In a post on LinkedIn, Bhasin said the founders “got carried away” in their search for opportunities to grow.
“Our passion to survive the inherent challenges of this industry and manage capital has taken over and we have made errors of judgment as we followed growth at all costs, including with regard to financial reporting, which we deeply regret.” he wrote. without giving details of the misreporting.
A forensic audit has been commissioned to gauge the extent of the financial misreporting.
In addition to the cuts, the startup has reportedly asked its remaining employees to work unpaid for the next three months.
“We take full responsibility for this current situation and have unanimously decided to restructure the company as we seek capital solutions,” Bhasin wrote.
“This restructuring will be painful and we will unfortunately have to let go about 70 percent of the workforce. In addition, an external company will conduct an audit of the company.”
Claiming that while the situation is far from anything the founders could have ever imagined, GoMechanic is working on a plan that would be most viable under the circumstances.
Bhasin along with Kushal Karwa,
The startup is backed by major investors including Sequoia Capital,
“GoMechanic’s investors were recently made aware by the company’s founders of the serious inaccuracies in the company’s financial reporting. We are deeply saddened by the fact that the founders knowingly misrepresented facts, including but not limited to inflation of revenues, which the founders have acknowledged,” said a statement from major investors.
The investors, it said, have jointly appointed a third party to investigate the matter in detail.
“We will work together to determine the next steps for the company,” it added.
With loans of Rs 120 crore and repayments of about a third due, the Gurugram-based startup will need to raise funds to survive.
“We founded GoMechanic in 2016 to bridge the gap between process-oriented authorized service centers and cost-effective local workshops for people looking for a better auto repair experience. In a short period of time, we were able to create a start-up that created a “network of technology-based car service centers, offering its services with just a tap,” Bhasin wrote in the blog.
The effort was to enable an easy, affordable, and reliable experience that helped the company gain customer trust.
“We were fortunate to receive support from a large number of investors on this journey. We have come a long way from starting with a few hundred clients to growing our business exponentially to serving over 7 lakh clients to now,” he said.
“As entrepreneurs, we identify problems, devise solutions, and explore every opportunity to grow those solutions to meet unmet needs. But in this case, we got carried away.”
He went on to solicit the support of well-wishers.
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