Stayzilla saga: Jigsaw’s muscle power will shoo away startups

Startups have started reviewing their vendors and their 'goonda' connections. Did Jigsaw factor in the sympathy that Stayzilla is getting?

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In a country where Bollywood celebs get bail in criminal cases within hours, it’s pathetic that Yogendra Vasupal, CEO of now shut Stayzilla, is still under arrest. A bail plea has been moved by his wife, Rupal Yogendra, but it is unlikely that Vasupal, popularly known as Yogi, will get bail before the weekend.

Latest news, from Techseen’s sources is that Yogi is in Central Jail, on the outskirts of Chennai, and that he is fine and his family has got to see him.

Yogi has garnered sympathy from Indian startups and entrepreneurs, but there is a section out there questioning the stand taken by the industry. Is Jigsaw, the ad agency that filed the criminal case against Yogi, subsequently leading to his arrest, not a startup? Shouldn’t the industry be sympathetic towards its CEO Aditya CS too, who is losing money? Valid questions. So why isn’t the industry sympathetic towards him?

Before Aditya, or his supporters can claim the right to earn sympathy, or see the industry take his side, there are questions that Aditya and his supporters need to answer:

  • Why was a dispute between two organizations made out to be a personal case against Yogi?
  • Why did Aditya’s lawyer take the “prerogative” to file a criminal case, when disputes of these nature are usually “civil cases”?
  • Who pulled the strings to get the Magistrate to sign an arrest warrant at 9.45 PM, when the courts close at 6 PM?
  • Why was there a delay in handing over the official copy of FIR filed by the police to Yogi’s family?
  • Why the whereabouts about Yogi were kept secret for long and why his family was made to run from police station to another to track him?
  • Did Aditya’s “dad” who “being a part of the press” really “wield” his “influence”? [While some reports suggest that Aditya’s father is an ex-employee of Times of India, one entrepreneur close to Yogi told Techseen that he was “probably with Outlook.” Techseen couldn’t independently verify both the “probable” connections.]

What’s the dispute about?

In one sentence that Stayzilla used services of Jigsaw Advertising and that the former still owes the agency INR 17.2 million (approx US$259,000). That’s what the agency says. Stayzilla agrees that the company owes the agency money, but it disputes the “quantum” that it owes, and it had advised the agency to take the legal route; and that’s what the law suggests; and that’s what any law abiding citizen or firm would do.

A civil case turned into a criminal case

Maheshwer Peri, former publisher of Outlook, and now an entrepreneur and Founder of edtceh portal Careers360 says in a Facebook post, “This isn’t normal. This isn’t due process of law. This isn’t about law taking its own course. This is a civil case being converted into a criminal one. This is about police abusing their powers because the agency is owned by the son of a media man.”

It’s not just Peri, who has dubbed the entire development as the “police abusing their powers.” Leading startup media, YourStory asks, “Yes vendors need to be paid, but do we need to resort to goondaism?”

Startup ecosystem will get hurt

P Narayanan, President of industry body, TiE Chennai, said: “This is bad in law and reflects badly on law and order in Tamil Nadu. The case is a civil case-non-payment to vendor.”

Indian Angel Network, which has been an initial funder in Stayzilla sent out an official statement condemning the entire episode.

“The Stayzilla episode where the founder has been summarily thrown into jail for what appears to be at best a civil matter has shocked the entire startup community. There are challenges in every business and startups have more than their fair share. It is imperative that the legal and regulatory framework supports and encourages new ventures to emerge and scale. Unlawful treatment in such situations will trigger a sense of fear in young minds and put the brakes on the Prime Minister’s Startup India dream. IAN believes that legal rights of every individual must be respected and the law must follow its proper course, unhindered and uninfluenced in any way.”

Vendors are being reviewed

The entire episode has left the entire startup ecosystem scared and scarred at the same time. Ravindra Krishnappa, who was an investor and Director with Stayzilla till 2015, tells Techseen, that he has got a couple of calls from startups, if they should start reviewing their vendors and check the network association of their CEOs/Founders.

“No one is going to win in this war. It is a strategic mistake on part of Jigsaw to file a criminal case against Yogi. The entire episode will harm Jigsaw more, as startups will be careful and probably shy from getting associated with the agency. It hurts the entire ecosystem and will hurt other agencies as well,” says Krishnappa.

Need for an industry body for mediation

Krishnappa moots for an industry body for mediation and reconciliation for such cases, which is non-existent right now. “I have had discussions with Nasscom and TiE members, who agree for the industry to have a reconciliatory body for such issues. It’s not cool to drag the family into a commercial dispute,” he says.

Another point that needs mention here, which Krishnappa says, having known Yogi and Stayzilla for years is that Stayzilla still has money in the banks, and it’s not bankrupt, and it has been in the process of setting priorities who needs to be paid first and how much.

Aditya in his defense, had said in a statement to Mint, “These startups get funding, they spend carelessly, they live a hunky-dory life and keep our payments on hold, and then shut shop saying we don’t have money. People doing genuine business like us have to bear the brunt… I AM NOT SCARED of their tantrums, my case is genuine and will fight it in the courts and I trust the courts.”

Stayzilla founders understand the pain of startups

Krishnappa is not willing to accept the allegation that Stayzilla and its Founders don’t understand the pain of a startup. Stayzilla was founded in 2005. At that point it was known by the name of Inasra Technologies. It was only in 2010 that it rebranded itself to Stayzilla. It got its first seed-funding 0f $500,000 from Indian Angel Network (IAN), only in 2012. For seven years, the company was bootstrapped and has gone through the pains similar to all self-funded startups.

As an investor along with IAN, Krishnappa says that like most angel investors, he’d invested into the team primarily and not the business model or the offering. He refers to his blog post on LinkedIn, published last month after Stayzilla announced its plans to shut down and come back in a new avatar.

“Everyone in this ecosystem knows that these Excel plans do change and frequently? Why then should you get all sanctimonious and accusative when something like Stayzilla (shutting down) happens?” he asks on the post.

Investment, he says is “not a game for faint hearted investors.”

What did Jigsaw gain?

We wish, Aditya had stayed true to his words on fighting it in the courts and his trust on the courts. But, ironically, he didn’t take the court route. He chose high handedness and goondaism in the process. How much it will hurt his agency, only time will tell. For now, the industry is behind Yogendra Vasupal and Stayzilla.

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