Zilingo, the Amazon of South East Asia, created headlines when it fell last year. But what happened to the potential unicorn? Find out in today's episode.
[00:00:00] Dealing with the Monday Blues? Well, we've got the perfect remedy. A super interesting
[00:00:05] story about a startup failure that will get you out of your funk. This story highlights
[00:00:10] how growth at all costs could sometimes be deadly. The story highlights how important
[00:00:16] corporate governance is for startups. This is the story of Zillingo.
[00:00:22] Grab a cup of coffee and readon. It all started in Thailand in 2015.
[00:00:27] Ankiti Bose, a bright young analyst working at Sequoia, visited Thailand's Chaturchak
[00:00:33] weekend market. While others shopped their hearts out, Bose identified a market gap. The
[00:00:38] sellers in the market had an amazing collection of clothes but no online presence. To fill
[00:00:44] this gap, Zillingo was born. Zillingo wanted to bring these merchants online and allow them
[00:00:50] to trade with each other. And it did not want to stay local. Based out of Singapore, Zillingo
[00:00:56] wanted to take this to all of Southeast Asia. And it did. By 2017, Zillingo had grown its
[00:01:03] revenue 10X Y Y and was growing 25% each month. It had received series B funding worth
[00:01:10] 17 million dollars from some of the biggest investors in the world like Sequoia and
[00:01:16] Capital India. The sky was the limit now and Zillingo was ready to reach new heights. Bose
[00:01:22] wanted to take Zillingo to the moon at any cost. She wanted growth at all costs. So much
[00:01:29] so that she launched a million dollar ad campaign in Morocco with nine social media influencers,
[00:01:35] fancy five star dinners and a hot air balloon trip. The plan bring a million users. Result
[00:01:42] only 10,000 users. That's a customer acquisition cost of 100 dollars. What's more, to encourage
[00:01:50] more merchant to merchant transactions, Zillingo started offering high discounts. It was essentially
[00:01:56] paying out of its pocket to enable these deals. The idea was that these discounts would onboard
[00:02:02] people and once they got used to the platform, they would stick. Reality, a lot of merchants
[00:02:08] started booking fake transactions just to get money from Zillingo. Zillingo still didn't give up.
[00:02:15] It introduced loans for merchants to get them. Now merchants did away loans, but before they
[00:02:21] could repay, COVID hit. So they couldn't repay. This spell traveled for Zillingo. Now all of this
[00:02:27] spending had gotten Zillingo's investors worried. You see, Zillingo was so busy chasing growth that it
[00:02:34] wasn't submitting its financial reports. But the truth came out when Zillingo's money ran out.
[00:02:40] Like any child out of pocket money, Zillingo turned to its messiahs, investors. And to get money,
[00:02:46] it had to reveal to its investors that its cash burn was an insane $7-8 million per month.
[00:02:54] Investors had no choice but to rescue it by pumping in another $25 million in November 2020.
[00:03:01] What did Zillingo do with this money? Well, that's where things got fishy. Apparently a lot of
[00:03:06] this money went into dubious deals and into the pockets of co-founders. In March 2022, some
[00:03:13] employees came forward and revealed to the board of directors that both had been authorizing sketchy
[00:03:18] payments and was also misreporting growth and revenue numbers. So the board suspended both and
[00:03:25] launched an investigation. What did the investigation find? Payments of $7 million to Algo Legal,
[00:03:32] a legal tech firm, $944,000 to eBix Cash to develop an IT system and $2.35 million to
[00:03:41] one Delta for testing this system. What's wrong about that? For one, there was no particular reason
[00:03:49] to pay Algo Legal. Second, Zillingo already had in-house tech why pay eBix Cash to build tech. And
[00:03:56] third, one Delta was paid to check eBix Cash's parallel tech even before Zillingo signed a contract
[00:04:03] with eBix Cash. Sound sketchy now? The worst part, Bose got a 10x salary hike from 2017 to 2019.
[00:04:12] Her CTO and COO also got a 3x and 7x hike. Without the board's approval,
[00:04:20] after all of this came the light, Bose was fired. Bose's reaction, she alleged that this was
[00:04:26] a witch hunt. She also made complaints that she faced sexual harassment by members of the company.
[00:04:32] Whether any of this is true or not, we don't know but Bose got a lot of support on social media
[00:04:37] at the time. Some investors, however, believe that this social media drama killed Zillingo.
[00:04:43] What started off as an ambitious mission to transform Southeast Asia's fashion industry
[00:04:48] is now shutting down. The company is being liquidated instead of being acquired or saved. But
[00:04:53] we are still left with the question, who's to blame? Well, investors and employees are blaming
[00:04:58] Bose. Bose claims she is just a scapegoat here, the convenient target. In fact, she's recently filed
[00:05:05] a hundred million dollar defamation suit against investor Mahesh Burhti for alleging that she took
[00:05:12] Sakoyas money. This shows that Bose is not willing to let her reputation sink. She's not going down
[00:05:19] without a fight. But is this a last attempt to cover up her misdeeds or is she truly a scapegoat?
[00:05:26] A year after the saga, we still don't know. What we do know is that corporate governance is the
[00:05:31] need of the R for startups. As startups get money in their coffers, they often go the growth at all
[00:05:38] costs route. Money from investors sometimes becomes both their wings and the news around their
[00:05:44] necks. So they want to grow fast no matter what it takes. Cooperate governance can be the tool
[00:05:49] that keeps startups in check. So we need to double down on this now. What are your thoughts on the startup
[00:05:56] ecosystem? How else can we stop such startup failures? See you in the next episode, Jay Hind.