BUSINESS

Here's Another Brutally Honest Confession By A Startup Founder On Why It's Shutting Shop

Online homestay aggregator Stayzilla has halted operations.

24/02/2017 7:33 PM IST | Updated 24/02/2017 7:45 PM IST
Stayzilla

After three revisions in its financial plan over the past 18 months, online homestay aggregator Stayzilla has halted operations, co-founder and CEO Yogendra Vasupal, has announced.

In a blog post detailing its "reasons for failure," Vasupal laid out not only the business challenges surrounding its business, the company's misguided financial decisions, but also the personal toll start-up life sometimes takes on founder-entrepreneurs. Earlier this week, founders of Indian e-retailer Snapdeal also detailed the "mistakes" they have made leading up to a re-organisastion of its business, and reported mass layoffs.

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"This has been one of the toughest decisions that I have taken so far but it is the right thing to do," said Vasupal. "The hardest part is saying goodbye to a perfect team that has accomplished a lot by putting Homestays on the map of India."

Vasupal outlined how over the years, the company veered from a strong cash flow focus to gross merchandise value (GMV) as in indicator of valuation, which ultimately hasn't been enough to help it turn the corner.

"The initial seven years were all about having negative working capital, positive cash flow and a sustained ability to fund our own growth. Those were the only metrics we tracked. In the last 3–4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV, room-nights and other 'vanity' metrics instead of the fundamentals of cash flow and working capital," he wrote.

"I have come to realize that the value of a business is extremely subjective, like beauty," said Vasupal, adding that while there are many benchmarks for valuation of a company, its "intrinsic value starts from inside and is tied very closely to the metrics that founders value and their comfort with that selection."

Vasupal said for the company, the past year had been "a focused attempt to get back to our initial, and stable, value system...However, 12 months was just not enough time to shift paths, when we were already 36 months down a dramatically different path," he said.

The company also ran up against some big macro challenges, particularly the lack of infrastructure in the homestay travel marketplace that required "extensive" investments both on the supply and demand side. Despite these challenges, it managed to create 8,000 homestays in over 900 towns," but the process "stretched us thin," said Vasupal.

Vasupal also profusely thanked his colleagues and co-founders including Sachit Singhi and Rupal Yogendra, COO of Stayzilla and also his wife.

"After a long discussion, we have arrived at the conclusion that, we need to spend the next decade strengthening our personal relationship which we have neglected for a more professional one in the last 10 years."

Stayzilla, which hopes to "reboot" with a new business model, has suspended all bookings and says it will refund any bookings with check-in dates after Feb 28.

Read the blog post in full here.

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