BENGALURU: Major investors of health-tech start-up Mojocare have uncovered ‘financial irregularities’, and have initiated a review of the company’s financial statements. The start-up has also laid off 170 employees.
Investors of the start-up include Peak XV Partners (Sequoia India), B Capital and Chiratae Ventures. In a statement, they said, “While the analysis remains ongoing, initial findings have uncovered financial irregularities, and it has become apparent that the business model is not sustainable due to a variety of operational and market factors. As a result, Mojocare will be scaling down operations, and the investor group is working with the company via its transition.”
In August last year, the start-up, founded by Rajat Gupta and Ashwin Swaminathan, had raised $20.6 million.
Earlier, Online car service and repair start-up GoMechanic too had faced a similar issue and they admitted to financial reporting ‘errors’. Both start-ups are backed by Sequoia and Chiratae Ventures, among others.
When asked about such financial irregularities that are being witnessed by some Indian start-ups, Anil Joshi, Managing Partner, Unicorn India Ventures, told this newspaper that such discoveries undoubtedly impact the entire ecosystem.
“VCs have to deal with fund life and want to see their companies grow, but it doesn’t mean the growth should come at the cost of financial irregularities. It is true growth attracts attention for further funding but ignoring the mismanagement leads to question trust and intent. It would be wrong to paint everyone with the same brush but the fact is irregularities are happening at a large level,” he said.
In most cases, founders are first-time entrepreneurs and lack managing financial discipline in order to gain traction at a fast pace. In most cases, they miss building strong backend operations including finance management, he added.