Sequoia to harden compliance amid trouble in India, SE Asian portfolio cos

The VC fund will undertake governance trainings for founders and senior management, implementation of whistleblower policies, more independent board representation

With allegations of financial mismanagement related to multiple portfolio companies emerging in the past few months, venture capital (VC) firm Sequoia’s India and South East Asia arm said on Sunday that it will drive increased compliance among its investee startups.

“We won’t hesitate to act to protect the interest of the company and employees, even if it costs us financially. We will take tough calls where needed in the interest of doing what is right,” Sequoia said in a blog post.

The fund will undertake governance trainings for founders and senior management, implementation of whistleblower policies, more independent board representation, asking for more disclosures and more rigorous adoption of internal audits and controls.

“We will continue to respond strongly when we encounter willful misconduct or fraud. When whistleblowers call us to report on issues, we always take them seriously,” the VC firm said.

“We know in some cases they may turn out to be baseless – but we still have to look into them as it is a board member’s fiduciary duty. We will continue to have zero tolerance towards proven wrongdoing,” it added.

Trouble started brewing in Sequoia’s portfolio first in January this year when it emerged that it was not getting along well with fintech unicorn BharatPe’s co-founder and managing director Ashneer Grover.

Subsequently, Grover was sent on a leave and the company’s Board started an audit that found alleged financial misappropriation by Grover’s kin. Before the report could be presented to the Board, the embattled BharatPe co-founder resigned and alleged that the company’s investors and top management were arm-twisting him to leave the company.

In March, social commerce start-up Trell, which too is a Sequoia-invested company, also got caught in the crosshairs of an audit that reportedly alleged certain related party transactions such as an investment in a company of one of its erstwhile co-founders.

Most recently, Sequoia Capital India’s Shailendra Singh stepped down from the board of troubled B2B e-commerce company Zilingo following questions about the high-profile start-up’s accounting practices.

Singh, a managing director at the influential venture capital firm, resigned as a director about two weeks back, after the departures of Temasek’s Xu Wei Yang and Burda Principal Investments’ Albert Shyy, according to a Bloomberg report.

In its last fundraise for the region in June 2020, Sequoia collectively committed $1.35 billion to two new funds., including a $525 million venture fund and $825 million growth fund. The VC firm counts unicorns like Zomato, Freshworks, Byju’s, Unacademy, Rebel Foods, Oyo and GoTo among portfolio companies in the region.

“At Sequoia India & SEA, we had our fair contribution last year with eight companies from our portfolio going public across our India and SEA portfolio. We feel privileged to play the role we play – partnering with great founders and helping them in their mission to build world class businesses,” the firm said on Sunday.

“We believe such founders are not just building value but changing the world, creating millions of jobs and making a meaningful impact on the markets they serve in the process,” it added.

Troubling times

January 2022: BharatPe co-founder Ashneer Grover sent on leave as allegations of financial misappropriation emerged

February 2022: Tiff between BharatPe Board and Grover intensifies, leaked forensic audit creates furore

March 2022: Grover resigns from BharatPe. Reports of financial audit showing related party transactions at Trell emerge

April 2022: Sequoia Capital India MD Shailendra Singh steps down from Zilingo board after questions about the high-profile start-up’s accounting practices