Burda Principal Investments, a venture capital firm, is considering legal action against Ankiti Bose, the former co-founder of Zilingo, after recent revelations exposed serious inconsistencies in reporting to investors. In a statement released on Wednesday, Burda Principal Investments alleged that “significant irregularities in reporting to investors” were to blame for Zilingo’s failure.
Further, Burda stated that “Kroll Inc was jointly hired by the main investors to examine this case, and the investigations into financial irregularities have been completed.” Burda Principal Investments, on the other hand, has declined to comment on any additional facts or provide information from the research as investors explore legal action.
Burda Principal Investments (BPI) is a division of Hubert Media Group – one of Europe’s largest technology and media companies, which provides long-term growth equity for fast-growing digital technology and media companies.
The statement follows a report by startup news portal Inc42 that detailed alleged financial wrongdoings by Bose, including inexplicable payments and inconsistent revenue statistics, among other things. Bose also recently sued Indian entrepreneur Mahesh Murty for defamation in the amount of $100 million.
“Burda is the second investor to have clarified that the action against former CEO and founder Ankiti Bose was a joint decision of all investors and not led by a single investor as claimed by her,” the statement from Burda added.
In another statement, Singapore’s state-owned investment fund Temasek, which also backed the legal action against the founder, said that it expects portfolio companies to abide by sound corporate governance and codes of conduct and ethics. “We are, therefore, in support of the board’s investigation into the complaint as a part of good governance to safeguard the interests of the company.”
During the period of investigation, the Board of Zilingo also issued a statement stating that the decision to suspend Bose was taken jointly by the Board and the relevant shareholders pursuant to pre-agreed shareholder voting rights, and does not reflect the decision of a single shareholder.
Apart from this, Sequoia Capital, which is also an investor in Zilingo, said in a recent blog that it will continue to respond strongly against wilful misconduct and fraud.
“When whistleblowers call us to report on issues, we take them seriously. We know that 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 for proven wrongdoing. We won’t hesitate to act to protect the interests of the company and employees, even if it costs us financially,” Sequoia added in its statement.
Zilingo board officially removed Bose as CEO on May 2022, after the board initially suspended her in late March 2022 over allegations of financial irregularities and other accusations of inflating revenues on the company books. Prior to her suspension in May, FE reported that she had begun exploratory talks with new investors to buy out a majority stake, including the 26% equity owned by Sequoia Capital.
In May last year, the Zilingo board set up a third-party audit team, including audit giant Deloitte and risk management firm Kroll, to conduct an analysis and investigation into the accounting practices under Bose’s leadership.
The B2B start-up, which offers a tech platform for fashion retailers to source wholesale supplies, has been one of the most celebrated start-ups to emerge from SEA geography. Zilingo has raised around $340 million in equity and debt financing to date from prominent investors, including Temasek Holdings, Sequoia Capital India, Burda Principal Investments, and many others. It was last valued at around $900 million in a funding round in February 2019.
In June last year, the two co-founders of the troubled Singapore-based SaaS firm Zilingo proposed a management buyout option to the board to avoid complete liquidation of the company. In an email sent by co-founder Dhruv Kapoor to investors and board members, which was also endorsed by co-founder and ex-CEO Ankiti Bose, Kapoor proposed to pay off the $48 million in delinquent debt owed to Varde Partners and Indies Capital, and infuse an additional $8 million in fresh equity into the company. Kapoor and Bose each individually own an 8.5% stake in Zilingo. The buyout plans also laid down a debt repayment plan that sought a 36-month moratorium on all outstanding debt. If the buyout plans were to be finalised, the new management would also seek to repay the debt in four equal instalments after the 36-month moratorium, according to the documents reviewed by FE.