Why is former CEO blamed for the economic turmoil in startup she co-founded?

At first glance, the implosion of vaunted fashion startup Zilingo Pte looked jarringly sudden.When the Singapore tech darling suspended its 30-year-old chief executive officer Ankiti Bose over complaints about alleged financial irregularities, it was March. Within weeks, creditors were recalling loans, more than 100 staff had left, and Bose found herself fired, though she denies any wrongdoing. The company’s survival is now in question.The Zilingo meltdown has rattled the tech industry in Southeast Asia and beyond. The start-up had raised more than $300 million from some of the region’s most prominent investors, including Temasek Holdings Pte and Sequoia Capital India, the regional arm of the Silicon Valley firm that backed Apple Inc. and Google. Bose was a celebrity who crisscrossed the globe to speak at tech gatherings from Hong Kong to California.Interviews with more than 60 people, including current and former staff, merchants, investors, entrepreneurs and friends of the key players, suggest that Zilingo struggled for years under Bose’s leadership. Bose’s management style alienated employees and undermined the business, according to staff who worked under her. The startup veered from one strategy to another in pursuit of sales, including a $1 million promotional trip in Morocco, loans to customers and a short-lived push into the US. At one point, she became fixated on “crazy growth” to catch the attention of Japanese tech titan Masayoshi Son, according to two former employees with direct knowledge of the matter.At the heart of the company’s breakdown lies the soured relationship between Bose and her longtime supporter, Shailendra Singh, head of Sequoia India. Allies for years, they fell out as financial pressures mounted. Singh lost faith in the management skills of the young founder he had championed, while Bose believed Singh betrayed her by pushing her out of her own company, according to people familiar with their relationship, who requested anonymity as the talks were private. The clash grew so acrimonious that Sequoia’s lawyers demanded in a May legal notice that Bose stop making allegations that could tarnish Sequoia’s reputation, the people said.Zilingo’s turmoil highlights an apparent lax internal corporate governance culture that’s not uncommon in the start-up industry. For two years, the company failed to file annual financial statements, a basic requirement for all businesses of its size in Singapore. Auditor KPMG LLP has yet to sign off on Zilingo’s FY20 results. While it’s not unusual for startups to miss these deadlines, which can result in a fine of up to S$600 ($430), it is typically a warning sign that firmer action may be needed by the board.Yet, investors including state-owned firms Temasek and EDBI, put more funds into Zilingo at the end of 2020. Shareholders that together own a majority stake of the company only formally acted against Bose after whistleblower complaints were filed earlier this year.Tech WarningThe saga has also become a warning for the region’s tech community, which is assessing the fallout of global economic shocks from Covid, to the war in Ukraine and global inflation.“Whatever happened at Zilingo, there will be a lot more dramas in the next couple of years as the big worldwide recession impedes hot shots from raising money,” said veteran investor Jim Rogers, chairman of Rogers Holdings Inc. in Singapore. “I’ve seen this rodeo before.”Bloomberg News reviewed dozens of internal documents, emails, texts and other media from Zilingo, and Bose sat for two extensive interviews, one before and one after her dismissal from the company on May 20. The board’s decision to fire her wasn’t abrupt, but rather the culmination of years of tension, according to the documents and people with direct knowledge of the matter.“Board members were concerned about the company’s performance over the last few years and sought to share suggestions to address the company’s performance including cash burn,” Zilingo and its board said in a statement to Bloomberg News. “In March 2022, investors received complaints about serious financial irregularities which appeared to require investigation. With the support of the majority investor shareholders, an independent forensic investigations consultancy was appointed to look into the said complaints. After a comprehensive process lasting almost two months, including numerous opportunities for Ms. Bose to provide documents and information, the company subsequently terminated Ms. Bose for cause based on the findings of that investigation.”Bose said the process to terminate her was an “unfair witch hunt” and denied that she was given numerous opportunities to respond to allegations. She said she hasn’t seen the investigation report, which wasn’t made public. On the board’s suggestion to implement changes, she said the team cut the cash burn by 70% between the end of 2019 and the end of 2021. “It was not easy, we did not succeed at everything,” she said in July. “It was chaotic and painful, but we did do it and we made the best effort we could.”Zilingo’s origin story is part of Southeast Asia’s startup lore. Bose came up with the idea as she wandered through Bangkok’s Chatuchak market, where 15,000 stalls offer goods from across Thailand. She and co-founder Dhruv Kapoor wanted to build a platform that would allow such small merchants to sell to consumers across Southeast Asia.Singh was instrumental from the start. He and Bose had worked together at Sequoia and he was happy to support one of the firm’s own. Singh had started his career in Sequoia’s Silicon Valley office, learning at the side of veteran investors Michael Moritz and Doug Leone. Singh had transformed Sequoia Capital India over 16 years into the region’s biggest venture capital firm with some $9 billion of assets under management and 36 unicorns on its scoresheet across India and Southeast Asia.He invested in Zilingo’s seed round in 2015, when Bose was 23 years old, and in every fundraising since. “We think the world of her,” he told a fellow VC in 2016, in an email seen by Bloomberg News.But like many upstarts, Bose and Kapoor faced challenges almost from the beginning. Their consumer-focused fashion site struggled because of the thin margins and low average income in Southeast Asia, a fragmented region with different languages and currencies. By late 2017, they decided to reposition Zilingo into a business-to-business platform, where small manufacturers and wholesalers could sell goods directly to small retailers in the region.