The now folded online homestay aggregator Stayzilla has been in murky waters lately. Post announcing halt of operations, the company founder Yogendra Vasupal found himself entangled in a criminal case that led to him spending nearly a month in jail on charges of intimidation and fraud.
The owner of the advertising agency that has alleged fraud by Stayzilla maintains Vasupal had out and out zero intent to pay and is continuing to fight the case to recover dues to the tune of INR 1 crore that Stayzilla allegedly owes to Jigsaw Solutions.
In a conversation with Entrepreneur, Aditya CS, Jigsaw’s owner who has been working with Stayzilla since 2013 details what went wrong with the popular startup.
How has your association with Stayzilla been?
I started working with them in 2013. At that time, they had a marketing manager who was good with online advertising but was clueless about offline but he was willing to understand. The company did clear advertising and marketing strategy was towards hotel rooms and cheap accommodation, advertised to the regular traveler by having a budget of around INR 15-20 lakh per month. They bumped it up slightly during the summer and the festive season to INR 30-40 lakh and they were doing well. Vasupal was himself involved with the business and their site traffic was increasing well when they were conservative and targeted.
When did you see a shift in their advertising focus?
When they shifted their base from Chennai to Bengaluru, their strategy shifted towards home stay and they scaled up their advertising. The first round of funding had come in and Vasupal was now not as involved in the day-to-day operations.
The marketing manager moved out and the advertising operations were now handled by a young team of two ladies who did not have a clear business objective. They didn’t have a clear marketing strategy and wanted to do every kind of advertising out there. They wanted to print, TV, outdoor everything as money was pouring in.
At one point they had outdoor hoarding with pastel shades. I advised them against it because pastel shades don’t work in outdoor hoarding but they went ahead with it and spent big on outdoor advertisements without thinking of the result. They spent nearly INR 5-6 crore in three months from December to February 2016. Stayzilla was on the baggage tags of two airlines and inside security areas of five airports and sporadically they did ads for newspaper, one for All India Radio. Some advertisement worked, some didn’t work.
How did your role evolve with the company?
Once the second round of funding came in, the company’s focus moved to advertisements to brand recall. The company was clueless and spent money on offline and outdoor advertisements luxuriously. From a consultant, I them moved into media buying for Stayzilla and they made me do their advertisement campaigns. I did not contest it because I am a professional rendering a service for which I would get paid for. Supply-side advertisements were nearly INR 2.5 crore per month. They didn’t know why they are doing it. There was a clear lack of objective and they wanted to do what everything that other startups were doing.
When did the dispute with Stayzilla start?
From March 2013 to March 2016, the company was running smoothly and there was absolutely no dispute.
Once all their campaigns were over after the second round of funding, bills were raised in March-April 2016 and I presented the bills for my dues with the company. I had had a smooth sailing with the company for three years and I trusted Vasupal to make the payments for the outdoor campaign executed.
Among the things done for the outdoor campaign, I had shortlisted the site, taken the purchase order, executed it and had sent them pictures for which I gave them an invoice with a proof of delivery.
In December 2016, they acknowledged the fact that they owed me money and sent me an audit report. Suddenly for some reason they held my payment for a year; an outstanding amount of above INR 1 crore.
Without any intimation, the company shut shop in February 2017 and said there was a dispute.
There was no communication anywhere whatsoever where any sort discrepancies with the advertisements made were raised. It became clear that there was out and out zero intent to pay. This was nothing but cheating. This is what my lawyers felt and hence a case of fraud was filed.
What is the way ahead?
I am a small business owner and I cannot afford to lose such a huge amount of money over one client. Stayzilla has shut down and I would be next if my dues aren’t cleared.