This is March 2018, in Bengaluru. There were four juvenile birds of the same plumage who were hard at work creating their ideal nest right then. NestAway got off to a roaring start when it was founded in 2015 by Amarendra Sahu, Deepak Dhar, Jitendra Jagadev, and Smruti Parida. The housing rental startup went from having a working income of 5.76 crore in the fiscal year 2016 to having a working income of 36.51 crore in the fiscal year 2017. This phenomenon was described as “newbie’s luck” by observers and trade experts. Generally speaking, they were not too far off the mark. Following the previous year, the firm that was financed by Tiger World saw a rather quiet development, with a high line of Rs 46.98 crore in FY18.
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NestAway’s calculations made perfect sense given that the company had a substantial presence in Bengaluru, Delhi National Capital Region, Hyderabad, Mumbai, and Pune, and that it provided services to more than 35,000 renters and 16,000 homeowners. It is hardly surprising that purchasers of marquees came in droves. Goldman Sachs and the UC-RNT Fund, which is a three-way collaboration between Ratan Tata’s RNT Associates and the College of California, contributed $51 million to NestAway in March of 2018. Additionally, existing sponsors such as IDG India and Tiger World participated in the Series D round of investment. This round of funding was also successful.
With this new development, the shared renting platform is planning to expand its operations and explore other categories of housing, such as student housing and neighborhood living. Despite the fact that the nest was becoming more crowded, the founders had been efficiently conquering the bricks and mortar of the business, which had a significant potential for growth. Although NestAway’s growth was rapid, it was clear that the company was headed in the wrong direction. It would have been difficult to overlook the ballooning losses: starting at Rs37.2 crore in FY16, they more than doubled to Rs97.73 crore in the next fiscal year, and then they skyrocketed to Rs156.81 crore in FY18.
After a year, the bottom line was a bright pink, amounting to Rs219.68 crore. This was the underbelly line. “All of us had been busy chasing development,” says a former top NestAway government official who has been with the company since 2015 and left the company in the most recent year. When asked about the issue, the individual requested anonymity. When the losses continued to accumulate, the cofounders and stakeholders should have been prompted to punch the panic button.” It did not take place. According to him, “We wanted to develop, and cutting costs was not the appropriate strategy.” He also mentions that the firm had a value of $220 million in 2019. “There were losses for everyone.
He explains that we did not stand out from the crowd. On the other hand, there was one aspect of NestAway that was not quite appropriate. One of the supporters, who wishes to remain anonymous, has pointed out that the year 2019 was the year in which the fault stresses in NestAway were discovered. Deepak Dhar, one of the four cofounders who also held a ten percent share, left the company in July. Smruti Parida, another cofounder who had exactly the same share, left the company three months after it was founded. The fact that purchasers promote their share in secondary deals, which eliminates the venture capitalist, is something that should be taken into consideration. He explains, “However, when cofounders leave in such a short period of time, it is an indication of one thing that is terrible.”
Jitendra Jagadev, another cofounder of NestAway, separated from the company in the beginning of 2019 and started taking care of HelloWorld, the company’s subsidiary. On the other hand, the official reasons for cofounders leaving their positions are almost always embellished, while the unofficial reasons are the ones that are already well known. In the instance of NestAway, the lack of agreement over the purpose and manner in which senior administration was engaged and authorized to execute was the first thing that led to the conflict. This was despite the fact that there was no conflict between the cofounders and the departures had been amicable.
An obsession with acquiring “skilled” arms from “massive” names resulted in a bloated worker profit pricing sheet, which turned out to be the most expensive item on the expenditure guide for a number of years. The labor price reached Rs93.49 crore in the fiscal year 2018, representing a 2.1x increase from the previous fiscal year. Several members of the top administration have been receiving wages that were more than one crore, according to a different former government employee at NestAway. It is his contention that the majority of them did not see a reduction in their wages even throughout the epidemic.
In FY19, the worker price was lower than it was in FY21 and FY22, but it quickly increased again in each of those years. (Please refer to the field.) The question that he poses is, “Don’t you find this peculiar?” To tell you the truth, during fiscal year 22 (FY22), the revenue from operations was lower (57.87 crore) than the worker price, which was 69.46 crore! A further disadvantage was experienced by NestAway, and this was not connected in any way to the manner in which the company was managed. Not only did the pandemic inflict a devastating blow, but it also made the problems worse. There was a decrease in income, activities had been reduced in order to bring the losses under control, and it was difficult to find new investors. The current supporters did not agree to contribute any further funds.
When a tragedy strikes, having enormous, marquee worldwide names on the board of directors is of little consequence, according to a venture capitalist who comes from a home-grown fund. “They never make significant investments,” says the venture capitalist who asked not to be identified. “They never make significant returns.” “When the tide turns, they like to write it off,” he adds. “If the guess pays off, they are completely satisfied, but when the tide turns, they like to write it off.” NestAway had just one option available to them since they did not have any supporters and their runway was becoming shorter. They had to look for customers. The technique started in the month of August.
Also, there have been three people involved in the conflict. According to one of the venture capitalists representing NestAway, “Gruhas and Anarock had been the primary two to give you presents.” He adds the information that “Aurum Proptech was the third suitor.” Despite the fact that venture capitalists were willing to acquire Aurum because of its track record of success (it had bought HelloWorld from NestAway for a price of Rs 42 crore in 2022), the administration was more likely to go with the other potential buyers. “The impasse remained for more than nine months,” the venture capitalist claims. In conclusion, Aurum paid Rs 90 crore to acquire NestAway at the beginning of June.
In the end, a firm that had previously raised a total of $110 million and ultimately had a valuation of $220 million would be given a 95 percent discount. The majority of the time, trade experts and watchers are not surprised. “That they had a fantastic beginning, but somewhere along the way they lost their focus,” Anil Joshi, the founding father of Unicorn India Ventures, believes. “That they had this tremendous beginning.” In a manner that is strikingly comparable to another segment of the real estate industry, home renting and co-living are businesses that are operationally demanding, intense, and depleting.
On the other hand, being too slow may cause you to be eliminated from the equation, while being too fast might be fatal. During the course of the next year, a company that seemed to be operating in just a few places up until February 2019 has spread itself very thin. It has been claimed that during one of the interviews with the media, the creator of NestAway, Sahu, expressed his desire for the company to become “India’s reply to Airbnb.” Joshi states, “One must be realistically formidable,” and he also mentions that the guys at NestAway failed to execute their plan. According to his estimation, “it is a merciless enterprise in which it is essential to continue optimizing price.” He emphasizes that the business model was logically and rationally sound. There was a significant amount of space for growth in this phase.
NestAway was ideally positioned in a flourishing era that just needed to survive the pandemic, according to Ashish Deora, the founding father of Aurum Proptech. He also believes that NestAway succeeded in doing this. What Deora, the brand new owner of NestAway, has to say about the business is that both the startup and the firm are promising. According to him, the future lies in shared housing and co-living arrangements. According to him, “the only thing that one desires is to run the business in a way that is sustainable.” It is his assertion that “we will turn around NestAway.” As a matter of fact, the responsibility won’t be easy, and until that day comes, the empty nest of NestAway will continue to stalk all entrepreneurs who have the ambition to soar high without first getting the foundations right.