GoMechanic, an online vehicle repair platform, has laid off 70% of its workforce as the Sequoia India-backed start-up grapples with a funding crunch after the existing and prospective investors found that the founders had misstated facts, says a report from TechCrunch.
The move comes as the Gurgaon-headquartered GoMechanic, which offers auto services such as repairing and car washing, has been struggling to raise funds for over a year, despite reaching advanced stages of deliberations with several investors, the report says.
According to TechCrunch, GoMechanic engaged with a number of other investors, including Malaysia's Khazanah to raise a large round. Khazanah was positioning to lead the round, whereas SoftBank was also looking to participate.
"This new round is no longer proceeding as serious discrepancies have been found in its books," two sources, requesting anonymity speaking to the press, told the portal.
Quoting two other sources, the report says, "A probe into the seven-year-old startup by EY as part of the due diligence for the recent funding deliberation found scores of issues, including inflated revenue and that some garages were fictitious."
In a post on LinkedIn, Amit Bhasin, co-founder of GoMechanic admitted issues related to the platform's accounting. He says, "We take full responsibility for this current situation and unanimously have decided to restructure the business while we look for capital solutions. This restructuring is going to be painful and we will unfortunately need to let go of approximately 70% of the workforce. In addition, a third party firm will be conducting an audit of the business."
"...we got carried away," he says, adding, "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."
The company has reportedly asked the remaining staff to work without pay for three months.
For over a year, GoMechanic has been struggling to raise funds, despite advanced-stage discussions with several investors.
Moreover, the start-up was in talks to raise a round of funding via Tiger Global (an American investment firm) at a valuation of over US$1bn (billion) early last year, according to the report.
GoMechanic was founded in 2016 by Amit Bhasin, Kushal Karwa, Nitin Rana, and Rishabh Karwa. It connects car owners with repair service-providers in their area and also sells original spare parts and accessories for automobiles on its website.
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