What would you expect at the first town hall meeting of a young start-up? A chance to let off steam over poor airconditioning? A chorus against the cafeteria food?
If it is a young company led by a 26-year-old who, in a matter of weeks, fought a public battle with a venture fund and a media house, sent his resignation to the board and then pulled it back, you could go so far as to tell him to chill a little.
The 2,251 employees of property search portal Housing.com may have been thinking on those lines on May 13 as they trooped into The Renaissance Mumbai Convention Centre Hotel on the banks of Lake Powai, one of Mumbai's more picturesque pockets, a short distance from Housing's corporate office. But if there was anything bubbling in their minds, it had to stay bottled up. Rahul Yadav, their 26-year-old CEO, had other things on his mind.
"It (real estate) is a hard problem to solve and that is what motivates me and I will work to solve that problem." Yawn, he always said those things.
"It is written in my stars that I will make a lot of money in life, and that I will." Of course! Didn't he just buy a Porsche Cayenne?
"I'm just 26, and it's too early in life to get serious about money, etc." Cute!
But nobody was, or could have been, prepared for what Yadav said next. He was going to distribute his 4.5 per cent equity in the company among the employees - every last share. He will make Housing a $10 billion company without holding a single share in it. That will show those people who keep talking about the importance of having your skin in the game. It was about the vision, not the equity.
Some say Yadav's stake is valued at Rs 200 crore, some say Rs 70 crore. Neither is small change. More importantly, this is India. Nobody gives anything away here unless the law compels them to. Venerable promoters sit on humongous stakes, some through a complex web of holding companies. Yadav's statement at the town hall is still just a statement. It has to go through the usual rigmarole of paperwork before his shares actually land with the employees. But he has said it publicly, how can he backtrack? It's not a resignation letter.
So what do you make of Yadav? Mind you, you have to take sides. A world whose opinion is increasingly shaped by the social media, nobody has time for fence sitters. Out there on Twitter and Facebook, the verdict ranges from "cult hero" to "crazy" and "immature". The latter side still chuckles at Yadav's chosen address for Sequoia's Shailendra Singh - "Dude" - in an e-mail that told Singh to lay off Housing. And at his now famous resignation letter to the board: "I don't think you guys are intellectually incapable?"
We try to find the method behind the cult and the crazy.
Stock Talk in the Air
The reason behind the giving away of the stake is not very clear, but there is indeed context. A Housing insider, who is part of its top layer, says there has been considerable discussion about creating a pool of equity to start a system of ESOPs.
Total funding $121 mn
February and March 2013: Undisclosed amount from Network18 CEO Haresh Chawla and angel investor Zishaan Hayath
June 2013: Series A funding of $2.5 million from Nexus Venture Partners
April 2014: $19 million led by Helion Venture Partners
December 2014: $90 million led by SoftBank at $250 million valuation
It seems the investors - the biggest are SoftBank, Nexus and Helion - were planning to give some equity to the co-founders and also create a pool from which ESOPs could be given to lure and retain employees.
Here the picture becomes hazy. One does not know which way the discussion went, but these days heat and handwringing are never far from a meeting of the Housing board, even with the reconstituted one that has more representation from investors.
There was much heat even before the reconstitution, as the board may have thought of getting someone else to replace Yadav as the CEO. Things were not going swimmingly for the company. It had spent a fat packet on marketing - reportedly Rs 100 crore - but the measurable returns on it were not much. The company wanted to acquire a smaller rival and was close to paying a much larger sum for it than could be rationalised. According to a source who does not want to be named, reckless spending led to a situation where there is only enough cash to survive the next three to six months. "Given Yadav's current reputation, it is difficult to say what the company will do if it cannot raise follow on funding," he says.
People were leaving the company. But Yadav's resignation changed the game, the goalpost, and the turf. In a swirl of sympathy and slander, nearly everybody woke up to his contribution, especially in building the technology.
"Anyone who has met Rahul will tell you he is incredibly talented. He has trained some of the best techies and has a cult status among them. His hunger to change the status quo jumps at you within minutes of meeting him. His tech-plus-product vision is outstanding," tweeted Tarun Davda, Director at venture capital firm Matrix Partners India, adding: "But what was also clear was his complete disregard for rules."
The stake giveaway drives the nail in further. Each of the 2,251 employees will be beholden to the man who gave them the equivalent of many months' salary. And the value of those shares will, at least in the short term, go down if there was to be an acrimonious exit of the CEO.
