• Mojocare was accused of inflating its financials and paying questionable vendor partners
  • The telehealth startup said the layoffs were made to 'rationalize costs'
  • GoMechanic, Zilingo and BharatPe are other Sequoia-backed startups accused of business misconduct

Investors at the Indian health and wellness startup Mojocare said they will be "scaling down operations" after they found "financial irregularities" at the company.

"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," the investors said in a joint statement, as per Business Standard.

As a result of the findings, the company will be scaling down its operations as the investor group works with the startup during the transition period.

While investors did not specify the events that led to the launching of the probe into Mojocare, Indian news outlet Morning Context reported Sunday that the startup had been inflating its financials and engaged in paying questionable vendor partners for some time.

The startup denied "all accusations of money being taken out of the company."

Mojocare recently laid off between 150 and 170 employees or about 80 percent of its workforce, citing the need to "rationalize costs," CNBC-TV18 reported.

"Facing difficult market conditions, we at Mojocare have had to make tough decisions to improve our unit economics," a spokesperson told the outlet.

The startup's investors include Peak XV Partners (formerly Sequoia Capital India and Southeast Asia), Better Capital, Chiratae Ventures, B Capital and Surge among others.

In May 2022, Mojocare saw its major investors rallying to land the company $20.6 million in a Series A funding round. At the time, the company said the funds raised will be used for product expansion and diversifying the product portfolio among others.

News of Mojocare's layoffs and scaling back came after several other Sequoia-backed Asian companies have been accused of business misconduct.

Last year, car servicing startup GoMechanic was accused of financial misreporting after Malaysian sovereign fund Khazanah Nasional and Japan's SoftBank jointly tapped accounting firm EY to review GoMechanic's financials.

GoMechanic co-founder Amit Bhasin has since admitted to errors in the startup's financial reporting. The company also announced earlier this year that it was slashing its workforce by 70%, affecting around 700 employees.

Another Sequoia-backed startup, e-commerce platform Zilingo, was accused of "significant irregularities in reporting to investors" last year. Investors jointly hired Kroll Inc. to review the irregularities.

Zilingo investor Burda Principal Investments (BPI), said in April that misreporting to investors ultimately led to the Singapore fashion startup's failure.

Ankiti Bose, Zilingo's co-founder and former CEO, vowed that she would clear her name after she was ousted from her position. "There is not a single payment made by Zilingo that did not have proper documents or either the finance, tech, or operations teams were not aware of," Bose told Bloomberg last year.

Finally, an independent audit accused fintech startup BharatPe's co-founder Ashneer Grover and his wife Madhuri Jain of allegedly misappropriating the company's funds.

Peak XV, which is BharatPe's largest shareholder, said it will "take tough calls where needed in the interest of doing what is right" after news of BharatPe's issues emerged.

Last year, Peak XV said some of its "worst days are when we hear about breaches of integrity or ethics in the portfolio" of startups it supports.

"Recently some portfolio founders have been under investigation for potential fraudulent practices or poor governance. These allegations are deeply disturbing," the venture capital firm wrote in a blog post.

The company vowed to "take a set of proactive steps" to ensure that every startup across its investment portfolio commits to business integrity.

Sequoia logo is seen on smartphone in this illustration taken, June 13, 2022. Illustration picture taken June 13, 2022.
Sequoia logo is seen on smartphone in this illustration taken, June 13, 2022. Illustration picture taken June 13, 2022. Reuters / DADO RUVIC