Housing.com: How one of India's biggest start-ups tripped

It quickly went from being a darling of investors to a liability

There was a cackle of laughter in a Powai office when Abhimanyu* (32) read aloud a story in a popular business daily about online start-up company Housing.com laying off 200 people. Abhimanyu turned to his friend Raman Shah* (31) and wondered aloud if they had been stupid to resign and not wait to be fired. Abhimanyu and Shah have been working at Housing.com for about a year. Recently, both decided to quit to pursue their new interests. A week after they handed in their resignations, Housing announced its layoffs.

Since they resigned, the duo's laptops have been taken away and they have been locked out of all their clients. "Housing has laid off a much higher number of people than reported in the past four months. In the latest round, the management started the layoffs before Diwali, but released the information much later," said Abhimanyu, indicating around 1,000 had lost their jobs. Asked, Housing said the number was inaccurate.

According to sources, the company, which started in 2012, and had 4,000 employees at its peak, is now trying to turn into a lean, mean realty-buying machine.

Executives said in its concentrated effort to stem the $5-million (Rs 32.5 crore) monthly burn, Housing has shut four divisions in the past six months, leaving the company with only one functional arm: Buy and sell.

The realty company, founded by Rahul Yadav and 10 others, was to be a Google for realty buying queries, from renting to long stays and from buying to selling. It took a step away from the listings platform. His idea was so strong that investors, which included SoftBank and Helion Ventures, poured almost $100 million into the company.

But, then, reality struck. Yadav was fired in June, interim chief executive Rishabh Gupta was let go in November, and the company was bleeding money. Sources said investors wanted returns and asked Jason Kothari, the new chief executive, to start a slimming operation.

The question is how did one of India's biggest start-ups get to this point?

The burn

Sources say as the company received funding, it started to rent offices across the country. At its peak, Housing had 19 offices across the country. Currently, the company has 11 offices in India: Five in Mumbai, three in Delhi and one each in Pune, Chennai and Bengaluru. All of Mumbai's offices are in Powai and three are currently running with little or no occupation. Most of it is because of the violent churn in the past six months.

The average monthly rent for a 5,000 sq ft office (which seats around 50 people) in Powai is Rs 5.4 lakh and has a lock-in period of six months. "Housing will end their lease agreements soon, but that means paying a huge penalty as the company signed agreements, which doesn't allow them to leave painlessly," said an executive.

Also, some of the laid-off employees objected to the company willing to spend Rs 1.5 crore on a party to celebrate their third annual day in March. Sources said Housing made Rs 1.7 crore in financial year 2015. The company has not filed its profit and loss numbers at the Registrar of Companies in the past two years and an official figure could not be recovered. Housing denied it had spent that much on a party, but it did not give a figure.

Housing reportedly spends Rs 100,000 a day to feed people in one office in Powai. Employees said they were given breakfast, lunch, snacks and refrigerators were stocked with juices and soft drink. The staff strength of that office is learnt to be 100.

The food and drink was not restricted to other staffers, but employees in secondary offices said it made no logistical sense for them to trek to the office for lunch. Not only was Housing overstocking talent, they were paying top dollar as well. The start-up, sources said, was hiring people at 85 per cent of the salary paid to the best in the business. Competitors said the policy to pay over the odds causes friction and is unaffordable. In the long term, these can be fixed if there is a consistent business plan.

Turn of events

2012
    Housing.com founded

2014 December
    Funding worth $120 mn from Qualcomm Ventures, Nexus Venture Partners, DST Global, Falcon Edge Capital, SoftBank Corporate, Digital Nirvana Fund & Helion Venture Partners

2015 March
    Launches Rs 120-cr marketing campaign

2015 June
    Founder Rahul Yadav fired

2015 November
    Interim CEO Rishabh Gupta fired, Jason Kothari becomes new CEO

*Names changed to protect identities