GoMechanic, Sequoia-backed venture, to cut 70% staff, after SoftBank walks away over irregularities

One Thing Today in Tech

GoMechanic, a car service startup backed by VC investors including Sequoia Capital, Tiger Global Management and Chiratae, will cut 70 percent of its staff and undergo an independent audit of its books, the company’s co-founder Amit Bhasin said in a post on LinkedIn yesterday. Also in this brief, Microsoft yesterday confirmed the 10,000 job cuts that had previously been reported in the news, and a TIME investigation reveals how OpenAI used lowly paid workers in Kenya to remove toxic content from ChatGPT.

Notes:

GoMechanic, a car service startup backed by VC investors including Sequoia Capital, Tiger Global Management and Chiratae, will cut 70 percent of its staff and undergo an independent audit of its books, the company’s co-founder Amit Bhasin said in a post on LinkedIn yesterday.

Due diligence conducted by accounting firm EY for prospective GoMechanic investors, SoftBank Group and Malaysian sovereign fund Khazanah Nasional, alleged that the Gurugram-based venture had inflated revenue, Bloomberg reported yesterday, citing people familiar with the matter.

EY’s research alleged that about 60 of the more than 1,000 GoMechanic service centres may have violated accounting rules to overstate revenue and divert funds, according to Bloomberg.

GoMechanic was in talks to raise $100 million in a funding round led by Khazanah, Bloomberg had previously reported. SoftBank and Khazanah called off the talks and informed Sequoia, according to Bloomberg.

“We got carried away … we made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret,” Bhasin said in his LinkedIn post. The company will be restructured while the founders look for more funding, he added.

Microsoft, yesterday, confirmed it was cutting about 5 percent of its workforce, affecting 10,000 people around the world. Sky News had reported the news previously.

“We are making changes that will result in the reduction of our overall workforce by 10,000 jobs through the end of FY23 Q3. This represents less than 5 percent of our total employee base, with some notifications happening today,” CEO Satya Nadella said in a note that was posted on the company’s website.

ChatGPT is being hailed as revolutionary in the world of AI for its ability to turn out human-like creative content. However, in its quest to make ChatGPT less toxic, its maker, OpenAI, used outsourced Kenyan labourers earning less than $2 per hour, a TIME magazine investigation has found.

OpenAI’s outsourcing partner in Kenya was Sama, a San Francisco-based firm that employs workers in Kenya, Uganda and India to label data for Silicon Valley clients like Google, Meta and Microsoft, TIME says in its report that was published yesterday.

Sama markets itself as an “ethical AI” company and claims to have helped lift more than 50,000 people out of poverty, according to TIME.

The data labellers employed by Sama on behalf of OpenAI were paid a take-home wage of between around $1.32 and $2 per hour depending on seniority and performance. For this story, TIME reviewed hundreds of pages of internal Sama and OpenAI documents, including workers’ payslips, and interviewed four Sama employees who worked on the project. All the employees spoke on condition of anonymity out of concern for their livelihoods, according to TIME.