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August 28, 2016

Why GoZoomo shut down & returned VC money and What It Means

A TechInAsia article chronicles GoZoomo's story and its shut down: 

The issues faced by the peer-to-peer used car marketplace company were:
1. Poor unit economics due to low conversions for a peer-to-peer used car marketplace - around 20%.
“For instance, we are taking pictures, inspecting 100 vehicles, but at the end only 20 of these sell on our platform. Then it becomes very difficult to recover the money we have spent on all the 100 vehicles listed,” explains Arnav.
2. Need for the market to mature - in terms of accepting standardised pricing for used cars by customers
In the course of the exit, the company has:
1. Returned over half of the investment amount raised (i.e. money in the bank) to its investors SAIF and DST Global.
 2. Employees were given a seven-week severance package and offered help with finding placements elsewhere. “As of today, except six, all have been placed,” Arnav says.
On the shut down Alok Goel, SAIF Partners shares:
“The startup journey is very, very hard,” says Alok, who was earlier the CEO of FreeCharge until its acquisition by Snapdeal. “The entrepreneur takes a lot of risk and puts his life at stake by picking up entrepreneurship. During that stage, he is fighting all kinds of odds to survive and win. So it takes a lot of emotional and intellectual maturity on the part of the founder to take a decision like this.”
“This is probably the first time an entrepreneur is announcing this kind of a decision. Typically, when something is failing, an entrepreneur would try to show that his company is being acquired, while internally the story might be totally different. But these guys are sharing a lot of things in a transparent manner and taking this mature decision of returning money.”
The decision to return money has split views of the startup ecosystem players (entrepreneurs, VCs, journalists, startup enthusiasts, trolls). Here are some of the contrarian views:

Sumanth Raghavendra (@sumanthr) August 26, 2016:

How are GoZoomo's competitors - Cartrade, Cardekho, Droom et al - operating within the same market/rules if this is such a big issue?

Sandeep Aggarwal, Founder of GoZoomo competitor Droom:

What's wrong with Indian startup ecosystem, founders brag about returning VC money & VC feeling proud. Founder are better off not giving-up till end and review vision, strategy and execution and VCs should focus on returns vs refunds. As far as falsely claiming that India does not have pricing guide or benchmarking engine for used automobile, below pictures shows what founders do vs returning VC money (OrangeBookValue.com I.e. OBV, 75mn pricing queries, 25k products in catalog, tens of thousands of dealers and 30k transactions worth ₹650 cr to validate Obv results). #gozoomo, #saifpartners, #techinasia #donotbelame

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