Sequoia promises greater vigilence on governance in India, SE Asia

“Recently some portfolio founders have been under investigation for potential fraudulent practices or poor governance. These allegations are deeply disturbing,” the firm said in a blog post.

“We have always strongly encouraged founders to play the long game. We focus on the enduring, and discourage focussing on vanity metrics. Despite that we find some counter-examples of what we espouse. It makes us reflect on what we could have done, along with other investors who have partnered in these companies, to prevent such situations.”

Companies in the spotlight include Indian payments player BharatPe. Ashneer Grover, one of the co-founders, and his wife left their positions earlier this year in the wake of a very public internal dispute and allegations regarding a toxic workplace culture. A subsequent audit report claimed the Grover family had misappropriated funds and linked them to related party transactions around hiring.

BharatPe closed a USD 370m Series E round at a valuation of USD 2.85bn in 2021. Sequoia was one of the company’s first institutional backers in 2018 and has re-upped in several growth rounds.

Meanwhile, Shailendra Singh, a managing director at the venture capital firm, recently stood down from the board of Singapore-headquartered fashion e-commerce platform Zilingo after questions were raised about the company’s accounting practices. The board launched an investigation and suspended CEO Ankiti Bose, who denies any wrongdoing.

Sequoia led Zilingo’s USD 226m Series D in 2019, which pushed the company close to unicorn status. Several other investors have resigned from their board positions as well.

An investigation is also underway at Indian social commerce start-up Trell over alleged related-party transactions and other financial irregularities involving the founders. The company, which has been jettisoning staff and assets, received seed funding from Sequoia in 2020, according to AVCJ Research.

Sequoia noted that board members can only work with the information shared with them. Moreover, they are tasked with helping make decisions in the best interest of the shareholders, not conducting ongoing investigations. This only happens when an issue is raised formally, often by a whistle-blower.

“Better corporate governance is a shared responsibility between founders, management, and the board. And to get there the ecosystem needs to come together and commit to some changes,” the firm said.

It called for guardrails and promised to do more than its fair share to drive increased compliance. Suggested initiatives include governance training for founders and senior management, implementation of whistle-blower policies, more independent board representation, more disclosure at the board level, and the adoption of rigorous internal audits and controls.

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• Topics
• South Asia
• Southeast Asia
• Regulation
• Technology
• India
• Sequoia Capital
• regulation