We all love listening to flamboyant success startup stories and often overlook the reality. From ouster of Uber founder Travis Kalanick to fall of Shopclues to many other such occurrences were also part of the reality of startups-fueled past decade.
Shopclues, Gurugram-based e-commerce firm, a promising Unicorn, which earned the tag of Unicorn in 2016 merged with Singapore online retailer Qoo10 Pte. Ltd in all-stock deal on October 31, 2019. The failure story of Shopclues has a lot to teach to emerging entrepreneurs. Let’s find out what went wrong.
Shopclues was one of the most promising startups of the last decade. It was founded by former Wall Street analyst Sandeep Agrawal in 2011. Sandeep Agarwal resigned from the company two years later following insider trading charges during his time at a wealth management firm in the US.
Following his ouster, the company was led by co-founders Sanjay Sethi, the CEO, and Radhika Aggarwal, the chief business officer & Sandeep Aggarwal’s wife. Under the new leadership, company comes up with innovative ideas and did very well. It raised an undisclosed amount in its series E round from Singapore’s sovereign fund GIC and Tiger Global, among other investors in 2016. And in January 2016, ShopClues became India’s fourth unicorn firm valued over a billion dollars at $1.1 billion.
The year 2017 was the beginning of the fall of Gurugram-based e-commerce firm. Leadership turmoil returned to the company in 2017 in the form of a public spat between the Sandeep Aggarwal and Radhika Aggarwal over a private affair.
The couple split up in 2017 while Sandeep Aggarwal filed a criminal defamation case against his wife Radhika Aggarwal and co-founder Sethi accusing them of downplaying his role in the creation of the online marketplace. He also accused his wife of having an illicit affair with Sethi and forcing him out of Shopclues, through Facebook posts (that have since been deleted).
But it was not the only reason. Lack of funding, focus only on Tier 2 and Tier 3 towns, entry of big players like Amazon and Walmart, less capital intensive business model, and in a bid to control cash burn sacrificing revenue growth, all result in a perfect recipe for disaster.
And above all, failure to raise funding and get the attention of investors in the time of crisis put the final stamp on the assured end of Shopclues on October 31, 2019, where it reported to sold out for between $50 million and $80 million at around 10% of the company’s peak valuation of $1.1 billion around four years ago.