[poloman]

Most well known secrets of startups are tumbling out. As usual employees are the ones who pay the price.

GoMechanic founder admits to financial reporting errors, to lay off 70% of workforce

It is hard to believe the VCs have no clue about such large scale accounting frauds. After Byju's looks like every startup is in to fudging accounts and inflating the numbers

GoMechanic will be the fourth Sequoia Capital-backed startup to come under fire for accounting irregularities. In 2022, financial services unicorn BharatPe, Singapore-based business-to-business (B2B) e-commerce startup Zilingo, and social commerce startup Trell were accused of accounting irregularities.

https://www.moneycontrol.com/news/bu...t-9885111.html

..and this. Don't know whether to laugh or cry. Forget due diligince, common sense is missing for these big banks and VCs.
https://www.entrepreneur.com/busines...stomers/442778

[shankar.balan]

Originally Posted by poloman

It is hard to believe the VCs have no clue about such large scale accounting frauds. After Byju's looks like every startup is in to fudging accounts and inflating the numbers
..and this. Don't know whether to laugh or cry. Forget due diligince, common sense is missing for these big banks and VCs.l]

This is another big bad fraud perpetrated in the US.
Another startup, another young founder and another scam. Fudgy Fudgy Data. Apparently this lady did it using Data De-identification processes for her own Dodgy Purposes.

Of the 7 Deadly Sins, Greed is the ultimate.

https://finshots.in/archive/how-jp-morgan-got-scammed/

[TusharK]

GoMechanic co-founder Amit Bhasin has admitted to errors in financial reporting after irregularities were found in the company’s account books.



The car repair start-up was in talks to raise US$75-80 million in a funding round led by SoftBank, but the deal was called off due to financial irregularities.

According to media reports, GoMechanic had reported overinflated numbers and fictitious garages. It is also said that some of its favoured partner garages were found to be making disproportionately more money.

In an official statement, Bhasin confirmed that the company would get its accounts audited by a third party. Besides, it would also lay off around 70% of its workforce.

Official statement by Amit Bhasin, Co-founder, GoMechanic:



GoMechanic was founded in 2016. It operates a network of partner garages that offer car repair services. The platform is said to have over 900 garages in more than 40 cities.

Link to Team-BHP News

[poloman]

Originally Posted by shankar.balan

This is another big bad fraud perpetrated in the US.
Another startup, another young founder and another scam. Fudgy Fudgy Data. Apparently this lady did it using Data De-identification processes for her own Dodgy Purposes.

Of the 7 Deadly Sins, Greed is the ultimate.

https://finshots.in/archive/how-jp-morgan-got-scammed/

This fraudster claimed 4 million customers and bank paid $175m just for the mailing list
$45 for each customer. But it is another matter that a measly 300,000 were genuine. Even then the company was worth cool $13m as per bank's valuation strategy.

Now I understand why every startup is not interested in the product but only user data.

[anti21]

When facing the crunch, the time of VC Subsidy is ending and when faced with the heat, these "sharks" founders just take the straightforward way out to fudge the numbers with the hope they just reach the finish line like Zomato and PayTM where the investors and founders exit with a hefty profit at the expense of the public without having made a dime of profit.

It is extremely hard to build a sustainable profitable business at the growth speed many of these startups did without subsidizing. Remember, you can always make up revenue numbers by selling Rs 10 note for Rs 8.

Also, Forbes 30 Under 30 strikes again.

Forbes have gone on such a downward spiral giving their titles to anyone who can afford it, it's remarkable.

[reinhardt93]

This is why I would never trust an app-based mechanic service. If they can't figure out the financials of the company, how can I trust them to get a reputed mechanic to fix my car?

You're better off just taking it to your authorized service centre (who nowadays also have their respective apps for servicing) or speaking with a local mechanic who is trusted.

[padmrajravi]

Misreporting financial numbers usually puts top management in jail if it happens in listed companies. How are these founders getting away with these with just an apology and firing people? Isn't it cheating and financial fraud ?

The note is well written though. The PR team who composed it gets my respect. Writing such inspiring "I am taking full responsibility" notes is quickly becoming a hot skill in the VC-funded start-up era.

[GTO]

Errors in financial reporting is a polite way of saying, we lied / committed fraud. Read on Economic Times that an audit by E&Y unearthed lots of fudged data, including inflating the revenue numbers, fake garages & higher payments to "favoured" garages (make of that what you will).

End of the day, with threads like these - fake customer reviews & fake AC services - how can any brand survive? If I hear from 10 people about GoMechanic, 9 are complaints & 1 is satisfied. How can you survive with a 90% dissatisfaction rate?

In the midst of all the fancy degrees from top institutions, renowned board members, millions of dollars in funding, "big ideas" and out of the box thinking, some startups get the basics horribly wrong & die.

1. Offer a top quality product or service.

2. Keep your customers, employees & yourself happy.

3. Manage your finances properly.

4. Keep it real, ethical, honest.

I feel sad for all those who have been laid off & vendors who haven't been paid in months.

