BENGALURU: Online car service and repair start-up GoMechanic has admitted to financial reporting ‘errors’, and will fire 70% of the 1,200-odd workforce. Now the cash-strapped start-up, which is backed by Sequoia Capital, Chiratae Ventures and Tiger Global Management, among other investors, will have its accounts audited by a third-party firm.
In a LinkedIn post, its co-founder Amit Bhasin said that they take full responsibility for this current situation and that they have decided to restructure the business while looking for capital solutions.“This restructuring is going to be painful and we will, unfortunately, need to let go of approximately 70% of the workforce,” he said.
“As entrepreneurs, we identify problems, come up with solutions, and explore every opportunity to grow those solutions to meet unmet needs.But in this instance, we got carried away. Our passion to survive the intrinsic challenges of this sector, and manage capital, took the better of us and we made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret,” he added.
Founded in 2016 by Kushal Karwa, Amit Bhasin, Rishabh Karwa and Nitin Rana, GoMechanic is a network of technology-enabled car service centres. These financial errors raise the question of accountability among start-ups.In September 2022, it was reported that SoftBank was planning to invest $35 million in GoMechanic.
In a joint statement, the start-up’s major investors said they were recently made aware of the serious inaccuracies in the financial reporting.“We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to inflation of revenue, which the founders have acknowledged,” the statement added.
As per Tracxn, the company raised $62 million in funding so far and its latest funding round was in June 2021. As of July 31, 2022, the start-up had employed 1,230 people. It was valued at $283 million in November 2021. In FY22, the firm reported Rs 96.8 crore revenues, compared to Rs 47.2 crore in FY21, and loss for the year stood at Rs 114.3 crore, up from Rs 27.4 crore in the previous fiscal.