Sequoia delays close of $2.8B fund amid probes; RBI dents Sachin Bansal’s banking dreams

By Kevin Colleran On May 18, 2022

Since the start of 2022, a number of Sequoia-backed companies – BharatPe, Trell and Zilingo – have undergone internal audits on charges of financial fraud and lax corporate governance. Now, the storied venture capital firm has told its limited partners it has decided to postpone the close of its $2.8-billion India and Southeast Asia fund out of an abundance of caution.

Also in this letter:
■ RBI delivers a blow to Sachin Bansal’s banking dreams
■ Jungle Ventures raises $600M towards final close of fourth fund
■ Twitter deal dead without proof on fake accounts, warns Musk

Sequoia puts off close of $2.8B India, SEA fund amid probes into portfolio firms

Sequoia Capital has postponed the closing date of its $2.8-billion fund for India and Southeast Asia (SEA) after alleged financial irregularities and corporate governance issues were discovered at some of its portfolio firms, sources told us.

Email to LPs: The move was communicated to Sequoia’s limited partners (LPs), or sponsors in the fund, through an email, the contents of which we have reviewed.

It said, “… during the past weeks, shareholders in a portfolio company have received information about a potential misconduct, requiring investigation. Given these events, we have decided to postpone the close date of the funds,” it said.

Sequoia’s LPs are typically US university endowment funds and blue-chip pension funds.

Firms under the scanner: Sequoia did not disclose the name of the companies being “investigated”. Since early this year, its portfolio companies BharatPe, Trell and Singapore-based Zilingo have undergone internal audits on charges of financial fraud and corporate governance issues.

In January, BharatPe’s cofounder Ashneer Grover became embroiled in a huge controversy after an expletive-laden audio clip allegedly featuring him and a Kotak Mahindra Bank employee went public. The matter escalated over the next two months, leading to the exit of Grover and his wife Madhuri Jain, who was the head of controls at the firm.
Zilingo’s Indian founder, Ankiti Bose, was suspended from the company in April after alleged discrepancies were found in its accounts while conducting due diligence before a funding round. Bose had disputed these allegations and contested her suspension.
On April 4 we reported, citing sources, that Sequoia had called for a probe at Trell after receiving whistleblower complaints.

RBI delivers a blow to Sachin Bansal’s banking dreams

By now, it’s likely you are aware that Chaitanya India Fin Credit, owned by Flipkart founder Sachin Bansal, has been denied a banking licence by the Reserve Bank of India (RBI). But the timing of the RBI’s announcement couldn’t have been worse for Bansal.

In the spotlight: He had just begun briefing the media about the launch of Navi Finserv’s Rs 600-crore non-convertible debentures (NCDs) issue when the RBI’s press release was uploaded on its website.

By the time Bansal finished briefing the media on what he said was a record for a fintech startup raising money via public debt, he was asked about what he thought of the RBI’s rejection.

Quote: “We haven’t received the written response yet. We are going to look into that and then we are going to chart the next course of action. Of course, lots of options are in front of us and this is not the end of the road for us — including reapplying,” Bansal said.

Why did the RBI reject it? The central bank did not elaborate on why it denied Chaitanya Credit a permit. But industry sources aware of RBI’s thinking on ‘fit-and-proper’ candidates for a banking licence have told us previously that the Enforcement Directorate (ED) probe into Bansal over his involvement with WS Retail could be a matter of concern.

What probe? Bansal and Flipkart cofounder Binny Bansal were on the board of directors of WS Retail, one of the largest sellers on Flipkart during 2009-2015. The ED believes this is a violation of Indian laws. Bansal doesn’t think so and has taken the agency to the Madras High Court, where the matter is being heard.

WS Retail does not exist anymore. It stopped operations in 2015 as the government started tightening FDI rules for ecommerce in India.

What it means: For Bansal, who is keen on running a bank, this is not good news. It makes business sense for an entrepreneur with big ambitions to build a large financial service company. It comes with a pride quotient, too – think Uday Kotak, Deepak Parekh. A licence could have put Bansal in their league.

