🧠 GoMechanic & the open secret of fraud in the Indian startup ecosystem
how long are we going to be quiet ...
First, I don’t want to talk about Go Mechanic’s fraud too much. For that, let me just quote Techcrunch:
“…Serious discrepancies have been found in its books…A probe into the seven-year-old startup by EY as part of the due diligence for the recent funding deliberation found scores of issues, including inflated revenue and that some garages were fictitious, two sources said.”
The FAR bigger issue, according to me is, It was common knowledge, and no one did anything.
This is a Linkedin message I sent to a startup journalist on JUN 27, 2022
We were already talking about another story (my inputs on the sector) & during that I shared this. Before that, around a year back I had shared the same GoMechanic story -and told another journalist (verbally) they should check it out.
Also FYI:
This is not the only startup or journalist I spoke to about the ecosystem’s troubles with specific examples. And I had no direct or indirect involvement with any of these startups.
Just connecting the dots between their declared numbers, the ads, and a simple Google search on the sector revealed serious issues. Have you noticed the number of fake reviews on GoMechanic’s play store? Or the ads they were running and the amount they were charging which didnt seem to be in sync with their books.
Yes, other friends did confirm these later, but I am a nobody, and if I knew, then how come the others didn’t? And if a reasonable number knew, then how unethical have we become that we keep quiet about fraudulent numbers?
In the last 2 years -the number of detected frauds in India’s unicorns and soonicorns is near half a dozen. Trell, Zilingo, , BharatPe, InfraMarket & now GoMechanic.
This doesn’t include the smaller ones like Bikayi, or the ones like Metaversity or Byjus, whose activities have been found to be suspect but nothing has come out.
But anyone who is reasonably connected to the startup ecosystem in India and dares, to be open, can confidently say this: it’s the tip of the iceberg, & we aren’t being honest about it.
🧠 🧠 But what’s the point of this:
India has had massive funds which have come in over the last few years. I have worked with startups in different geographies and trust me India has been the easiest country to raise money in (only US could come come close) , given the massive amount of VC funding available.
But incidents like this are giving the Indian startup ecosystem a bad name.
So if you are someone who is slogging your ass off & making sacrifices to build something or want to build something-What do you think will happen when more stories like this emerge?
I am reminded of this scene from Dropout “
And what happened later in terms of ground reality: Despite all the talk about diversity and speeches or Linkedin posts :
In 2022 of the 75.4 billion $ in capital deployed in Silicon Valley -the most progressive startup ecosystem in the world only 3.4% went to women founders. This hasn’t changed too much in the last 3 years. Do you think stories like Theranos did not play a role?
There are many or rather most Indian startups and founders who are doing a great job and are ethical. But they aren’t usually in the limelight.
They are the ones who will be impacted the most-from investors to potential employees there is bound to be doubt as the market starts to dry up and more cases emerge.
We all know that Indian startups will find it difficult to justify their massive private valuations at least for the next 5 years & international LPs are bound to question the startup India story. On top of this do we also want to be known for fraud ?
And beyond fraud, there is nepotism, lying to investors and stakeholders, unpaid vendor dues, dissatisfied customers who can’t get refunds of their money , or simply founders diluting stakes in secondaries instead of putting money into the business and becoming rich before the shit hits the fan...
#startupindia is seeing it all, and worse is quiet about it all.
What can we do?
Be honest, talk about it.
‘Sunlight is the best disinfectant’
Written by Saurabh