The biggest controversy of the year started with Ashneer Grover resigning from BharatPe as MD after two months of allegations, counter allegations, probe and mud-slinging
After BharatPe, another Sequoia-backed startup Zilingo suspended its CEO Ankiti Bose following an investigation into its finances and accounts
The first four months also saw 1,900 employees being laid off by six startups
The year 2021 was the year of unicorns for India. The startup ecosystem added 44 startups to the unicorn club in 2021, more than the total unicorns India produced between 2011-2020.
The year 2022 hasn’t been bad either, with India already adding 14 startups in the unicorn club. However, when founders are running such billion-dollar businesses, disagreements and disputes do crop up during the board meetings.
Most of the time, these differences of opinions or disputes are handled behind closed doors, but sometimes, when the abyss between the founders and investors grows beyond a point, skeletons tumble out of the closet.
The year 2022 saw a lot of controversies involving some of the big names from the startup world. Let’s take a look at some of the major controversies:
BharatPe Saga: Ousted Cofounder, Public Brawl At $3 Bn Startup
The controversies around BharatPe and its founder Ashneer Grover were the talk of the startup town, and it is highly unlikely that anyone would have missed it.
What started as an audio leak, in which BharatPe’s MD Grover was allegedly heard hurling death threats and abuses to a Kotak Bank’s employee for failing to secure allocation in Nykaa’s blockbuster IPO, quickly snowballed into a billion dollar fight.
While Grover initially took a voluntary leave after the leaked audio call went viral, little did he know that within two months he would have to resign as an MD from the firm that he had built and is now valued at over $3 Bn.
Soon after Grover went on voluntary leave, BharatPe announced an independent audit after reports about issues with the startup’s corporate governance and due diligence surfaced. Later, a preliminary inquiry found Grover’s wife Madhuri Jain’s connection to some financial fraud as well.
Meanwhile, Grover asked BharatPe’s board to remove its CEO Suhail Sameer. He even asked BharatPe to buy him out by paying INR 4,000 Cr for his 9.5% stake in the startup.
Grover, who had appointed former SBI chairman Rajnish Kumar as BharatPe’s chairman, later demanded his resignation too. Kumar, a well-known banker, was brought to the startup’s board to look into corporate governance.
Shashvat Nakrani, another cofounder of BharatPe, later accused Grover of creating a false narrative about the startup and further supported the board’s call for unseating Grover based on the auditor PwC’s report.
Amidst all this, Grover’s wife Jain shared images of office parties and alleged sexist work culture at the startup.
Reports later surfaced that BharatPe was withholding the salaries of a few employees. The startup is now planning to initiate action to clawback Grover’s shares.
Financial Irregularities Hit Trell
Social commerce startup Trell, which was waiting to receive a $100 Mn cheque that would have helped the startup inch closer to a unicorn valuation, suddenly found itself in a tight spot after an internal investigation carried out by EY India found anomalies in its financials.
The investigation report also alleged that third-party related transactions were carried out by its founders.
Soon after this, news came out that its $100 Mn funding round had fallen through and the loss-making startup was considering laying off almost 50% of its workforce.
Amidst all these, Pulkit Agrawal, cofounder and CEO of Trell, wrote a seething letter to its investors, including Sequoia Capital, stating that the EY investigation was neither started by the cofounders nor by the board.
Agrawal further wrote in the note, “(The founders) will not take a hit on their reputation lying down. If forced, we will do all that is within our command to protect our reputation and interest of the company and its shareholders.”
Shell Companies, INR 220 Cr Of Unaccounted Income At Infra.Market
In March, officials from the Income Tax Department (I-T Department) conducted raids at 23 offices of B2B unicorn InfraMarket and seized a large amount of incriminating evidence, including undisclosed income worth INR 224 Cr.
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The raids started on March 9, 2022 in Maharashtra, Karnataka, Andhra Pradesh, Uttar Pradesh, and Madhya Pradesh, covering multiple offices of the startup along with the residences of its founders.
According to the I-T Department, the directors of the unicorn admitted to a modus operandi of falsifying purchases; making large, unaccounted cash expenditures; and bogus accommodation entries to the tune of more than INR 400 Cr.
The department further unearthed a network of shell companies connected to Infra.Market. These shell companies are said to have bogus accommodation entries worth INR 1,500 Cr.
Infra.Market is one of the most profitable startups in the country, with a topline of 1067.7 Cr in FY21. It posted a total profit of INR 30.5 Cr in FY21.
