2023 has not been a good year for talking about founder ethics. This time, it’s healthcare company Mojocare’s investors including Sequoia Surge, B Capital and Chiratae Ventures that have flagged financial irregularities at the Bengaluru-based company, according to a statement issued by the consortium on Sunday.
This has come after firing of 170 employees by the company on the pretext of operating as a small yet robust team. Entrackr was first to report about the layoff on Saturday.
“Major investors of Mojocare initiated a review of the company’s financial statements. While the analysis remains ongoing, initial findings have uncovered financial irregularities, and it has become apparent that the business model is not sustainable due to a variety of operational and market factors. As a result, Mojocare will be scaling down operations, and the investor group is working with the company through its transition,” the statement said. That statement, as strong an indictment as you will get from investors, is a pointer to a possible end of the line for Mojocare, as far as its investors are concerned.
Mojocare has raised $24 million in total and was valued at around $70-75 million during the last fundraise. After the recent layoffs, the company talked up capital efficiency and rationalising costs to explain the move to a small team. The company, however, did not mention the current team size.
“At Mojocare, we are working closely with our investors to find a way forward. We categorically deny all accusations of money being taken out of the company. Together with our investors we are actively figuring out what’s best for the business,” said a Mojocare spokesperson in a statement.
Mojocare follows almost half a dozen Sequoia portfolio firms such as BharatPe, GoMechanic, Zilingo, Trell, Byju’s that have been proved or are under scrutiny for financial irregularities. While BharatPe and Zilingo are being operated by a new team, GoMechanic got acquired by Servizzy, a consortium led by the Lifelong Group after firing more than 70% of employees. Trell also fired almost half of its workforce in March last year as its funding talks fell through.
While Sequoia’s portfolio firms have been under the spotlight, it is apparent that the issue is not limited to just that VC, as multiple other firms have been caught out in a season of oversights and overstepping. The old adage, when it floods, everything seems like a boat has never been truer, as shrinking funding has served to shine the light on far too many founders who have been caught out building a nest for themselves, instead of building a sustainable business. In an ecosystem that remains relatively closed to many startups for reasons as varied as ‘pedigree of founders’, scale of ambition to not being ‘disruptive’ enough, don’t expect things to change any time soon. As industry insiders know only too well, many of the founders in the dock are influencers in their own right, and their actions may have served to justify similar or worse transgressions at many other firms. What will probably happen is a push for stronger investor oversight on decision making, which is anathema for many founders. Finding a balance, or demonstrating a clear will to have a transparent approach to reassure investors will be critical going ahead.
