Why Stayzilla backed by Matrix and Nexus shut down. A founder’s rare admission

Stayzilla was founded by Yogendra Vasupal (C) with his wife Rupal Yogendra (L) and his friend Sachit Singhi (R) in 2010. They were avid travelers and their passion showed in the curation of exotic homestays on Stayzilla. Photo credit: Stayzilla.

The initial 7 years were all about having negative working capital, positive cash flow, and a sustained ability to fund our own growth. Those were the only metrics we tracked. In the last 3 to 4 years, though, I can honestly state that somewhere I lost my path. I started treasuring GMV (gross merchandise value), room-nights, and other ‘vanity’ metrics instead of the fundamentals of cash flow and working capital.

That’s Yogendra Vasupal, founder and CEO of India’s largest homestay network Stayzilla, talking.

This the first time that an Indian founder has spoken so bluntly about his startup’s failure. That too just a day after he broke the tough news of layoffs to his employees.

Earlier today, Tech in Asia broke the news of Stayzilla’s shutdown.

See: It gets worse: India’s largest homestay startup Stayzilla shuts down

The startup with a network of 55,000 properties, including homestays, small hotels, and other properties across towns in India – from faraway Ziro in northeast India to Theni in the south – had served over a million travellers.

Stayzilla was founded by Yogendra Vasupal – better known as Yogi – with his wife Rupal Yogendra and his friend Sachit Singhi in 2010. They were avid travelers and their passion showed in the curation of exotic homestays on Stayzilla.

It initially got US$500,000 from the Indian Angel Network, followed by a series A round of an undisclosed amount in 2013. Two years ago, in the boom time of 2015, it raised US$20 million and US$13 million in series B and C rounds from Matrix Partners and Nexus Ventures.

“The last year has been a focused attempt to get back to our initial, and stable, value system. However, 12 months was just not enough time to shift paths, when we were already 36 months down a dramatically different path,” Yogi said.

In an effusive blog post, Yogi thanked his entire team, even naming several individuals who played a key role in building up Stayzilla, and shouldered the entire blame for the startup’s shutdown. That’s another first.

Reasons for failure, according to the founder

“Despite having a very clear lead, despite a lot of firsts, despite being successful in getting an ecosystem up from scratch pan-India, there are a few reasons why we are at this juncture,” Yogi elaborated.

Forced to match prices, we could not even recoup what we put in, necessitating very large capital requirement simply to sustain growth.