In May this year, Mumbai-based O2O platform Appie, which helps consumers discover product availability and price from different offline retailers located in their vicinity, stated that it has raised $1 Mn in a bridge round of funding. The investors remained undisclosed apart from mentioning that one was from Mumbai and two from Europe.
Come August and company employees or as the founder Kartik Sanghavi calls them- “the “Appiening team” are now running from pillar to post to get their dues and are in the process of filing a case against the company over non-payment. Apparently, it turns out to be that the funding claim by the startup may well have just been that. A claim!
In an email to Inc42, the employee has mentioned
“Kartik’s father (Mahesh Sanghavi) denied any such funding has happened and this was just a PR gimmick”.
Here is the text reproduced in full-
The Curious Case Of The Funding That Never Came In
Despite the tall funding claims in May, employees were not paid their salaries for the month. Some were not paid for March as well. In mid-June, Kartik sent out an email to employees stating that due to “certain unforeseen circumstances and broken commitments,” salaries for May and June had been delayed.
When employees questioned him on the funding, he stated that the funding has been delayed. He added that he had exhausted the ‘planned allocation for this product in October 2015 but had created a runway for another year till December 2016.’ He promised to clear the salaries in a week or two.
On July 1, Kartik sent an email to the team stating, “We, the Appiening team are set on course to navigate the future of how Mobile, Product Search, Ambient Experiences, Connected experiences will evolve and impact millions of lives. For a whole lot of us the biggest binding motivation is to be able to lay claim to a product, our creation that is worthy of our life’s work, our collective learning over the years, something that makes us and our loved ones proud.”
In that email, he mentioned that “we just got the final official confirmation from the Times Group, they have confirmed investment of Rs 15.00 Crores in our Organisation in terms Ad inventory. According to them the worst case valuation of our company is Rs 82.00 crores. And yes it is upto us how much we can take this up.”
Additionally, he also doled out 1% equity to the Appiening Team stating-
“Towards this milestone, towards the continued support shown by not only all of you but also your family members and towards increasing responsibilities and more importantly towards growth I am proud to announce 1% equity to the Appiening Team, for all those who have shown commitment and will continue to grow and help the team and the organisation grow.
How to grow the value of this equity beyond the “worst case scenario valuation of INR 82.00 Cr ” is completely up to us.
This entire pool of ESOPs will continue to increase 5 or even 10% as we grow and so will the opportunity to get more it.So it is entirely upto the team to make sure that how much we can jointly not only make this 1% grow but also how the increased amount of ESOP pool can be rewarded more and more to a smaller team. And this is apart from lot more other surprises we will be bringing in soon!”
The Disappearing Act
There were more surprises in store for the Appiening team. Around July 7, Kartik Sanghavi stopped coming to the office located at Kewal Industrial Estate building at Senapati Bapat Marg in Lower Parel. Instead, his father Mahesh Sanghavi started coming to work. When the employees raised their concerns to him about their salaries, he assured them that by July 31, he would clear everyone’s salaries.
But that was once again a false promise. Left with no other alternative, the employees went to the Lower Parel police station to file an application. Consequently, a few days later, Karthik’s father Mahesh was summoned to another police station by the police official. He again came and stated that he would be clearing their salaries in a couple of days. But this too never happened.
The employees also reached out to the Times Group, who confirmed that the deal was applicable only if the $1 Mn funding went through. According to employees, the office has been closed since July 31. On August 3, the company’s HR messaged employees via WhatsApp informing them that the office will remain closed until further notice and they were to work from home.
No Salaries, No Documents, No Way Out
In distress, employees asked the management to provide them an experience letter and relieving letter so that they could move on and apply somewhere else, which was agreed upon at the police station.
The employees then went back to the office, to collect their personal belongings, and send Karthik an email from the office for crediting their salaries as well as the documents.
The email goes as follows-
Even though Kartik was requested to acknowledge the email, he did not. Neither were the salaries credited nor were the documents sent across.
All their actions have been to the contrary. On August 21, Mahesh sent a message on the company’s WhatsApp group stating that he would pay them a month’s salary in cash by the 22nd August on the condition that the employees will have to hand in their resignations.
The 30-odd employees were miffed. Instead of being fired or asked to serve a notice period and then leave, the management was instead demanding their resignations in lieu of dues. They waited for his next message as to when should they come to the office to collect their salaries, but it never came.
Left in the lurch, they will be filing a case against the company. Curiously, the website which had remained shut down has been updated just two days back with new job listings.
But coming from a company which could spread the funding news as a PR gimmick, it hardly seems believable.
O2O Not Good To Go?
In March this year, Mumbai-based price comparison startup Pricebaba shut down its offline model as it failed to monetise despite creating business for retailers and managing to generate a lot of traction.
Founder Annkur Agarwal had stated that one major roadblock to the model was that local retailers did not have the bandwidth to reply or follow up with the consumer leads generated through the portal. Then there was the trouble faced in tracking conversions of enquiries through the portal and thereby charging a subscription amount. Most of the retailers started out as free customers, hence making them pay at a later stage was very tough.
Another major deterrent was the consumer mindset that online shopping is only more discounts and incentives, something that has been propagated by the rampant discounting model followed by the big ecommerce players. Bigger ecommerce players have set unrealistic expectations in the minds of consumers which leads to many small retailers getting harassed with calls for more discounts.
Hence startups who want to succeed in this space need to figure out how to tackle these challenges. O2O is a story that looks much easier on paper but when it comes to execution, it is hardly rosy.
Keeping that aside, Appie’s example is a clear case which demonstrates that gimmicks and falsities are hardly the way to anything happy. Funding or no funding, leaving your employees in a lurch is not the stuff of what successful startups are made of. The recent case of AskMe’s shutdown is still a grim reminder of how vulnerable the startup ecosystem is when it comes to the misdoings of a few affecting the company as a whole.
We tried reaching out to Mahesh Sanghavi, but he is yet to respond.
Update: Mahesh Sanghavi responded that the management is trying its level best to collect funds to clear employees’ dues and they will be done as early as possible. He also added that the $1 Mn funding did not go through as the two parties could not reach an agreement on certain things.