Car servicing startup GoMechanic will fire around 70% of its workforce as the company looks to restructure its business after struggling to raise funds for more than a year.
In a LinkedIn post, GoMechanic co-founder Amit Bhasin said the startup "made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret."
"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 approx. 70 percent of the workforce," Bhasin wrote.
The layoffs come after the Gurugram-based startup failed to raise funds from investors amid reports that it inflated revenue. Audit firm EY had conducted due diligence of the Sequoia-backed car repair company.
The startup will now hire a third-party firm to audit its business. "While the situation is far from anything we could have ever imagined for Go Mechanic, we are working on a plan which would be most viable under the circumstances," Bhasin wrote on LinkedIn.
"We were fortunate to get support from a large number of investors in this journey... 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," says Bhasin.
In a joint statement, the startup's investors said, "The investors of GoMechanic were recently made aware by the company's founders of the serious inaccuracies in the company's financial reporting. We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to inflation of revenue, which the founders have acknowledged."
GoMechanic had last raised $42 million in a Series C funding round led by Tiger Global in June 2021.
According to market research firm Venture Intelligence, private equity (PE) and venture capital (VC) investments into Indian firms dipped by 29% year-on-year to $46 billion across 1,261 deals in 2022. Local companies had garnered about $65 billion in PE-VC investments across 1,362 deals in 2021. In the startup space, VC investments declined to $24 billion in 2022 compared to investments of $35.4 billion that new-age firms attracted in 2021.
Earlier this week, ShareChat parent Mohalla Tech sacked around 500 employees or 20% of its staff, months after it raised around $255 million in funding from a clutch of investors.
