Millions still in the bank, GoZoomo shuts shop, returns VC money. The whole story.

GoZoomo co-founders Arnav Kumar, Himangshu Jyoti Hazarika, and Ankit Behera. Photo credit: GoZoomo.

This is rare among Indian startups.

A two-year-old startup raises US$7 million from top VCs, has more than half of it left in the bank, but decides to return the money to its investors.

Used car marketplace GoZoomo, which had shown much promise in tackling the problem of mistrust in this space, is shutting down. The founding team of three IITians decided that the unit economics were not adding up, despite several iterations in the business model. They looked at the data objectively and took the tough decision to shut shop instead of burning VC money on an unsustainable business.

It is better that this capital gets deployed elsewhere instead of us hoarding it and hoping that something good happens.

“The right thing to do is to treat the capital respectfully and deploy it where there is a better chance to create huge value,” GoZoomo CEO and co-founder Arnav Kumar tells Tech in Asia. “We tried to build a fast-scaleable business, but realized that the business model does not work. So it is better that this capital gets deployed elsewhere instead of us hoarding it and hoping that something good happens.”

All the employees are getting seven weeks of pay as severance and help with landing other jobs. As for Arnav, he wants to take time off to focus on the learning from this experience. “We couldn’t solve this problem and eventually had to take this call. But we learned so much,” he says bravely.

A new ethical standard in the Indian ecosystem

The decision has earned the respect of Alok Goel, MD of GoZoomo’s main investor Saif Partners.

“The startup journey is very, very hard,” says Alok, who was earlier the CEO of FreeCharge until its acquisition by Snapdeal. “The entrepreneur takes a lot of risk and puts his life at stake by picking up entrepreneurship. During that stage, he is fighting all kinds of odds to survive and win. So it takes a lot of emotional and intellectual maturity on the part of the founder to take a decision like this.”

Alok Goel, MD of SAIF Partners. Photo credit: SAIF Partners.

Alok points out that returning so much money to an investor sets a new standard in the Indian startup ecosystem. “This is probably the first time an entrepreneur is announcing this kind of a decision. Typically, when something is failing, an entrepreneur would try to show that his company is being acquired, while internally the story might be totally different. But these guys are sharing a lot of things in a transparent manner and taking this mature decision of returning money.”

On Arnav’s part, he has learned the hard way that it is really difficult to build a sustainable company. But he’s also more confident than ever that it is possible. He hopes to build a big company one day with the same investors.

The problem they set out to solve

The problem they could not solve

Achilles’ heel

No blood bath

What next