Can he still become a banker? Only time can tell, really. Bansal is still fighting the ED case and much will depend on its outcome. That, however, could take a long time.

Jungle Ventures raises $600 million towards final close of fourth fund

Singapore-based venture capital firm Jungle Ventures has raised $600 million towards the final close of its fourth fund.

Details: The funding includes $450 million in the main Fund IV and $150 million in additional managed commitments, one of the largest pools of capital available in the region, a senior company executive told us.

The fund – which has backed companies such as Livspace, Moglix, and CityMall – has more than $1 billion in assets under management (AUM).

The fund, which set out to raise $350 million, was oversubscribed and exercised the green shoe option of raising more capital.

“Around $450 million has come in to be invested in new companies and $150 million will go towards follow-on investments in backing a winner portfolio,” said Amit Anand, founding partner, Jungle Ventures.

ETtech Done Deals

■ Fashinza, an AI-driven business-to-business (B2B) marketplace, has raised $100 million in a funding round led by Prosus Ventures (formerly Naspers Ventures) and Westbridge. The company will use the funds to create a sustainable supply chain and expand into new geographies, it said in a statement.

■ Melorra, a direct-to-consumer (D2C) jewellery brand, has raised $16 million from Axis Growth Avenues, SRF Family Office, N+1 and existing investors, in the first leg of its Series D round. The funding includes $14 million in equity and $2 million in debt.

TWEET OF THE DAY

Twitter deal can’t go ahead without proof on fake accounts, warns Musk

Elon Musk has said his deal to acquire Twitter “cannot move forward” until the social media platform proves its claim that fake and spam accounts account for less than 5% of its users. Musk claimed once again that by his estimates, such accounts could make up more than 20% of Twitter’s users.

The number being referred to here is Twitter’s monetisable users who are active on the platform daily. The company claims it has 226 million such users and that less than 5% of these are fake or spam accounts.

Also Read: Twitter loses three more senior employees ahead of Elon Musk’s takeover

Driving the news: Replying to a report posted on Twitter by Teslarati, Musk wrote: “20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher”.

He added, “My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of

He later posted a poll in which he asked: “Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?” The options were a pair of laughing emojis and “who me?!”

Twitter chief executive Parag Agrawal had tweeted on Monday that internal estimates of spam accounts on the social media platform for the last four quarters were “well under 5%,” responding to days of criticism by Musk of the company’s handling of fake accounts.

Musk replied to his thread with a poop emoji.

Why is Twitter silent on Musk’s ‘trolling’? Twitter, meanwhile, said the deal is going ahead. Reuters reported, citing sources, that the company believes Musk’s recent comments (and emojis) have violated the non-disparagement terms of their agreement.

Yet it has not taken any legal action against Musk over what it sees as his “trolling” of the deal, and plans to do so only if he does not carry out the tasks needed to complete the transaction, the sources said.

Also Read:MoS Chandrasekhar responds to viral video of ‘Twitter engineer’

Celebs must do their homework before endorsing crypto, says ad body

Given that cryptocurrency is an unregulated product, the Advertising Standards Council of India (ASCI) said that celebrities should be “circumspect” when endorsing it.

Quote: “We have always maintained that celebrities need to do their due diligence on the claims they endorse. The Consumer Protection Act also lays down penalties for endorsers in case the ad they feature in is found to be misleading, and if they have done no due diligence,” Manisha Kapoor, CEO of ASCI, said.

ASCI’s statement comes after a report by Hindu Businessline said the Securities and Exchange Board of India (Sebi) has recommended to the Parliamentary Standing Committee on Finance that celebrities should not be allowed to endorse crypto and other virtual digital assets (VDA).

WazirX transparency report: A report released by WazirX on Tuesday said 17,218 accounts were locked between October 2021 and March 2022, compared to 14,469 in April-September 2021. The number of accounts against which it took action rose by 19% between October 2021 and March 2022, compared with the previous six months, it said.