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The Sequoia India-backed startup has acquired troubled company GoMechanic from a Lifelong Group-led consortium after it admitted to “serious errors” in financial reporting.
Lifelong Group, which serves several major players in the automotive industry including Hero and General Motors, said its investors had won the bid to acquire the struggling Gomechanik earlier this year.
“This transaction allows us to protect the ecosystem as a whole and provide a sustainable livelihood for the employees at Gomechanik,” Lifelong Group said in a statement.
The acquisition has created a scandal in India’s startup community after it was revealed that GoMechanic’s founders had misrepresented, misrepresented revenue figures, kept investors in the dark and tried to raise new funding under false pretenses.
High-profile backers, including SoftBank and Malaysia’s existing investor Tiger Global, considered a new investment in Gomechanic last year, but decided against it for different reasons. According to TechCrunch, a survey commissioned by existing fans of GoMechanic, which offers auto services such as repairs and car washes, is virtual, among other things.
With no new funding, Gomechanik cut costs and laid off 70% of its workforce. The seven-year-old startup has raised more than $60 million in funding over the years and was looking to raise its valuation to $1.2 billion last year.
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