Car-servicing startup GoMechanic will let go of 70% of its workforce, company co-founder Amit Bhasin said on Monday in a LinkedIn post.
Bhasin also acknowledged lapses in financial reporting, which was reportedly discovered during due diligence by EY. GoMechanic was in talks with SoftBank to raise fresh capital. The co-founder said a third-party will now conduct an audit of the company’s business.
“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,” Bhasin said in the post.
The original post, however, had Bhasin admitting making “grave errors.”
Bhasin further said that the company has decided to restructure the business as it looks at capital solutions. The restructuring, however, involves laying off 70% of employees. According to the company’s page, the company has over 1,000 employees.
The development comes after a MorningContext report that GoMechanic was in dire need to raise fresh capital as the company struggled to clear dues of partner workshops.
With this, GoMechanic becomes another Sequoia-backed company after BharatPe, Trell and Zilingo, to be in the news for financial irregularities. In April last year, Sequoia India announced measures to tackle “willful fraud” in the aftermath of these startups facing charges of financial irregularities. Sequoia Capital last year faced a similar challenge with FTX, the global crypto exchange that had suddenly collapsed.
Founded in 2016, GoMechanic is backed by several marquee investors, including Sequoia Capital and Tiger Global. In June 2021, the company raised $42 million in a funding round led by Tiger Global.
In FY22, GoMechanic’s revenue rose 2.7x when compared to the previous fiscal year, managing to inch close to Rs 100 crore. Its operating income surged to Rs 91 crore in the last fiscal year as compared to Rs 34 crore in FY21. Outpacing its growth in scale, GoMechanic’s losses spiked 4X and stood at Rs 114 crore in FY22. According to Fintrackr, the biggest cost center for the firm was advertisement and promotion which surged 3.8X to Rs 65 crore.