Young founders which inspired professionals to follow their entrepreneurial calling are now ousted from their firms and struggling to keep startups afloat. After changing accounting methods revealed a massive loss at edtech unicorn Byju's, others such as BharatPe, Trell and now GoMechanic have been caught misreporting earnings. With four Indian startups funded by it embroiled in financial fraud, Sequoia Capital has decided to audit its investments across South Asia.
Sequoia may increase funding to fill gaps
The US-based venture capital giant, with investments in 400 startups globally, also has stakes in almost 40 Indian firms. But Sequoia along with Tiger Global and others, was caught off guard when an audit by Ernst & Young ahead of investment by Softbank and Khazanah revealed a scam at GoMechanic. After working with the audit firm, Sequoia will reportedly increase budget allocations to startups for improving their governance.
Senior partners to keep a sharper eye
The way board seats are acquired in investee firms will also be tweaked, as senior partners may replace junior members of Sequoia's team. The company has said that there is still no norm for special audits, but due dilligence will be conducted before follow-on funding rounds.
Sequoia, the firm behind Apple and Google, is the largest stake holder in GoMechanic, which misreported its revenues and mentioned non-existent garrages in its book.
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