SINGAPORE (BLOOMBERG) – At first glance, the implosion of vaunted fashion start-up Zilingo 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 employees had left, and Ms 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 South-east Asia and beyond. The start-up had raised more than US$300 million (S$414 million) from some of the region’s most prominent investors, including Singapore investment company Temasek and Sequoia Capital India, the regional arm of the Silicon Valley firm that backed Apple and Google. Ms Bose was a celebrity who criss-crossed 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 Ms Bose’s leadership. Her management style alienated employees and undermined the business, according to staff who worked under her.
The start-up veered from one strategy to another in pursuit of sales, including a US$1 million promotional trip in Morocco, loans to customers and a short-lived push into the United States. 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 Ms Bose and her long-time supporter, Mr Shailendra Singh, head of Sequoia India. Allies for years, they fell out as financial pressures mounted. Mr Singh lost faith in the management skills of the young founder he had championed, while Ms Bose believed Mr 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 Ms 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 is 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 has yet to sign off on Zilingo’s financial year 2020 results. While it is not unusual for start-ups to miss these deadlines, which can result in a fine of up to $600, it is typically a warning sign that firmer action may be needed by the board.
Yet, investors, including Temasek and the Economic Development Board’s investment arm 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 Ms Bose after whistle-blower complaints were filed earlier this year.
The saga has also become a warning for the region’s tech community, which is assessing the fallout of global economic shocks from Covid-19, 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 in Singapore. “I have seen this rodeo before.”
Bloomberg News reviewed dozens of internal documents, e-mails, texts and other media from Zilingo, and Ms 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 was not 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.”