Davda says Yadav is confident and knows what he is up to and against. The press statement after the resignation drama on May 5 by Housing's public relations agency Genesis Burson-Marsteller could well be an acceptance of the fact that investors as well as board members were worried that the company would flounder if Yadav stepped down, simply because he was crucial to the product, called Housing. "In the relatively short period of its existence, Housing has revolutionised the real estate market in India and it continues to lead and disrupt with world class product innovations. Today, the Housing board met and has been reconstituted to include all main shareholder representatives. After some good conversations the board has reaffirmed its faith in Rahul Yadav's vision at Housing," it stated.
|THE SPATE OF SPATS|
How it started...
HOUSING CEO RAHUL YADAV WRITES TO SEQUOIA CAPITAL'S SHAILENDRA SINGH, MARCH 6
I have been humble to you guys even after inhuman and unethical things that you've done with Housing... I just came to know you are personally after Housing's employees... If you don't stop messing around, directly or even indirectly, I will vacate the best of your firm.
SHAILENDRA SINGH, MD, SEQUOIA CAPITAL, RESPONDS ON QUORA ON MARCH 11, 2015. EXCERPTS:
I am deeply hurt by this e-mail... it came as a surprise and a big disappointment.
RAHUL YADAV REVERTS TO SHAILENDRA SINGH
You clearly know what s*** you've done with multiple entrepreneurs and start-ups in India with your cheap and dirty tactics... Unlike being fake like you, I'll be true here - I do not wish good for you or your firm until you're at the helm.
RAHUL YADAV'S E-MAIL TO EMPLOYEES IN APRIL
...In April we've beaten, burden on the society, MagicBricks & 99acres... Starting so late in such a hyper competitive space and winning in such a short time is a historic achievement!
RAHUL YADAV'S RESIGNATION E-MAIL DATED APRIL 30
Dear board members and investors, I don't think you guys are intellectually capable enough to have any sensible discussion any more. This is something which I not just believe but can prove on your faces also!
I had calculated long back...that I only have 3L [300,000] (hours) in my life... certainly not much to waste with you guys! Hence resigning from the position of directorship, chairmanship and the CEO position of the company. I'm available for the next 7 days to help in the transition. Won't give more time after that. So please be efficient in this duration.
YADAV'S E-MAIL TAKING BACK HIS RESIGNATION
After some frank and healthy discussions with the board, I have agreed to withdraw my resignation and I apologise for my unacceptable comments about the board members. I look forward to staying on at Housing as CEO and building an even greater company, while working in full harmony with the board.
On the House
The foundation of Housing.com was laid by 12 IIT Bombay guys in June 2012. While Yadav dropped out of the course in the final year to give shape to the company, the remaining founders, including Advitiya Sharma, completed their studies before joining the start-up as full-time employees. "We were all techies and we are not very accustomed to the way the world functions. If we were, we would be using some other real estate site instead of doing what we are. When you do not get accustomed (to something) you build new things. That's how Housing was born," says Vaibhav Tolia, one of the co-founders, who was responsible for developing the company's mobile interface.
With his team of techies, Yadav has crafted a story which any technology start-up in the country can only dream of. Many see Housing as the poster boy of India's hottest breed of start-ups, a company that has not only come a long way to disrupt the existing methods of searching properties, but also convinced some of the top investors to pump in $121 million in just two years of its existence. So inspiring has been the story, that Housing has become a big draw for young graduates who prefer a stint at the start-up instead of opting for high-profile jobs at tech majors.
According to Gagan Goyal, Founder and CEO of Thinklabs Technosolutions, and one of the eight angel investors who had invested in the start-up within a few months of its launch, Yadav is changing the skyline of the realty e-broking space. "Within a couple of weeks after meeting him at my Powai office I was convinced he was different. He is not just a regular entrepreneur," says Goyal, adding what Yadav had told him way back in 2013, when Housing was still trying to find its footing in the segment: "I am making something which is as big as Facebook. In fact, I will make real estate as big as Facebook in India."
With Yadav at the helm, Housing's journey has been "crazily awesome", says Tolia, who has moved on to start his own venture. "I did not quit over differences with Rahul. I never had any serious issues with him. Our roles were clearly defined. He is good and has worked hard to create a big company, irrespective of his personality traits. He was supposed to do a job and he did it amazingly well."
