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GoMechanic’s unravelling raises questions over investors’ due diligence

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Aparajita Saxena

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Aparajita Saxena

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While the GoMechanic scandal has raised questions about the startup’s corporate governance, it has also triggered a debate in the ecosystem around investors’ role and responsibility in ensuring good corporate governance.

January 20, 2023

5 MINS READ

“This “move fast, break things” and “growth at all costs” mentality is a very VC-induced phenomenon. India used to be able to produce quality, solid companies like Haldirams, Dabur, and Godrej without raising outside capital and building slowly but steadily. Now, every six months, you hear of billion-dollar companies going bust, and it all ties into the fact that VCs want returns—by hook or by crook,” an investment banker at a large US financial services firm told The CapTable.

This is a sentiment that has been echoed by the rest of the business ecosystem over the last 24 hours. Where were GoMechanic’s investors as the company played fast and loose with its financials, and what were they doing all this while?

According to sources, the GoMechanic debacle came to light after Sequoia initiated a forensic audit of the firm’s books. Three sources YourStory spoke to added that GoMechanic had inflated its revenue figures and understated its expenses to elicit increased funding from investors such as Softbank and Tiger Global at a valuation in excess of $1 billion.

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