Walking the Tightrope
After two years of growing at a scorching pace, led by acquisitions, it seems things are not going well for AskMe. Recently, there were reports that the company has laid off 600 employees, reducing its workforce to 3,500. The company says this was part of its annual workforce rationalisation exercise.
- May 27, 2016,
- Updated May 27, 2016 10:37 AM IST
Mumbai-based Jaysukh Jayani, the promoter of Silection Art, sells his products on Amazon, Flipkart and Snapdeal. Last August, he registered his product catalogue on AskmeBazaar.com, an e-commerce marketplace. He was given two seller accounts, one for women apparel and one for imitation jewellery. The partnership hit a snag from the word go.
AskmeBazaar did not pay him for the first few apparel orders. Strangely, it paid him for the jewellery orders on time. Even though the accounts for both were the same, it said the details of the apparel account were incorrect. He had to call up AskmeBazaar a number of times and write several emails.
After two years of growing at a scorching pace, led by acquisitions, it seems things are not going well for AskMe, which, though a late entrant in e-commerce, thought it could make up for the lost time by tapping its massive database of 15 million small and medium enterprises, or SMEs, which is part of its classifieds business. To put this in perspective, India has 38 million SMEs.
Recently, there were reports that the company has laid off 600 employees, reducing its workforce to 3,500. The company says this was part of its annual workforce rationalisation exercise.
At the heart of the problem is lack of focus, weak technology and changes in the overall market scenario - something that's haunting hundreds of start-ups after years of fast growth, funded by investor money. For instance, two investors in Flipkart recently marked down their stake, bringing down the company's valuation to $9-10 billion. The company had earlier said it was valued at $15.2 billion. Also, HSBC's brokerage arm slashed by half the $1-billion valuation of restaurant-discovery platform Zomato. In April, online grocery start-up PepperTap shut shop, while food technology start-up TinyOwl scaled down operations last year.
While talking to BT, both Sethi and Murthi were gung-ho. Contrary to the pessimism around the company, Sethi said the group was aiming at $1 billion annualised GSV (gross sales value) by the end of 2016. Its present GSV is a little over $700 million.
At present, Getit Infoservices Private Ltd is around 95 per cent owned by Malaysian billionaire T. Ananda Krishnan's Astro Holdings. Helion Venture Partners owns a minuscule stake. The company claims it has raised $200 million so far from Astro. A significant portion of that money has been spent on ad campaigns, hiring, customer acquisition and expanding the seller network.
Getit Infoservices' revenues more than doubled from Rs 23.4 crore in 2011/12 to Rs 51.2 crore in 2014/15, as per the Ministry of Corporate Affairs data. Net losses ballooned from Rs 54.3 crore to Rs 300 crore during the period. With such a high cash burn rate, it will need a fresh round of funding to keep going. "We are on the verge of closing a big round with a new set of investors. The [entire] money will come in the company," says Sethi.
Experts say the overall fund crunch for start-ups and dependence on a single investor may hit the company's ability to raise funds. This is because a big investor keeps tight control over the company and does not give new investors much say in decisions. Sethi agrees that conventional wisdom says that start-ups don't want to bank on one investor and prefer investors who can bring in market access and capabilities that are beyond dumb money.
As far as Astro is concerned, Sethi says, "If you have a single majority investor, sometimes the path you want to take, versus the path that the board wants you to take, may differ. So far, that hasn't happened."
"If Flipkart is facing difficulty in raising money, others cannot be an exception. Nobody can put the foot down and tell investors that I am good at doing something and will do only that. Everybody is under pressure from investors," says Sahni.
For now, it seems AskMe is grappling with more questions than it has answers for.
Mumbai-based Jaysukh Jayani, the promoter of Silection Art, sells his products on Amazon, Flipkart and Snapdeal. Last August, he registered his product catalogue on AskmeBazaar.com, an e-commerce marketplace. He was given two seller accounts, one for women apparel and one for imitation jewellery. The partnership hit a snag from the word go.
AskmeBazaar did not pay him for the first few apparel orders. Strangely, it paid him for the jewellery orders on time. Even though the accounts for both were the same, it said the details of the apparel account were incorrect. He had to call up AskmeBazaar a number of times and write several emails.
After two years of growing at a scorching pace, led by acquisitions, it seems things are not going well for AskMe, which, though a late entrant in e-commerce, thought it could make up for the lost time by tapping its massive database of 15 million small and medium enterprises, or SMEs, which is part of its classifieds business. To put this in perspective, India has 38 million SMEs.
Recently, there were reports that the company has laid off 600 employees, reducing its workforce to 3,500. The company says this was part of its annual workforce rationalisation exercise.
At the heart of the problem is lack of focus, weak technology and changes in the overall market scenario - something that's haunting hundreds of start-ups after years of fast growth, funded by investor money. For instance, two investors in Flipkart recently marked down their stake, bringing down the company's valuation to $9-10 billion. The company had earlier said it was valued at $15.2 billion. Also, HSBC's brokerage arm slashed by half the $1-billion valuation of restaurant-discovery platform Zomato. In April, online grocery start-up PepperTap shut shop, while food technology start-up TinyOwl scaled down operations last year.
While talking to BT, both Sethi and Murthi were gung-ho. Contrary to the pessimism around the company, Sethi said the group was aiming at $1 billion annualised GSV (gross sales value) by the end of 2016. Its present GSV is a little over $700 million.
At present, Getit Infoservices Private Ltd is around 95 per cent owned by Malaysian billionaire T. Ananda Krishnan's Astro Holdings. Helion Venture Partners owns a minuscule stake. The company claims it has raised $200 million so far from Astro. A significant portion of that money has been spent on ad campaigns, hiring, customer acquisition and expanding the seller network.
Getit Infoservices' revenues more than doubled from Rs 23.4 crore in 2011/12 to Rs 51.2 crore in 2014/15, as per the Ministry of Corporate Affairs data. Net losses ballooned from Rs 54.3 crore to Rs 300 crore during the period. With such a high cash burn rate, it will need a fresh round of funding to keep going. "We are on the verge of closing a big round with a new set of investors. The [entire] money will come in the company," says Sethi.
Experts say the overall fund crunch for start-ups and dependence on a single investor may hit the company's ability to raise funds. This is because a big investor keeps tight control over the company and does not give new investors much say in decisions. Sethi agrees that conventional wisdom says that start-ups don't want to bank on one investor and prefer investors who can bring in market access and capabilities that are beyond dumb money.
As far as Astro is concerned, Sethi says, "If you have a single majority investor, sometimes the path you want to take, versus the path that the board wants you to take, may differ. So far, that hasn't happened."
"If Flipkart is facing difficulty in raising money, others cannot be an exception. Nobody can put the foot down and tell investors that I am good at doing something and will do only that. Everybody is under pressure from investors," says Sahni.
For now, it seems AskMe is grappling with more questions than it has answers for.