The Lost Founders: Stayzilla Story

‘The Lost Founders’ is our latest series considering the Indian start-ups’ shutdown in 2017. Today we are here with another start-up Stayzilla. Let’s discuss the reason behind shutting down of the startup, the economic impact, overall impact on the industry and the mistakes they made which led the start-up toward Death Valley. The lost founders is a series in which we will discuss the start-up stories and the reason behind the biggest failure of the start-ups.

Stayzilla.com

Founder(s): Yogendra Vasupal (Yogi), Rupal Yogendra, Sachit Singhi
Headquarter: Bengaluru
Launched: 2005
Category: Hotel, Leisure, Tourism, Travel
Closed in: Feb 2017
Funding: From the commencement, the start-up had raised total $33.5 million from three funding rounds, $500K seed funding in 2012, $20 million Series B funding in 2015, $13 million in Series C from Matrix Partners in 2016. An undisclosed amount of funding had been raised by the Stayzilla in 2013 by Matrix Partners in Series A funding.

Stayzilla Works:

Stayzilla initially launched as an online travel agency, Inasra for hotel bookings. Later on, they renamed the platform to Stayzilla and in 2010 they pivoted it into a hotel aggregator model. They aimed to provide unprecedented reach to travellers by providing stays across the entire length and breadth of the country, including all sorts of options from ultra-low-budget rooms to luxury stays.

Economic Impact:

At the time of cessation of the start-up, Stayzilla had spread over more than 1100 cities with more than 17000 options. As the start-ups play a significant role in the development of the economy. Stayzilla had 200-500 employees, according to LinkedIn, and behind the scene, various another workforce of the company who did housekeeping work and various others these types of workers, and the homestay, guesthouse owners who suffer because of the company.

Overall Losses:

The actual fair loss USD 33.5 million, the invested amount of the investors was a pure loss for investors and the initial amount invested by the co-founders during investment. The money which can either be used in various forms. They raised funding from the market but still the upper management of the company fails to manage the operations in the favour of the company, nor they meet the customer’s expectation so far, nor their hotel aggregator partners neither they satisfy their employee’s contentment. From the shutdown, employees left their jobs and the biggest loss to the country’s economic growth.

Stayzilla Reviews:

We are starting with some reviews about the start-up who had dealt with the companies in past, in short, their old customers describing their experience with the company. Some of their past customer’s reviews were satisfying that they are happy with the customer service and with the start-up overall but the coin of other side is still remaining to review. So other customer’s or we can say 85% or more customers’ review itself explains the entire story of the start-up. Below are some reviews:

“…tour to Arunachal…we stayed three nights…we booked through Stayzilla…we paid Stayzilla 30% booking charge in advance…Stayzilla had not paid the homestay the booking fees…the homestay had to be satisfied with the rest 70%…we paid them while leaving…the simple and cordial people did not know how to get the money back…this is not fair and this is not the way to earn money by deceiving simple people…” – a customer

“…my worst decision ever…joined this company…no scope to learn, no experience gained…superior was the worst…my precious time wasted…guess they have had their lessons already…” – an ex-employee

“…company has a lot of issues with HRM…they could not provide the ESOPs promised until a year…company closed down before the options could become available…company needs to work on limiting its scope better and working on what exists instead of moving forward continuously…there are very big structural problems in the entire codebase…basically not allowed to be worked on in favour of new extensions and rewrites…” – an ex-employee

“…most hated fraud online booking site ever…made hotel booking using Stayzilla…the booking get auto cancelled itself…it’s more than a month…not processed the refund amount yet… the quality of customer service is very poor…not to book with Stayzilla…it should get blacklist…” – a customer

“…are not responsive…once booked can be auto-cancelled giving some lame excuses…don’t have a proper tie-up with hotels…use our money and refund unexpectedly…don’t ever book through them…hotels they are tied up with are of inferior services…” – a customer

So from above presented some review, defined their experience with the startup Stayzilla. We can easily analyze the review about the company from the consumer’s reviews.

Stayzilla Owners:

According to their LinkedIn profile, it still showcases the same company and the same designations. No further information is available about co-founders current whereabouts. Yogendra Vasupal has been granted conditional bail by the Madras high court on charges of defrauding an advertising agency. A case has been charged by the local authorities in Chennai on the founder for defrauding an advertising agency.

Lack of Proper Outlining:

“Some of the startups only want to earn money by defrauding the innocent customers and raise funding from the investors without having long-term plan to run the business and shut it down later on.” The start-up’s tragic death briefs the improper planning, lack of setting proper strategies and later on suffer the innocent customers by ruining their trip. The start-up derailed and forgot the original agenda behind the commencement of the Stayzilla, they lacked in various aspects of the business to run it properly, such as market research, planning, strategy, etc. They were unable to satisfy their customers in many ways neither provided quality services nor assisted in providing better services to grievances.

Through the customers’ reviews, we can easily understand their services and how much they were dedicated to their work. Various reviews showcase that they only arranged guesthouses or homestay from the local peoples and they did not pay them the amount of stay, and demand to serve the guest according to their wants. There were various other cases too about the defrauding customers and hotels or resorts, deducting charges for the services in the Stayzilla account, even after showing confirmation of bookings to customers, but in the resort record, there’s no such confirmation about the booking made by them. Most of all they didn’t return the amount which they had already deducted but not provided services to customers.

From the above review of customers and employees, it was obvious that the company was a fraud there is no other motive than defrauding the customers and hotel providers. This clearly shows the mismanagement of the top-level department who fails to manage the things properly. Lack of communications among the stakeholders, and between the hotels, resorts and also in the management of Stayzilla. Stayzilla also didn’t satisfy their customers in any manner, we can say poor customer services are one of the main reason behind shut down. It would have been easier for the company if they had given a thought to such kind of challenges well before in time. Also, they usurped the amount deducted for the services which they have never given to their customer, didn’t return the amount.

If we observed reviews, it is quite clear that the company management terribly failed to provide solutions to such issues. Also, the company did not learn even after hundreds of customers giving this as a major cause of concern for the services from the company. Such defraud led a case on the founder of the Stayzilla Yogendra Vasupal, charges were defrauding an advertising agency. But what our market research explicates the reason behind shut down was the lack of trust in consumer, fraudulent activities; lack of communication among stakeholders, mismanagement and the important thing is they lost their goodwill from the market one by one. In recent, an interim order of status quo passed by the Supreme Court against the proceedings of insolvency on the homestay aggregator. Thus, in September last year, the order freezing the insolvency resolution process (IRP) ordered by the National Company Law Tribunal (NCLT).

NCLT orders Stayzilla into insolvent liquidation in case file by vendor Jigsaw know more.

Our take on the whole scenario is that Stayzilla failed to get a proper understanding of its industry. It could not foresee the challenges that were most common and thus could not devise a proper plan to satisfy its customers in due time.

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