A Can of Worms
Zilingo comes under fire as start-up founders show scant regard for governance standards
MUCH LIKE THE SORDID saga at BharatPe, the embattled Singapore-based start-up Zilingo, too, suffers from dodgy accounting practices, mistrust and disagreement between founders, and strained investor confidence. Moreover, allegations of harassment and abuse make this an even more pressing concern for all stakeholders.
Skeletons tumbled out of Zilingo’s closet when discrepancies were observed during a due diligence process for a new funding round, thanks to a whistle-blower who raised the alarm on financial wrongdoings in which its Co-founder and CEO Ankiti Bose was allegedly involved. As per sources Business Today spoke to, a slew of allegations around opaque accounting practices—including inflated revenues, improper vendor transactions and internal corruption—were brought to the notice of the board and investors.
Taking cognizance of the matter, the board placed Bose on suspension and ordered an investigation into the issues of financial fraud and corporate misconduct within the company. Shortly after her suspension, the Co-founder sent a legal notice to the company’s board, levelling charges of harassment and abuse. While Bose feels she was unfairly targeted by Sequoia, the company made a statement that it was the board’s collective decision to suspend Bose and that the ongoing investigations have not found anyone guilty yet. Zilingo said Bose raised “certain harassment-related allegations” only after her suspension on March 31.
As the mudslinging continues, what becomes apparent is a deep-rooted disregard for corporate governance from founders and a convenient lack of oversight from boards, as startups get caught up in the rat race of growth over profits and investors are driven by FOMO (fear of missing out). Following a string of governance lapses, Sequoia has said it has zero tolerance towards proven wrongdoing, and that it will continue to respond to wilful misconduct or fraud, and take proactive steps to drive increased compliance across its portfolio companies.
These incidents have also caught the attention of the Commerce and Industry Minister Piyush Goyal, who has advised start-ups to practise self-regulation to strengthen corporate governance standards.
“Growth over everything else” is a widely-worn trope in the hustle culture that start-ups thrive on. While this “act first, apologise and fix later” strategy helps get products out faster and gain market share, the downside is that it can build a dysfunctional company culture that gets overlooked until it manifests itself in untenable ways.
In Zilingo’s case, an immediate focus of the board would be to upgrade the company’s processes to establish more checks and balances and compliance protocols with regular internal audits so that future issues can come to light sooner rather than later.