Behind the Homigo hullabaloo: tenants upset, founders missing, what next?
In 2014, like any new comer in the city, IIT Kanpur alumnus Nikunj Batheja was faced with the problem of finding a furnished home in Bengaluru. There was born the idea for Homigo, to help others like him. The startup was launched in 2015, along with batchmate Jatin Mitruka as Co-founder.
We first wrote about Homigo on YourStory in September 2015. Since then, it has expanded across Bengaluru and even raised $200,000 from undisclosed investors. The team has also got the likes of the online home furnishing startups Livspace and Mebelkart as its investors. Mebelkart, which was part of AskMe, shut shop in 2016.
A few days back, a number of rumours surfaced: that Homigo was in talks to be acquired by Nestaway, a bigger player in the space. And that Homigo's tenants had been asked to vacate their homes by the landlords of the buildings they were staying in. There was also talk - and even a screenshot of an email - that said Nestaway would be dealing with the deposit refunds of Homigo's tenants. YourStory itself received more than one such email, and then discovered similar complaints on Quora and Facebook groups.
With regard to the takeover, however, Nestaway Co-founder Amarendra Sahu told that they were not acquiring Homigo.
“There were a few initial talks with the team, but after a few checks and due-diligence, we decided not to acquire the company. There were several discrepancies, which we didn’t want to associate with.”
Another source at Nestaway, who was part of the team exploring the acquisition, said that Homigo had come to them with a proposal where they would “transfer 540 beds to Nestaway” and Homigo would only take a commission on these.
Homigo founders, in a happier time. Akash Verma joined in as founder in 2016
Tenants in a soup
Back to the tenants. Reports emerged on social media – mostly Facebook groups – where Homigo customers were escalating complaints that they had been asked to vacate these homes immediately by the landlords. There are tenants who have also suggest that the founders will not be available for the next two months.
A group of Homigo's tenants has also filed an FIR with the Mico Layout police station in Bengaluru saying that Homigo’s founders are absconding. (YourStory has copy of the FIR.) Speaking to YourStory, one of the tenants said on condition of anonymity: “We have repeatedly tried reaching the team and the founders. I have a deposit of Rs 16.5 lakh with Homigo, which I am yet to receive. The founders are yet to share anything. This is a lot of money at stake.”
According to his lease agreement shared with YourStory, the said deposit was 3-year lease period.
A post on the Facebook group Flat and Flatmates states that a customer’s Rs 50,000 deposit has been with Homigo for over three months now.
Facebook post on the group - Flat & Flatmates
An email sent by a group of tenants to YourStory says that many tenants are facing similar problems. Most are waiting to get a refund on their deposits. In some cases, tenants have not heard from Homigo but the original owners of the properties who had leased these out to Homigo. A tenant shared an email they received from Homigo, dated February 24, 2019, with YourStory. It says:
“Due to unforeseen circumstances, Homigo had to temporarily halt all its operations across Bangalore for 2 months. This is due to lack of funds and the decision by the board is to stop all losses and money burn for a couple of months, while we work on arranging more funds. We would like to request your support in this hard time while we do our best to revive our company.
“We request you to not believe in any rumours and stay calm. As on date, there is no money that is due from Homigo to you, the money is only due after a move out notice and vacation of the property.
“Due to the spreading of the rumours and turbulence in the market, the owners of the property are getting worried and taking measures to hamper your stay. We certainly don’t want that to happen and we are trying our best to sort the matter with the owners and keep your stay peaceful, as it has been over the years.
“If you have any queries, feel free to mail us at ‘firstname.lastname@example.org’. Our legal team is working of sorting each and every case amicably.
Some media reports have suggested that the original owners of properties leased by Homigo have told tenants that the startup has not paid them the said lease amount, and that is why they are asking tenants to vacate. YourStory was unable to confirm this.
Multiple emails and text messages that YourStory sent to the founders of Homigo remained unanswered at the time of publication. We will update the story as and when we receive a response. There have also been reports of resignations of two board members. We were unable to conclusively identify these board members.
What put off Nestaway?
A highly placed source at Nestaway, who was part of the due-diligence process when it was considering acquiring Homigo, told YourStory,
“The problem isn’t just the lack of funds. When we began to dig deeper, we realised that there was mismanagement. In our due diligence, we also noticed that the red in the ledger was more than what the team had initially claimed.”
It was one of the primary reasons for the deal to fall through in the last moment, the source added. Further, the main problem also was how the properties were being managed.
“In our tests and checks, we realised that the basic amenities and services needed to ensure a pleasant living experience were lacking. The main reason for startups like us to survive and thrive is not just funding, but also a quality experience” added the source in Nestaway.
The Facebook group and complaints on Quora also indicate that many of the premises that Homigo rented out were not furnished the way that had been promised to customers.
Running a rentals business can be an expensive proposition
But the business of running a rentals business is not easy. The furniture needs to be in order, the food arrangements in place, housekeeping and maintenance of the property to be taken care of, as would be the most important draw for the millennial customer: Wi-Fi. All of these aspects form a significant part of the operational expenses for a startup.
As per Homigo’s filings with the Registrar of Companies, the company’s revenue has been climbing steadily, but so have expenses and losses. With no funding raised, it was becoming all the more difficult for Homigo to keep operations going.
The challenge for a business like co-living – in order for it to be lucrative – is to control the experience, backed by offline service and a strong technology backbone. An investor told YourStory on condition of anonymity,
“Homigo, from what I gather, focussed on building a great platform and tech behind it. But like any startup that has a first-time entrepreneur, without the balance of a management co-founder it is possible that they could’ve missed out the operational parts that would be a part of a co-living business.”
Co-living: a growing, lucrative market
Co-living as a market is fast growing and expanding. The global sharing economy is believed to touch $335 billion by 2025. A KnightFrank report says that co-living today is one of the biggest bets for businesses targeting millennials today.
“Millennials or ‘Generation Y’ are the population group belonging to the 18–35 years of age bracket. Of the total global population of 7.4 billion, millennials account for a substantial 27 percent forming the largest demographic group worldwide,” the report said.
It is to address this market that several startups have ventured into the space. There is Delhi-based CoHo, Bengaluru-based StayAbode, YourOWNRoom and SimplyGuest, Noida-based Placio, Gurugram-based Flathood and Co-Live. Bengaluru-based ZoloStays, which recently raised $30 million in funding. And of course, the hospitality heavyweight OYO too has entered the market.
For Homigo’s tenants, these are uncertain times, and it is a tough job to separate rumour from fact in such an environment. Unfortunately, it is not uncommon for a startup to face a cash crunch or have to shut down because a business has become severely unprofitable. We can only hope that the founders of Homigo are able to find a solution that does right by their tenants, and is right for their company and themselves.