Severed Ties With Cofounder & Investor, Lack Of Vision Led To Zilingo CEO’s Ouster
Singapore-based B2B fashion marketplace startup Zilingo’s founder Ankiti Bose was suspended amid an internal investigation into the startup’s accounting practices and finances. The Sequoia Capital-backed startup was in the process of raising a fresh round of investment which led to further questions about its accounting standards and financial practices.
Inc42 dug deeper into the issue to understand how faulty accounting practices and poor financials skipped the eyes of Zilingo’s board, which consists of representatives from Sequoia Capital, Temasek, BEENEXT, and Burda Investments.
While reporting this, it was unravelled that the relationship between Bose and cofounder Dhruv Kapoor had severed over the years over the differences in their vision for the company and the cultural disparity between operations and technology.
Bose further alleged that she faced harassment in 2021, and the startup’s board has now appointed Deloitte to further investigate this. Bose has also sent legal notices to Kapoor, and chief operating officer Aadi Vaidya on the complaints raised by her last year.
Currently, Zilingo is without a CEO. Kapoor is looking after his primary role as the CTO and Bose’s role of CEO in her absence. As per some reports, Ramesh Bafna, who was appointed as the CFO of Myntra in March 2022, is likely to be the next CEO of Zilingo.
Sequoia Capital’s Shailendra Singh also stepped down from the startup’s board along with Temasek Holdings Pte’s Xu Wei Yang and Burda Principal Investment Ltd’s Albert Shyy.
To learn more about the chain of events that led to the eventual downfall of Zilingo, which was once considered one of the most successful startups in Southeast Asia, click here.
Shopee Bids Farewell To India
In March, Singapore-based ecommerce player Shopee decided to shut its India operations. The startup cited market uncertainty as the reason for this, leaving around 300 employees without jobs.
The development came almost five months after Shopee launched its operations in the country, further raising the competition in the already crowded ecommerce market in India. Earlier in the year, India also banned Free Fire, a game operated by Shopee’s parent Sea Ltd.
EV Scooters Catch Fire As Summer Sets In
The months of March and April saw two-wheelers of various electric vehicles (EV) manufacturers go up in flames in different parts of the country. It started with a viral video of Bhavish Agarwal-led Ola Electric’s S1 Pro escooter catching fire in Pune. In a statement, the startup acknowledged the incident and said that appropriate action would be taken to find the root cause of the fire.
Ola Electric has been in the news for various reasons, including untimely delivery to malfunctioning of its EVs, since it started the deliveries of its escooters.
Okinawa, PureEV and Jitendra EV are among the other brands which saw their escooters catching fire. The government has formed a team to investigate the fire incidents, while Road Transport Minister Nitin Gadkari asked EV makers to take action to recall defective batches of vehicles.
Following this, Okinawa recalled 3,215 units of its escooters, while PureEV has recalled around 2K units. Meanwhile, Ola Electric also recalled 1,400 units of its EVs.
Government think tank Niti Aayog’s member and scientist VK Saraswat has even questioned the suitability of imported battery cells in Indian conditions.
Layoffs Shake Indian Startups
The year 2022 started with Tier-I investors-backed startups laying off employees, mostly to achieve profitability. Around six startups, of which three are unicorns, have laid off around 1,900 employees in 2022 so far.
It started with edtech startup Lido firing 150 employees. The startup was facing a cash crunch which led to salary dues and layoffs. Also, Lido couldn’t raise a fresh round of funding and thus was unable to run its operations and pay salaries to its employees.
Soon after this, around 40 employees of Tiger Global-backed OkCredit were laid off. The loss-making startup later said that it has decided to change its priorities and focus more on fintech initiatives.
Later, the second largest edtech startup Unacademy laid off around 1,000 employees based on their performance and also to cut costs and achieve profitability. Inc42 was the first to report on the development. Furniture rental startup Furlenco also fired 180 employees to cut costs and become profitable. Furlenco said around 95% of the laid-off employees were in customer-facing roles, including customer support and other similar roles.
Facebook-backed Meesho also laid off 150 employees in a restructuring of its Meesho Superstore grocery delivery service. The development came seven months after it raised $570 Mn at a valuation of $5 Bn.
Bengaluru-based edtech unicorn Vedantu became the latest startup to resort to job cuts, when it laid off around 200 employees.
Apart from these layoffs, around 800 employees of WhiteHat Jr resigned as they were asked to relocate to their work locations within a month’s time. Few of the employees claimed that it was a cost cutting exercise by the startup.