Sequoia, which holds the largest share in BharatPe, where co-founder Ashneer Grover was virtually terminated, said it will not hesitate to protect stockholders’ and employees’ interests, no matter how costly it may be.

Sequoia Capital India broke its silence on the crisis at fintech firm BharatPe on Sunday, saying it has zero tolerance for proven wrongdoing and would continue to respond aggressively to deliberate misconduct or fraud so that a few errant founders do not cause major setbacks for the startup ecosystem.

Sequoia Capital, the largest stakeholder in BharatPe, where co-founder Ashneer Grover was effectively fired, stated in a blog on its website that it will not hesitate to intervene to safeguard the interests of shareholders and employees, even if it means losing money.

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We will take tough calls where needed in the interest of doing what is right,” it said without directly mentioning BharatPe

Sequoia, which owns 19.6 percent of BharatPe, would not specify whether it pressed on Grover’s resignation after a third-party audit found serious governance flaws under him.

BharatPe, which lets shop owners accept digital payments via QR codes, initially fired Grover’s wife, Madhuri Jain, for suspected theft of business cash. Grover resigned, and the firm stripped him of co-founder and other titles for suspected “extensive misappropriation of company funds” by “creating fake vendors” to drain money and using “company expense accounts” to “enrich themselves and fund their lavish lifestyles.”

Grover has denied any wrongdoing.

The India unit of the American venture capital firm said it wants companies that are not just valuable but also enduring.“Recently some portfolio founders have been under investigation for potential fraudulent practices or poor governance. These allegations are deeply disturbing,” it said. “We have always strongly encouraged founders to play the long game. We focus on the enduring, and discourage focusing on vanity metrics.”

“We usually stand shoulder to shoulder with our founders during hard times. But on some rare occasions, we wake up feeling disappointed. Our worst days are when we hear about breaches of integrity or ethics in the portfolio. This is the stuff that pains us deeply. And it’s time we speak about this,” it said.

“We want great companies to be built that are not just valuable but also enduring — and that can only happen if the values are right and the governance is strong. We think it’s time for us, as an ecosystem, to sign up for better governance.”

It’s time to improve on the ‘how’ to deliver on better governance, it said.

“We still want founders and the entrepreneurial energy to drive companies because founders provide the vision, mission and drive the culture and values. But we need some guardrails that we, as an ecosystem, sign up to, so that a few errant founders don’t create big setbacks for the wider ecosystem at large,” it said.

Stating that it is easy to think of this issue as ascribed to poor due diligence, it said when investments are made at seed or early-stage there is hardly a business to diligence. “Even later stage investors can face negative surprises, post-investment, if there is willful fraud and intent.”

“As an investor representative, one serves on the board, and boards can only work with the information shared with them – the less transparency there is to the board the lesser their ability to truly unearth errant behaviours. The board is there to govern and help make decisions in the best interest of the shareholders.

“The board is not responsible to investigate on an ongoing basis unless something formally is brought up with them, which is often through a whistleblower. Better corporate governance is a shared responsibility between founders, management and the board. And to get there the ecosystem needs to come together and commit to some changes,” it said.

Sequoia India said it has held itself to a high standard on integrity since it has been in business for a long time. “We will take a set of proactive steps as a responsible participant of this ecosystem and do more than our fair share to drive increased compliance across our portfolio companies including, but not limited to, governance trainings for founders and senior management, implementation of whistleblower policies, more independent board representation, asking for more disclosures and more rigorous adoption of internal audits and controls.”

“We will continue to respond strongly when we encounter wilful misconduct or fraud,” it said.Whistleblowers are always taken seriously, it said, adding that while some complaints may turn out to be unfounded, all complaints must be investigated since it is a board member’s fiduciary obligation.

“We will continue to have zero tolerance towards proven wrongdoing. We won’t hesitate to act to protect the interest of the company and employees, even if it costs us financially. We will take tough calls where needed in the interest of doing what is right,” it added.