Inside the story of how a turnaround CEO tried to repair Housing for its sale

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Indian real estate portal Housing.com got acquired last week by another online property marketplace PropTiger. It was a distress sale at a valuation of US$70-75 million for the SoftBank-backed startup, which had raised US$160 million in funding since its inception in 2012.

Barely a month before the sale, I met the man who had been put in charge of nursing the startup back to health: Jason Kothari, earlier credited with the turnaround of Valiant Entertainment in New York. The beleaguered startup was in a freefall after its co-founder and CEO Rahul Yadav was sacked following a public spat with the board.

The backers – SoftBank, Helion Venture Partners, Nexus Venture Partners, and Qualcomm Ventures – wanted to salvage what they could of their investment. The stock-swap deal with PropTiger at least gives them another shot at getting some tangible returns in the future.

See: Why is a turnaround expert joining Snapdeal?

Damage control

Jason’s first task was damage control. “The reputation was at rock-bottom,” he told Tech in Asia in an exclusive interview.

The founder of a company being sacked by its own board of directors had made Rahul Yadav the Steve Jobs of India in the eyes of many. Jason had to combat that. He reached out to all the participants of the fiasco – employees, investors, and even media – to clear the air.

“I went to every business head, every investor, and journalists, to just talk to them. Re-building relationships was crucial to bring back lost reputation,” Jason says.

But Housing needed much more than PR to get out of its swamp.

The company had been touted as a disruptor of the highly unorganized real estate sector, with a technology-backed model to make house-hunting easier. In 2014, SoftBank pumped US$90 million into Housing at a valuation of US$250 million.

The company was ahead of its competitors. There was no reason to hurry.

But the group of 11 friends from IIT Bombay helming the startup seemed to get carried away and faltered in utilizing the funding judiciously. The company spent a whopping US$20 million of the SoftBank funding on a single marketing campaign. Mind you, Housing wasn’t making large sums of money at that time.

Here’s how much cash it was burning: at the end of March 2015, the startup reported losses of over US$40 million, on a revenue of just around US$2 million. The company’s expenses were out of control. Employee cost at the end of March 2015 had jumped four-fold to US$13 million, and annual marketing costs had increased almost 10-fold to US$18 million. The investors objected, Rahul responded with animosity, and eventually he was sacked by July.

The problem with Housing was its leadership, Jason says. “An entrepreneur who has seen multiple markets and challenges would realize the importance of judicious expenditure. Housing’s founders probably didn’t have that exposure.”

Dressed up for a sale

Time of reckoning