PhonePe cries foul against Ventureast after Indus OS deal goes bad

Walmart owned digital payments app company PhonePe on Saturday said it had filed a complaint with markets regulator SEBI (Securities and Exchange Board of India) against Ventureast Proactive Fund-II (VPF), an alternate investment fund (AIF) of Chennai based venture capital firm Ventureast.

The complaint, as per a statement from the Bengaluru based startup, relates to multiple violations of SEBI’s code of conduct in relation to VPF’s recent side dealings with Affle.

PhonePe added that it has highlighted activities that include a series of unethical, bad faith actions, potentially illegal actions, which have been undertaken by the managing partner, general partner and principal at VPF involved with the reported deal.  

The new complaint follows a lawsuit that PhonePe has filed against Ventureast and Affle in the Singapore High Court. The suit claims that VPF deliberately deceived PhonePe by continuing to engage PhonePe and OSlabs on the sale of its shares in OSlabs in favor of PhonePe, even after it had already sold those same shares to Affle in a side deal. 

The suit further claims that VPF kept OSlabs and PhonePe in the dark about the side deal on a prior date during a legally binding no-shop period.  

“As founders, we are always held to the highest standards of legal and ethical integrity by our investors. But these standards should apply to investors in startups too... We have a very strong case and are confident that we will prevail on both fronts, and hopefully in the process also create a strong deterrent against bad actors trying to bully young startups,” PhonePe founder and CEO Sameer Nigam said. 

Affle Global, a minority investor in OSlabs owned Indus Operating System (IndusOS), reportedly filed a petition against the payments platform’s bid for the content discovery platform in the Singapore. 

The legal and regulatory muddle originates from PhonePe’s plan to purchase a 32% stake in Indus OS, at a valuation of $60 million. 

Technology firm Affle Global had claimed that it had been a long-term investor in OSlabs, having invested over $20 million, which valued the content discovery platform at $90 million. 

Accordingly, Affle Global and Ventureast first filed a competing lawsuit against PhonePe in Singapore.   

Indus OS, a content discovery platform, was founded in 2015 by IIT Bombay alumni Rakesh Deshmukh, Akash Dongre and Sudhir B.  

FMO and CDC backed Ventureast Proactive Fund II is a follow-on fund of Ventureast Proactive Fund, managed by 2007 founded Ventureast. Other online-based businesses in the Ventureast portfolio include insurer Acko, healthcare services providers Portea and Ekincare, car service provider Pitstop, marketing automation MoEngage, and consumer lending platform Kissht. 

Separately on Thursday Affle said it would wholly acquire Jampp, a Latin American programmatic mobile advertising company for a total consideration of $41.3 million.