How can you tell if a used car salesman is lying? When his lips are moving. Used car dealers in India are stereotyped to be disorganized, fragmented and unreliable. They do up a broken-down car and can sell it to you at whopping margins.
GoZoomo started out a couple of years ago with the idea of solving this lack of trust in the Indian used car market by Arnav Kumar, Himangshu Jyoti Hazarika (both from IIT Kharagpur) and Aniket Behera (from IIT Bombay).
Unlike other e-commerce portals, they did not open their marketplace to used car dealers,instead only cars inspected by against GoZoomo’s 150-point checklist would be listed for peer-to-peer transactions. They knew the market for used cars would grow in India, where car sales really took off about a couple of decades ago. Every car which was listed on the platform was pre-inspected and there was no fee for the inspection report. If they could tackle the lack of trust and make people confident of getting their value for money, then they would buy the car. Which happened initially.
“We raced to 100 transactions per month within just three months of operations – that means a million dollar monthly transaction value on the platform,” Arnav reported to TechInAsia.
It soon got glossed over in the excitement and wanting to build on the product fast, Saif Partners and Yuri Milner pumped in a series A round of $7 million in July last year. That was on top of the $1 million seed funding which they had received earlier. See CrunchBase for stats
What happened next
While trying to make buying second-hand cars easy and not opening up to the dealers already present in the market, Gozoomo had to use double the manpower actually required for the job. Trying to create exclusivity on a small market ended up blowing up on their faces.
Other factors which caused a discrepancy in their market was that their marketing strategies involved only a ‘word of mouth’ approach. Which meant most of the people for whom this kind of marketplace would have been useful had no idea of it ever existing, till the news of them dissolving the company came to light.
Although, the startup did try other ways of monetization such as charging for inspections or other value-added services. But being an end-to-end marketplace, it’s success rested on the number of conversions. Which the startup found hard to push beyond 20%.
Additionally, in December last year, GoZoomo pivoted realising that monetizing the business through post-sales services – such as charging for paper transfer, insurance, etc. wasn’t really going to take it any further.
Consequently, it had to lay off 130 people, mostly the call centre employees. As per the founders, they too were all given seven weeks’ severance pay and help with finding other jobs.
Despite the tweaking, reduction in cost and team size, the essential problem remained the same – lack of a pricing standard which made transactions a challenging affair.
Not so smooth engine running?
The startup also decided to explore the option of a merger/acquisition but failed to get any attractive offers in their last few months of running. Adding on to this, there was an intense tussle between the other two co-founders and Himangshu Hazarika, which lead to his ‘amicable departure’ earlier this year. When asked about his departure by Inc42 he said, “I left amicably. By end of March, I felt we could not solve the problem in India using technology. I was mentally and emotionally drained and hence left formally but continued in an advisory role.”
Reasons made for dissolving
India’s most traditional habit of blaming things that don’t work out to fate or as we see here the market. Instead of trying harder to make money off the $3.5mn left in the bank and trying to accept and work on their marketing and executing skills, they decided to give up and create an image of ‘honesty’ and ‘maturity’ which will help them gain investors individually in the future.
Read this TechInAsia article which calls the failure as “A new ethical standard”.
Startups in India have come up with far less than a million in their bank and made it work instead of giving up and blaming the market. And most of these were not even the brainchild of some of the most intelligent IIT-ians.
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