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Home > Industry News Analysis, My Thoughts, Start Up, Strategy, Venture Capital > Learnings From AskMeBazaar Shut Down

Learnings From AskMeBazaar Shut Down


zager

Today morning I woke up to the news of AskMe shutting down its services leaving thousands of its employees and lakhs of its vendors and partners in quandary. It is not unusual for startups to stumble and fail. Globally more than 95% of the startups shut down.

AskMe was a different care altogether. The startup had raised $119m from Astro Holdings and other investors and were in talks to raise another $200m at a valuation of $1b. But then Astro decided not to participate in the next round. Things came to a dead end when Astro skipped the last Board meeting and AskMe wrote a letter to Registrar of Companies not to let Astro wind up their operations before clearing their dues (Approx Rs300 Cr).

I was surprised why it came to such a situation that the company had to shut overnight and lay off all its employees. The reason I found out was that Astro Holdings owned a whooping 98.5 % stake in the company. Let that sink in.

I am not sure what the founder were thinking while raising funds, but this is an insane amount of stake to be offered to a single investor. It does not leave room for other investors to have their say. In this case Astro did not want to participate in the next round of funding and I am sure the legal formalities would have got messed up for bringing in new investors of raising funds from other minority investors (if any).

The biggest learnings that the other entrepreneurs should learn from this incident are:

  1. Never have one single investor own an insanely large chunk of your company. 98.5%….never!
  2. When you get money in the bank, try working out the unit economics rather than burning the money at an insane rate. AskMe spend a large chunk of money hiring Bollywood brand ambassadors for TVCs. The same would have given much better ROI had the amount been spent on online marketing.
  3. In case such a situation arises, take care of your people. They trusted the startup ecosystem and toiled for your venture day in and day out. Never leave them high and dray by wrapping up operations overnight. I am sure the founders would have known the situations months ago. They should have told the truth to the employees and held them in faith to turn around things. Now the employees will not only lose the faith in the founders, but also the Indian startup ecosystem.
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