“A majority of Mojocare investors 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 statement said. “As a result, Mojocare will be scaling down operations, and the investor group is working with the company through its transition.”
Mojocare joins the likes of BharatPe, Zilingo, Trell, GoMechanic and Rahul Yadav’s 4B Networks, all of which were found to have lapses in their financial reporting over the past year, amid a wider scrutiny of corporate governance at Indian startups.
Also read | Exclusive: Sequoia’s Shailendra Singh on corporate governance, VC accountability, frothy tech valuations and moreOn Saturday, Mojocare said it laid off 150 to 170 staffers across roles to improve its unit economics and better its capital efficiency.
“Facing difficult market conditions, we at Mojocare have had to make tough decisions to improve our unit economics. Despite our best efforts, our business fundamentals have not worked out over the past few months,” a company spokesperson said in a statement on Saturday.
The startup will revert to operating as “a small yet robust team” to figure out what is the best way forward for profitability, it said.
Chiratae Ventures is the largest shareholder in the Bengaluru-based company, while B Capital has invested the highest amount.
The startup had raised about $20 million led by the B Capital Group, a venture capital firm set up by Facebook cofounder Eduardo Saverin in August 2022. Existing investors Chiratae Ventures, Surge and Better Capital had also participated in the round. Prior to that, it had raised a little over $3 million.
Mojocare runs a direct-to-consumer business to address issues like reproductive health and fertility, hair care and weight loss through its online platform, which offers products and consultations with doctors for customised treatment plans.
What went wrong
Employees who have been retained have mixed feelings about the events that have unfolded over the weekend. Though anxious, they are also waiting to hear from management on Monday on the way ahead, they said.
While the audit findings are yet to be released, multiple employees ET spoke to said that in recent times the leadership had been inconsistent and opaque with their updates on revenue growth.
“It’s a crowded and competitive market, you have to be on your toes to build a business, especially in the early stages. You need to go all out and try harder (than before)… That stopped happening around December,” an employee told ET.
The employee said that in recent months, new strategies around distribution were taking longer to be approved, both in online and offline businesses. The company had been inflating its sales volumes and misreporting its gross merchandise value as its revenue for months, another employee said.
“The company has blundered in pursuing growth at all costs. It’s an error of judgement… but there is nothing that can help them now,” one of the employees added.
The company did not respond to ET’s request for comments on the matter.
The founding team
Mojocare was founded in May 2021 by Ashwin Swaminathan and Rajat Gupta.
Swaminathan, an Indian Institute of Technology (BHU) graduate of 2016, was previously an investor with Chiratae Ventures for a little over two years. He oversaw the Bengaluru-based venture capital firm’s investments in startups such as Railofy, Pyxis, WMall, Agrostar, Cure.Fit, and Playsimple, as per his LinkedIn profile.
Gupta, on the other hand, is an IIIT Hyderabad alumnus from the 2003 batch, headed marketing at Mobile Premier League, Times Internet and also worked at Ogilvy.
