Why did Housing.com fail? | Case Study on Housing.com

Introduction to Housing.com

Housing.com was India’s fastest-growing startup. With a growth rate of 300 % per month, this startup was growing and everything was going well. But suddenly one day the man behind this successful startup has been fired from his startup. This result in the fall of housing.com .Mr. Rahul Yadav was the founder and the genius mind behind this startup. In Rahul’s presence, the valuation of this startup was 1500 crore INR which dropped to 450 crores after his exit.

Housing.com failed despite having a first-mover advantage, a great team of IIT’ians & a crore of fundings.

Housing.com advertisement. Housing.com startup.
Housing.com advertisement

Let’s get into the details of why did this startup fail?

Back in the year 2012, India’s real state market was very unorganized. At that time buying and selling was a complex task for normal people. This is the time when Rahul Yadav and his friend were searching for renting home. But despite meeting brokers they didn’t get any property, which they wanted. And with this single incident, Rahul Yadav identifies 2 things about Indian Real Estate, market:-

1.Discoverability:- He experienced that searching for residence is a difficult and time-consuming task. And without brokers, this is impossible for one to find homes. He decided to make something that makes the discoverability of properties easy.

2.Lack of transparency:– There was a lack of transparency between brokers and home buyers. Customers used to experience a lot of issues within their homes after buying or renting them. There was no proper maintenance of the property or the society. And this encouraged Rahul Yadav to start a company that solve these problems and housing.com started.

Born of Real Estate, startup Housing.com

Housing.com was made to solve these 3 major problems of the market,

1. Customized discoverability:- Housing.com made house hunting easy by introducing a customized discoverability option. Where people can filter their options like range, area home type, and many more. This not only benefitted house hunters but landlords we’re also benefitted a lot. Landlords now can filter their tenant’s profiles by their requirements. Earlier there used to have a communication gap between tenant and landlord which creates problems for both parties.

2. Fill-up time:– Earlier in India, the housing real estate market was a mess. Here people used to buy expensive properties but they failed to rent out these properties on time or when they rent them out they used to hardly get their return on investment. Housing.com saw this problem and made aim that the properties of owners never run vacant.

3. Transparency:- People used to experience that brokers were not transparent about the properties & the actual conditions of the houses vary a lot from the description. And housing.com wanted to fix these things. Housing.com made various changes in its platform and experimented with new ways to solve this problem. They allowed brokers and landlords to upload pictures of their property with a detailed description of the property they want to rent or sell. And they show similar properties to buyers according to their requests. This makes buyers find out properties which they want.

Rahul Yadav was a coder, initially he build a website on his own. Later he convinced 12 of his colleagues and friends from his college IIT Bombay to start this company. Only after a few weeks of the launch, they clock the revenue of 8 million dollars. Seeing this many investors started approaching Rahul Yadav for investment opportunities in Housing.com

But there was a huge problem in this startup which was “Synergy in Energy”. In simple words, there was a huge difference in the thinking & energy of every single person from the core team. And in a startup, a good core team is one of the most important factors behind the failure and success of that startup.

Internal Problems in Housing.com

Every Core member of housing.com had different thinking and energy from every other member. Someone’s energy level was very high & someone’s very low which promoted unwillingness to work environment. At starting the company was operated on a subscription-based business model. Where brokers or landlords can list an unlimited number of properties in just 8000 INR. This model worked very well in the starting. But Rahul Yadav knew that in the Real Estate market more power is in selling rather than renting.
And wanted to work in this direction but due to internal issues and different mindsets of the members, this process slowed down. He wants to have exclusive deals of selling properties but other members thought that this was is not a great idea and wanted to continue as the things we’re going. Not only in India, he wants to expand Internationally but he was unable to take further steps as things were getting worse in the company.

Soft Bank enters this story in December 2014 and invests 550 crore INR. After this funding Rahul speed up the procedure for international expansion. As all things were about to be done the new issue arises which is ” Investor Rage”.

Venture Capitalism Problems In Real Estate Startup.

Sequoia capital and nexus ventures partners, we’re the initial investors in the company. That means the investors also sit on the Board of Directors, and have involvement in companies’ decision-making. Managing Director, of Sequoia capital M.R Shailendra Singh, poached 6 employees of the company. He asked them to leave this company and offered them a job in Sequoia capital.

When Rahul came to know about this situation he sends a threatening email to Shailendra Singh. Unfortunately, this email got leaked on the internet. And this makes the situation worse for the company.

Sequoia Capital is one of the largest investment banks in the world so it’s obvious that they are well connected. And they started creating fallacies & problems between other investors and Housing.com.

This results in losing the faith of other investors in the company.

The fall of Housing.com

Because of losing faith in this company investors slowly started taking a lot of time in decisions to be taken by investors. During that period Rahul Yadav saw potential in a company & wanted to acquire it for 7 crores INR but due to a delay in investors’ decision, the company valuation rise from 7 crores to 17 crores. And due to this company reported 10 crores of loss.

Sequoia Capital blamed Rahul Yadav for this and with all other investors, they expelled him from the company. But after he exists a company saw the loss of vision.

After Rahul’s departure company changed many CEO’s but no one was able to run this company properly. The reason for this was Vision as no other person was able to comprehend the vision like Rahul Yadav. And soon companies’ valuation dropped from 1500 crore to 450 crores and was merged with Proptiger.

Business lessons from Housing.com failure

Be decisive without ego clashes – for every company making a fast and healthy decision is very beneficial. But one should take care that decision should not be ego-driven. As this reduces your analytical capabilities.

Finances are equally important – Rahul Yadav was an excellent programmer, he’s is a great visionary as well but never managed & maintained the finances of the company, Due to which at a time loss of the company got thrice of its profit.

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