Despite the fact that startup investments have become a viable option for high-net-worth individuals and institutional investors, incidents such as the GoMechanic fraud and the liquidation of Zilingo have significantly dampened the enthusiasm.
Limited partners in funds, such as the Small Industries Development Bank of India (SIDBI), which invests in alternative investment funds (AIFs), are now questioning venture capitalists (VCs) about their due diligence process and why certain irregularities went undetected for so long. According to sources close to a SEBI-registered AIF with SIDBI backing, the regulatory body has questioned some VCs who previously backed GoMechanic. This comes after some investors, including Mumbai-based Orios Venture Partners, which owns about 17.14% of GoMechanic, had already written off their investment in the startup.