Caught In Battle Between Board And Cofounder, Will BharatPe Become Another Housing.com?

Update | 7th Feb, 10:35 AM

The earlier version of the story had incorrectly mentioned Sequoia as a common investor in both Housing and BharatPe. We have edited the same to reflect the right details. We apologise to our readers.

The article’s feature image has been updated. The image used earlier was signalling incorrect meaning.

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Every now and then, there comes a startup that grips the imagination of the tech ecosystem to rise rapidly, and is then cut to size by pressure and investors. In India, this was Housing.com, while globally WeWork is among the biggest examples.

While both of these companies continue to exist and operate, the aura around them has definitely diminished since the time they burst onto the scene. Something similar is happening to BharatPe and there are more than a few commonalities between Housing.com and BharatPe than at first glance. Is this Deja vu?

But before that here are two smaller stories that also matter:

• Google has thrown its hat in the Make-in-India ring and says it will build more products in India for the global market
• As reported exclusively by Inc42, Unacademy will launch offline experience centres – ‘Unacademy Store’ to provide counselling and teaching demo

The Housing.com & BharatPe Connection 

That the Ashneer Grover and BharatPe controversy has overshadowed the Union Budget (for startups at least) in many ways just goes to show how grave things have turned at the fintech giant.

The Current Situation: This past week, cofounder Grover has claimed that BharatPe CEO Suhail Sameer and the board comprising key investors has forced him out of the company amid all the controversies.

Calling Sameer “a puppet of investors”, Ashneer Grover has alleged a conspiracy and said that the CEO and the company’s general counsel Sumeet Singh manipulated him into going for a leave of absence. However, last month, Grover claimed that he’s going on leave voluntarily. So which is true?

Of course, that’s just scratching the surface — the problems at BharatPe also include malpractices, alleged embezzlement and another cofounder Bhavik Koladiya, who was convicted in a financial services crime in the US in 2015.

Investors have to answer serious questions about shortcomings in their due diligence process before investing millions in BharatPe. And instead of taking potshots at each other through social media and announcements, Grover, BharatPe and its investors need to fix more than the reputation of the company.

Another Housing.com? Of course, a lot of the attention on Grover is due to his brash attitude, which is on display on Shark Tank India. Similarly, Housing.com former CEO and cofounder Rahul Yadav was also known to be an outspoken person, which was on full public display in 2015 after Housing.com had scaled up and reached great heights.

With backers like SoftBank, and others, Housing quickly raised funds and was valued at INR 1,500 Cr ($200 Mn) before the entire fiasco. BharatPe has also grown at a similar hot pace and so far has raised over $700 Mn and is valued at $3 Bn.

 The Sequoia Connection! In July 2015, amid a number of PR disasters and a public spat with investors (on Quora of all places), Yadav, who was one of 12 cofounders, was ousted from the Mumbai-based startup. Yadav had publicly criticised the VC’s managing director Shailendra Singh.

Read all about the poaching saga that fuelled the Housing-Sequoia war in 2015. 

Now Sequoia is at the centre of another storm as details of a similarly heated debate with BharatPe’s Grover have emerged in the past month. In both cases, it seems investors and board had the final word with Yadav ousted and Grover on the verge of the same fate with BharatPe.

Questionable Acts: In BharatPe’s case there are questions of missing due diligence due to allegations of embezzlement, a weak business model, payments to non-existing vendors and a toxic work culture.

During its controversy, Housing also was reported to be spending massively on advertising and even acquired companies without the express approval of investors. It spent nearly INR 120 Cr on a “Look Up” promotional campaign, which was several crores over-budget.

Aftermath: Of course, Yadav has since then launched Intelligent Interfaces, a startup that never really took off, and has made a more recent comeback with Broker Network, another real estate tech company. For Ashneer Grover, the focus now will be on protecting his stake in BharatPe, even if any plans for a new venture don’t pan out. Besides this, he could look to add to his angel investment portfolio, which has grown since he appeared on Shark Tank.

What’s worrying is after the fiasco at Housing.com, more than 600 employees were laid off. Will a similar fate await the employees at BharatPe?

Funding Roundup For The Week

• The Indian sovereign wealth fund NIIF marked its entry into the startup ecosystem by investing INR 100 Cr in ecommerce unicorn FirstCry.
• Subscription management platform Chargebee topped the funding chart of the past week with its $250 Mn fundraise.
• The Indian startup ecosystem saw 32 disclosed funding rounds in the past week raising a total of $563 Mn — a 237% drop week-on-week.

Indian IPOs & Tech Stock Tracker

• Logistics startup Ecom Express has filed its DRHP for INR 4,860 Cr IPO at $1.5 Bn to $1.8 Bn valuation, consisting of INR 2,160 Cr fresh issue and INR 2,700 Cr OFS
• Teleshopping and ecommerce platform Naaptol is planning for INR 1000 Cr IPO and will file its DRHP in Feb 2022

A Budget For Startups?

After finance minister Nirmala Sitharaman’s Union Budget address this past week, many called it the ‘Budget For Digital India’ thanks to the slew of proposals and announcements that will open up opportunities for startups. Take a look at the key takeaways here, along with some of the important stories below:

• The Modi government’s focus on eVidya and Digital University has missed the major problem of access to edtech devices and services due to infrastructure hurdles
• The govt has allocated INR 1,000 Cr for the Fund of Funds for Startups in Budget 2022, lower than its revised estimate of INR 1,330 Cr
• Subhash Chandra Garg, former secretary at the Ministry of Finance, believes the 30% crypto tax rate is quite high and out of line with the taxation of gains from other assets
• Logistics and tech ecosystem has hailed the PM Gatishakti plan saying it could have a multiplier effect on the economy and job market
• The battery-swapping policy and interoperability standards come as an encouraging factor for the EV industry which otherwise found not much to cheer about 
• While addressing some of the shortcomings of the budget from the startup POV, TV Mohandas Pai believes that it discriminates against Indian investors

Jio’s Metaverse Play & Other Stories

• Jio Platforms has acquired 25% of Two Platforms Inc, to build Metaverse, web 3.0 and mixed reality applications
• WazirX cofounder Nischal Shetty has teamed up with blockchain architect Omar Syed to launch a new Layer-1 blockchain called Shardeum
• Aditya Birla Group will launch a new subsidiary with a ‘House of Brands’ approach to acquire, build and scale D2C brands across fashion and lifestyle segments
• Zomato’s Deepinder Goyal has sold his stake in Blinkit (earlier Grofers) to US-based hedge fund Tiger Global
• UPI recorded 461 Cr transactions worth INR 8.31 Lakh Cr ($111.3 Bn) in January 2022, up by 1% from December 2021

See you next week with another roundup of our top stories.