By the way, this is yet another Sequoia-backed company caught in fraud. Makes me wonder if the Sequoia dudes need some more QC & monitoring of their companies.

[naikameya]

Financial misreporting (aka faking the numbers) - I know someone will say it happens in most start-ups due to VC pressure. I still feel it is the rut that people get into to get a tag of having a start-up but all that doesn't matter when you become a slave to the incoming investor and dilute your product and ethics.

I take full responsibility should be added to Indian Penal Code and should mean whoever is being laid off impacted will be paid by this person for a reasonable duration. Yeh sab Doglapan hai.

For u car owners (not just enthusiasts), all it means, go to your dealer or a local garage to fix your cars directly. A company with questionable morals will not deliver great service and definitely a no-no for any non-cosmetic/plug-and-play work.

[SR-71]

Many of these new age online middlemen have contributed significantly in making things worse in some ways, irrespective of the sector they are servicing. Be it food, transportation, travel, insurance, shopping, services etc., everything has an online middleman in the form of an app. They all start out good but most fizzle out eventually cause they realise they are caught between a bean counting clientele and sky high returns expecting investors. It seems many wannabe entrepreneurs do not account for these challenges or they are simply affected by the ostrich syndrome. And when they fail, they fail big. The few who are passionate about what they do and who are careful with the investor money survive this cut throat competition.

On a side note and an off hand remark, I see SoftBank as a key investor in many of these new gen online platforms which eventually fizzle in a big way. Does SoftBank not keep a tight leash on its investments.

[parrys]

The problem is, none of these companies have any transactional profit.

Heavy on cash burn, high customer acquisition costs, unreasonable growth projection, over ambitious business heads with no specific domain expertise are few of the top reasons why these EXCEL SHEET based companies will go out of business.

Investors are also unhappy with small but 100% guaranteed profits. They want huge projections, even if they are unrealistic. Only to get an exit for themselves.

I myself had started a doorstep car service company in Mumbai Metropolitan Region. Even though it had merit, had to shut it down because it was labour and investment heavy.

[bobbyblr]

I think they have spent much of the funds for the fake customer reviews.

[yashg]

It's fraud, plain and simple. GTO is right, if it happens in listed companies, CEO goes to jail. Remember Ramalinga Raju? Essentially the business model of these middlemen startups is broken. There is just no way to profitability because they have to spend heavily to acquire customers. VCs don't care if they fudge the numbers as long as they somehow manage to capture the market and create enough buzz to either get acquired by a large company or go public and dump the shares on retail investors. Now that the free money tap has been turned off, skeletons will start tumbling out of the cupboards.

"Only when the tide goes out do you discover who's been swimming naked."
- Warren Buffett

[anantsood]

Cannot agree more. Too often startups think about the glamour of being a "startup" and that overtakes the fact that you have to focus on being a business - build something customers like and want to pay you for + try to service the demand in a way that you make a profit.

Tried GoMechanic at one point for my Fiat Punto in Bangalore. Was one of the 9 (dissAtisfied) people you quote. Didnt see what the brand provided that a FNG couldnt.

As a startup founder myself, I hope sanity returns and we don't oscilate between boom and bust cycles fueled purely by "investor" money.

Originally Posted by GTO

Errors in financial reporting is a polite way of saying, we lied / committed fraud. Read on Economic Times that an audit by E&Y unearthed lots of fudged data, including inflating the revenue numbers, fake garages & higher payments to "favoured" garages (make of that what you will).

End of the day, with threads like these - fake customer reviews & fake AC services - how can any brand survive? If I hear from 10 people about GoMechanic, 9 are complaints & 1 is satisfied. How can you survive with a 90% dissatisfaction rate?

In the midst of all the fancy degrees from top institutions, renowned board members, millions of dollars in funding, "big ideas" and out of the box thinking, some startups get the basics horribly wrong & die.

1. Offer a top quality product or service.

2. Keep your customers, employees & yourself happy.

3. Manage your finances properly.

4. Keep it real, ethical, honest.

I feel sad for all those who have been laid off & vendors who haven't been paid in months.

By the way, this is yet another Sequoia-backed company caught in fraud. Makes me wonder if the Sequoia dudes need some more QC & monitoring of their companies.

[man_and_machine]

I think when someone is down we tend to pile up everything on it. The wrongs needed to be pointed out, but not follow the 'broken window' concept.

There is was nothing wrong in the idea of a D2C service provider, platform and aggregator in this space. Today, for out of warranty cars, this is a big problem space, has good margins and the TAM is growing. We would never bat an eye lid towards an mFine or an Apollo chain in healthcare, or an UrbanClap.

What is wrong is when ethics are thrown out and short cuts are taken to demonstrate pseudo growth tuned only words fund raise. That is so very wrong in multiple ways. It not only affects the employees, it also dilutes the trust in the startup funding eco-system. This they are fully guilty of.

Since its private equity, Sequoia can (might) pursue legal action, but had it been a public fund, then surely jail time is not impossible.

I would not surprised if someone new fills this void. It's like start brith, from the supernova of an older star new stars are born. Hope the next one shines bright.