Mojocare Stakeholders Mulling Legal Action Against Founders

A group of shareholders in the beleaguered healthtech startup Mojocare is reportedly considering legal action against the founders, a day after an investor group said an analysis of the startup’s financial statements revealed irregularities.

As said in a statement late last week, Mojocare’s investors, including VC firms and angel investors, are looking to wind down company operations. The investors are also looking to distribute the remaining capital among themselves.

Per an ET report, the investors have shared a draft note about the founders allegedly inflating the business numbers. The forensic audit of the company’s books, being conducted by Deloitte, is expected in around 10 days.

Some of the biggest investors of the Bengaluru-based Mojocare include Facebook cofounder Eduardo Saverin’s B Capital, Chiratae Ventures and Peak XV’s Surge (formerly Sequoia Capital India’s Surge).

The legal action will depend on the final report of the forensic audit, according to an investor source cited by ET. However, the source added that it is already clear that the founders lied about the revenue numbers. The investors were said to be discussing the nature of the legal case.

The Mojocare Story So Far

Mojocare was founded in 2020 by Ashwin Swaminathan and Rajat Gupta. The healthtech startup has raised around $24 Mn since its founding.

A source close to Mojocare told Inc42 that the founders confessed to fudging the numbers in May 2023. The source said the healthtech startup’s founders round-tipped funds via inventory sold to relatives, created fake invoices and inflated revenue.

Per the startup’s FY22 financials accessed by Inc42, Mojocare earned INR 12.12 Cr in total revenue in FY22, nearly 38 times higher than the INR 32 Lakh it reported in FY21. Given the recent developments, these numbers are subject to change.

Following the confession, the investor group is said to have appointed a CFO and asked the founders to step down. The investor group also shut down all operations at the startup.

ET reported that the startup still has INR 80-100 Cr in the bank. As such, the investors are discussing shutting down Mojocare entirely and returning the remaining capital to existing investors.

After a month of the confession, the healthtech startup fired 80% of its workforce, impacting around 150-170 employees.

The founders are said to have taken money out of Mojocare via their relatives, who they used to beef up revenue figures. While the founders confessed to fudging numbers, the company has denied taking money out of the company.

“At Mojocare, we are working closely with our investors to find a way forward. We categorically deny all accusations of money being taken out of the company. Together with our investors, we are actively figuring out what’s best for the business,” a spokesperson for Mojocare told Inc42.

Mojocare joins the list of Indian startups which have put their investors in a tight spot amid financial irregularities. In the past year, startups such as GoMechanic, Zilingo, Trell, Rahul Yadav’s 4B and others made headlines for all the wrong reasons.

GoMechanic, in particular, was a highly controversial case as the founders publicly admitted to ‘errors in judgment’ in financial reporting, which saw around 500 employees fired and the startup sold to a consortium led by Lifelong Group, which is a majority shareholder in GoMechanic rival Servizzy.