Will Respond Firmly to Fraud: Sequoia Capital on Controversial BharatPe

Breaking its silence on the controversy at fintech firm BharatPe, Sequoia Capital India said on Sunday it has zero tolerance for proven wrongdoing and will continue to respond strongly to intentional misconduct or fraud. so that a few errant founders don’t create big setbacks for the startup ecosystem.

Sequoia, which is the main shareholder of BharatPe where co-founder Ashneer Grover was all but fired from his rolein a blog post on his website, said he would not hesitate to act to protect the interests of shareholders and employees even if it costs him financially.

“We will take the tough calls if necessary in the interests of doing the right thing,” he said without directly mentioning BharatPe.

Sequoia, which owns 19.6% of BharatPe, did not say whether it pushed for Grover’s exit after a third-party audit alleged serious failings in its governance.

BharatPe, which allows store owners to make digital payments via QR codes, initially fired Madhuri Jain, Grover’s wife, for alleged embezzlement of company funds. This was followed by Grover’s resignation and the company stripping him of the co-founder and other titles for ‘significant embezzlement of company funds’ by ‘creating fake salespeople’ to siphon off money. and using “corporate expense accounts” to “get rich and fund.” their lavish lifestyles.

Grover has denied any wrongdoing.

The US venture capital firm’s Indian unit said it wanted businesses that were not only valuable, but also sustainable.

“Recently, some wallet founders have been investigated for potential fraudulent practices or poor governance. These allegations are deeply troubling,” he said. “We have always strongly encouraged founders to play the long game. We focus on the sustainable and discourage focusing on vanity metrics.

The startup ecosystem needs safeguards so that a few errant founders don’t create big setbacks, he added.
Sequoia, which has invested in companies ranging from 1mg to Byju’s to Cafe Coffee Day and Grofers, said eight companies in its portfolio went public last year.

“We usually stand by our founders during difficult times. But on rare occasions, we wake up disappointed. Our worst days are when we hear of integrity or ethical breaches in the portfolio. This is what makes us deeply suffer. And it’s time we talked about it, ”he said.

🗞️ Subscribe now: get Express Premium to access the best election reports and analysis 🗞️

“We want great companies to be built that are not only valuable but also sustainable – and that can only happen if the values ​​are right and the governance is strong. We believe it is time for us as an ecosystem to commit to better governance.

It is time to improve the “how” to ensure better governance, he said.

“We always want founders and entrepreneurial energy to drive businesses because founders provide the vision, mission, and drive the culture and values. But we need safeguards that we as an ecosystem subscribe to, so that a few errant founders don’t create big setbacks for the wider ecosystem,” he said.

Stating that it is easy to think that this problem is attributed to poor due diligence, he said that when investments are made in the seed or early stage, there is little reason to be diligent. “Even later-stage investors can face negative surprises, post-investment, in cases of fraud and deliberate intent.”

“As a representative of investors, you sit on the board, and boards can only work with the information shared with them – the less transparency there is to the board, the less able to truly detect errant behavior The Board is there to govern and help make decisions in the best interests of shareholders.

“The board is not responsible for investigating on an ongoing basis unless something is formally raised with them, which is often done through a whistleblower. Better corporate governance is a shared responsibility between founders, management and the board. And to get there, the ecosystem has to come together and commit to some changes,” he said.

Sequoia India said it has held itself to a high bar on integrity because we are in this for the long haul. “We will take a set of proactive measures as a responsible participant in this ecosystem and do more than our fair share to foster increased compliance across our portfolio companies, including but not limited to governance trainings. for founders and senior management, implementing whistleblower policies, more independent board representation, demanding more disclosures, and more rigorous adoption of internal audits and controls.

“We will continue to react strongly when we encounter intentional misconduct or fraud,” he said.
Whistleblowers are always taken seriously, he said, adding that while in some cases they may turn out to be baseless, any issues they raise still need to be investigated as it is the fiduciary duty of a council member.

“We will continue to have zero tolerance for proven wrongdoing. We will not hesitate to act to protect the interests of the company and the employees, even if it costs us financially. We will take the tough calls if necessary in the interest of doing the right thing,” he added.

Leave a Comment