marketplaces such as Cars24 and Spinny.
Meanwhile, days after the fraud came to light, GoMechanic’s second biggest institutional backer, Orios, wrote down its investment in the startup.
However, GoMechanic is not the first startup backed by Sequoia to come under the spotlight for corporate governance issues and financial scandals. Prior to this, other portfolio startups such as BharatPe, Trell, and Zilingo were also in the dock for allegations ranging from financial and accounting irregularities to lax implementation of norms.
In the past, cofounders of its startups have also publicly sparred with Sequoia India leadership be it BharatPe’s former MD Ashneer Grover or Zilingo’s Ankiti Bose. The VC firm has also seen a host of corporate governance issues crop up in the past few years.
Sequoia is an active investor in the Indian startup ecosystem. Last year, its India and Southeast Asia arms collectively raised its biggest $2.85 Bn fund to largely invest in Indian startups.