Recalling the Housing days, Tolia breaks into a chuckle. "The partying and posting of videos on YouTube, working like crazy for five days and then staying up all night in the summer of 2013 ahead of the company's Bangalore launch, and the excitement in anticipation of the company's first coverage in TechCrunch, the popular, AOL Media-owned blog on start-ups. Every bit of it was awesome."
Putting Housing in Order
Beginning with a map-based search feature that enabled home buyers to get the exact location on Google Maps, the company has consistently been launching new technologies ahead of competition. By the end of the first year, Housing had launched another ground-breaking feature with Price Heat Maps, where buyers could see the price variations across locations in cities and towns in India, while in November 2014 it introduced the Slice View technology to provide an aerial view of under construction projects, primarily to facilitate online bookings for the ones that the company was betting big on.
The company's Data Science Lab comprising 40 techies is an innovation hub that boasts of ground-breaking technology in the realty e-broking space. From rating properties on parameters such as child-friendly index to lifestyle needs, or its virtual reality tours, Housing offers the best. Its team of 500 data collectors across 55 cities has solved the problem of fake or unverified properties. It collects data on a 100-point index to ensure the customers get every detail that could influence their home-buying decision. Housing has also introduced other verticals such as online signing of rental agreements and home loan applications - areas it hopes to monetise soon.
"We have grown 10 times over the past six months from an average listing of 400 to 500 homes a day to 4,000 to 5,000 houses every day," Advitiya Sharma, one of the co-founders, told Business Today, adding property listings would go up to 12,000 to 15,000 a day over the next couple of quarters. Sharma brushes aside the competition's capabilities in copying technologies that Housing has developed. "For example, virtual reality tours launched later by others are only a B-grade version of our Slice View feature," he adds. The company believes it has been able to sell about 700 homes online from builders, including Tata Value Homes and Nirmal Builders - a rare feat in e-broking in India. Yadav often had a direct role to play in each innovation. The ideas behind product innovation have been accepted by prospective customers as much as by the company's own people. Yadav's Housing colleagues look up to him. And, that is where he draws his strength from, while taking on the likes of SoftBank and Sequoia.
SoftBank Plays Hard Ball
For SoftBank ,the $90 million funding into Housing in December 2014 was one of the biggest bets in the Indian start-up space. Its other investments were in Ola Cabs and Snapdeal, where it has pumped in $210 million and $627 million, respectively. However, while both Ola and Snapdeal had a proven business model in place, Housing was a high risk investment because it was yet build a perfect product and find a footing in the realty e-broking market. Clearly Yadav's conviction in the product helped Housing clinch the deal.
Therefore, knowing how important Yadav was to the product, SoftBank had no option but to convince him to stay on. However, after the resignation episode on April 30, the company's largest investor had no option but to take steps to have a tighter control over Housing by forming a five-member executive committee headed by its representative Jonathan Bullock, who will replace Vice Chairman of SoftBank Corporation Nikesh Arora. The committee will closely monitor the financials and operations of the company. Yadav will now have to take approval of the committee before taking key decisions.
Early investors in Housing, as well as those like Matrix Partners' Davda, who know Yadav well, feel an ideal combination would be to let him take control of the product while someone else runs the company. "The company could have avoided these needless distractions if Rahul was supplemented with a strong business-builder whom he trusted. Facebook founder Mark Zuckerberg got in Sheryl Sandberg, Larry Page and Sergey Brin brought in Eric Schmidt to build the business so they could focus on the product," Davda tweeted, adding that Yadav is indispensable to the company, no matter what.
Yadav's letter of apology after the resignation fiasco could well be a turning point. "After some frank and healthy discussions with the board I have agreed to withdraw my resignation and I apologise for my unacceptable comments about the board members. I look forward to staying on at Housing as CEO and building an even greater company, while working in full harmony with the board."
But given his tendency to get into public spats, Yadav may continue to keep us engaged. His e-mail message to Sequoia's Shailendra Singh on March 6 is a case in point, where he accused Singh of poaching key employees to open an incubation facility, and threatened him of harm to his company. Sequoia had been trying to expand its team of analysts and had met about 100 candidates, including two of Housing's employees, with each of whom Singh had spent an hour.
To be fair, though, there may have been some inclination in the Housing employee to explore other options. Why else will they meet Sequoia? One does not know whether these two were in the town hall on May 13, but, if they were, they would not be meeting Sequoia again any time soon. Those shares won't let them.