Mumbai Capital

Early investor drags Mu Sigma to US court

Mu Sigma, an Indian unicorn (unlisted firms with over $1 billion valuation), has been dragged to court by one of its early investors Patrick Ryan over ‘downplaying’ its prospects to buy back his stake, according to a Bloomberg report citing court documents.

Ryan is a founder and former chairman of professional services firm Aon Corp. He had made an early investment in Mu Sigma through its private investment arm Walworth Investments. According to the Bloomberg report, the lawsuit accused Mu Sigma and its founder of “grossly misleading” Ryan’s Walworth Investments when the firm bought back the latter’s 17.5 per cent stake six years ago. By portraying Mu Sigma with dim prospects at a time when it was actually thriving, founder Dhiraj Rajaram schemed “to buy out a significant shareholder at an artificially low price”, it said, citing the complaint filed in a Chicago court.

As per the plea, Walworth had put in $1.5 million into the firm in 2006, when Mu Sigma was new and still looking for capital. In 2010, Mr Rajaram struck a deal to buy back the 17.5 per cent stake held by Mr Ryan for $9.3 million.

This deal was reached after Mr Rajaram put “deceitful” pressure on Mr Ryan’s son, Patrick Ryan Jr, telling him that Mu Sigma had limited growth potential because it was on the verge of losing its biggest clients, according to the complaint reported by Bloomberg.

The complaint also blamed Mr Rajaram’s devotion towards Lord Shiva as one of the reasons behind his action. According to Walworth’s complaint, Lord Shiva’s core philosophy called for “destroying or selectively abandoning the past”. “Only in hindsight did it become clear that Rajaram’s true objective was to gain back the ownership that he had been forced to share, and that, far from tapering off, Mu Sigma was growing geometrically,” the complaint alleged.

Mu Sigma was founded in 2004 by Mr Rajaram, who was earlier a strategy consultant at Booz Allen Hamilton and PricewaterhouseCoopers. It helps companies institutionalise data-driven decision-making, and harness big data. Mr Rajaram recently stepped down as the CEO, giving the position to his wife Ambiga Dhiraj, a co-founder of the firm.

Mu Sigma has raised more than $160 million in multiple rounds of funding from investors such as General Atlantic, Sequoia Capital, Fidelity, FTV Capital, and Accel Partners besides MasterCard.

“We are aware of the filing, and believe the allegations to be without merit,” a Mu Sigma spokesperson said in an email response. “We intend to vigorously defend the case, but decline to comment further.” Till the time of writing this article, Walworth did not reply tok mails seeking comment.

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Printable version | Jan 20, 2021 7:30:43 AM |

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