GoMechanic had all the ingredients for success – first-mover advantage, IIM A-graduate founders, big names of the VC world either invested or interested, a strong customer base, and a network of nearly 1,000 garages across 40 cities in place. However, it ended up having a very different outcome.
In a LinkedIn post, Co-founder Amit Bhasin admitted to financial reporting errors at the Sequoia-backed car repair startup. He said that he and the other three co-founders “got carried away” while trying to grow at all costs and made “grave errors” in judgment.
This was the fourth major instance of corporate governance lapses at a startup backed by Sequoia Capital in India. So, the GoMechanic had all the ingredients for success – first-mover advantage, IIM A-graduate founders, big names of the VC world either invested or interested, a strong customer base, and a network of nearly 1,000 garages across 40 cities in place. However, it ended up having a very different outcome. Question that everyone was asking was whether PE and VC investors were aware of what was happening with their portfolio startups?
Moneycontrol delved into the details of the happenings at GoMechanic over the last one year and found out that the investors had no clue about the company’s financial irregularities. This was because the books were audited by KPMG and they issued no qualifications on GeoMechanics books in FY22, even as the founders themselves later admitted to financial errors.
The GoMechanic incident is a stark reminder that startup founders need to be aware of the consequences of their actions. They should not get carried away in the chase for growth at all costs, as this can lead to serious legal and financial repercussions.
Moreover, investors need to be more diligent and ask the right questions to make sure that their portfolio startups are following proper corporate governance practices. They should also conduct regular audits to ensure that the financials are accurate and that all disclosures.