Case Study on Housing.com: Why Did It Fail?

The Untold truth about the fasted growing startup of India.

Introduction

Housing.com was the startup that grew the fastest in India. This startup was growing at a rate of 300% per month, and everything was going well. The man behind this successful startup, however, was abruptly fired one day. As a result, housing.com went bankrupt. Mr. Rahul Yadav was the startup's founder and genius mind. The valuation of this startup in Rahul's presence was Rs 1500 crore, which dropped to Rs 450 crore after his exit. Despite having a first-mover advantage, a great team of IITians, and a crore in funding, Housing.com failed.

Let's get into the specifics: what caused this startup to fail?

India's real estate market was very unorganized in 2012. Buying and selling was a difficult task for ordinary people at the time. This is when Rahul Yadav and his friend were looking for a place to live. Despite meeting with brokers, they were unable to obtain the desired property. With this single incident, Rahul Yadav identifies two aspects of the Indian real estate market:

1. Lack of transparency: The relationship between brokers and homebuyers lacked transparency. After buying or renting a home, customers used to experience a lot of issues. The property and society were not properly maintained. This prompted Rahul Yadav to establish a company to address these issues, and thus hous

2. Discoverability: He discovered that looking for a home is a difficult and time-consuming task. And without brokers, it is impossible to find a place to live. He decided to create something that makes it simple to find properties.

The beginnings of a real estate venture 

Housing.com was created to address the market's three major issues.

1. Transparency: People used to complain that brokers were not forthcoming about the properties and that the actual conditions of the houses differed greatly from the descriptions. 

2. Personalized discoverability: Housing.com simplified house hunting by introducing a personalized discoverability option. where people can narrow down their options based on price range, area, home type, and a variety of other factors. This greatly benefited not only house hunters but also landlords. Landlords can now filter tenant profiles based on their specific requirements. Previously, there was a communication gap between the tenant and the landlord, which caused problems for both parties.

3. Fill-up time: Previously, India's housing real estate market was a shambles. People used to buy expensive properties in this area, but they either failed to rent them out on time or received little return on investment. Housing.com recognized this problem and set a goal of ensuring that owners' properties were never vacant.

And housing.com wanted to fix these things. Housing.com made several changes to its platform and tried out new solutions to this problem. They allowed brokers and landlords to upload photos and detailed descriptions of the property they wanted to rent or sell. They also show similar properties to buyers based on their requests. This helps buyers find desirable properties.

Rahul Yadav was a coder who built his first website on his own. Later, he persuaded 12 of his colleagues and friends from IIT Bombay to join him in founding this company. After only a few weeks of operation, they only make $8 million in revenue. Seeing this, many investors approached Rahul Yadav for Housing.com investment opportunities.

However, there was a major issue with this startup, which was called "Synergy in Energy." Simply put, there was a significant difference in the thinking and energy of everyone on or in the core team. And in a startup, a good core team is one of the most important factors in the company's success or failure.

Internal Issues in Housing.com

Every core member of housing.com had a different thought and feeling than the others. Someone's energy level was extremely high, whereas another's was extremely low, resulting in workplace apathy. The business model of the company is subscription-based. For 8,000 INR, brokers or landlords can list an unlimited number of properties. In the beginning, this model worked extremely well. But Rahul Yadav understood that in the real estate market, selling has more clout than renting.

and wanted to work in this direction, but due to internal issues and the members' different mindsets, the process slowed. He wants to have exclusive deals on selling properties, but other members thought this was a bad idea and wanted to keep things the same. He wants to expand not only in India but also internationally, but he was unable to take further steps because things were deteriorating in the company.

SoftBank invested 550 crore INR in this story in December 2014. Rahul will accelerate the process of international expansion after receiving this funding. As everything was about to be completed, a new problem arose: "investor rage."

Venture Capitalist Issues in Housing.com

The company's initial investors include Sequoia Capital and Nexus Venture Partners. This means that the investors are also members of the board of directors and have a say in how the company makes decisions. M.R. Shailendra Singh, Managing Director of Sequoia Capital, poached six employees from the firm. He asked them to leave this company and offered them a position at Sequoia Capital.

When Rahul became aware of the situation, he sent Shailendra Singh a threatening email. Unfortunately, this email was leaked online. And this aggravates the company's situation.

Sequoia Capital is one of the world's largest investment banks, so it's no surprise that they're well connected. And they began to create misunderstandings and problems between other investors and Housing.com.

As a result, other investors lose faith in the company.

The fall of Housing.com

Investors began to delay decisions because they had lost faith in this company. Rahul Yadav recognized the company's potential and wanted to purchase it for 7 crores at the time, but investor delays caused the valuation to rise from 7 crores to 17 crores. As a result, the company suffered a loss of Rs 10 crore.

Sequoia Capital blamed Rahul Yadav for this and expelled him from the company along with all other investors. However, a company noticed a loss of vision after he existed.

Following Rahul's departure, the company went through several CEOs, but no one was able to run the company properly. The reason for this was because no one else could comprehend the vision like Rahul Yadav. Proptiger purchased the companies after their valuation was reduced from Rs. 1500 crore to Rs. 450 crore.

Business lessons from the failure of Housing.com

Finances are just as important. Rahul Yadav was an excellent programmer and a great visionary, but he never managed and maintained the company's finances, resulting in the company losing three times its profit at one point. Be decisive while avoiding ego clashes. 

Be decisive without having ego clashes. Making a quick and healthy decision is very beneficial to any company. However, one must ensure that a decision is not motivated by ego as this limits your analytical abilities

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