SUMMARY
The VC has ended its association with Algo Legal after it claimed to have found ‘concerning incidents’ involving the firm and related parties
A recently concluded investigation in a portfolio company has also brought concerning details to light, Sequoia said
Algo Legal was founded by Kapoor in 2019 after he ended a nine-year-stint with Sequoia India as its general counsel
Juggling a slew of problems related to founders in its portfolio, the stalling of its latest fund closing and after warning some of its founders about the ‘funding winter’, Sequoia Capital has now told its portfolio companies that it has stopped working with law firm Algo Legal, which was founded by former Sequoia general counsel Sandeep Kapoor.
Inc42 has reviewed the note that the VC sent to its portfolio, ending its association with Algo Legal after an investigation into a portfolio company found ‘concerning incidents’ involving Kapoor’s firm and related parties.
“Sequoia India & SEA came to be informed of concerning incidents involving Algo Legal, a service provider associated with a former senior Sequoia India employee, and related entities. A recently concluded investigation in a portfolio company has also brought concerning details to light regarding such entities.Sequoia India & SEA (and affiliate entities) have terminated all arrangements pursuant to which any services were being provided to the firm by Algo Legal and related entities and has referred the matter to legal advisors to seek their counsel on actions, if any, to be taken.” — An extract from Sequoia’s email to its portfolio on Algo Legal
Sequoia told founders working with Algo Legal or its related entities that moving forward they need to inform AZB & Partners about their dealings. AZB is a noted corporate law firm in India, with offices in Mumbai, Delhi NCR, Bengaluru and Pune.
While the letter does not explicitly state that the related party involved with Algo Legal in this investigation, sources have told us that Algo Legal had dealings with many of Sequoia’s portfolio companies. For instance, sources told Inc42 that during Zilingo’s layoffs in mid-2020, Algo Legal was the third-party firm managing the legal ramifications and other formalities involved.
Multiple sources told us that Algo Legal representatives were in the room when they were let go by Zilingo between March and May 2020. And any queries in relation to their termination were directed to the law firm, we were informed.
Algo Legal was founded by Kapoor in 2019 after he ended a nine-year-stint with Sequoia India as its general counsel. The law firm has been an advisor for a number of Sequoia-led funding rounds including CRED’s unicorn round in 2021.
Sequoia Capital India did not respond to Inc42’s queries on the probe into Algo Legal. Responding to ET, which first reported the email, Kapoor denied receiving any communication from Sequoia Capital India and SEA about any probe.
From Zilingo To Trell: Many Fires In Sequoia’s Portfolio
It is interesting that Sequoia’s note to the founders does not mention which Sequoia-related entity was found to be involved in ‘concerning incidents’ with Algo Legal, there are multiple fires within the Sequoia portfolio at the moment.
Besides Zilingo, Sequoia has also had to deal with issues around irregularities at Trell besides the months-long BharatPe saga. While BharatPe and Zilingo’s issues have led to the dismissal of cofounders — BharatPe’s Ashneer Grover and Zilingo’s Ankiti Bose — the situation around Trell is also currently unclear even though there has been no change in the leadership.
The Bengaluru-based social commerce platform is currently seeing an exodus of employees and has also undergone layoffs to cut costs and bring burn back to manageable levels. The irregularities at Trell, reported earlier this year, also seem to involve a whistleblower allegation against the company’s management, according to sources.
Whistleblowers were also at the centre of the controversy at Zilingo that saw CEO and cofounder Ankiti Bose being suspended and subsequently fired from her position.
Of course, the BharatPe controversy erupted before Trell and Zilingo, and Sequoia is at the centre of it being the leading shareholder in the fintech unicorn. Here too Sequoia has faced allegations of overlooking key aspects in the company’s operations and financials when investing in the past, which has snowballed into wider concerns about misappropriation of funds by key personnel.
Given these troubles, Sequoia has even stalled the closing of its $2.8 Bn venture fund for India and Southeast Asian startups, as per communication sent to its limited partners in April.
