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Why Did Stayzilla Fail? Check their Failure Analysis here!

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Stayzilla was once known as Airbnb of India. Why did it have such a tragic end? They were the trailblazers of an online marketplace for accommodation booking in India. They wished to revive the Indian concept of ‘Atithi Devo Bhava’. But envisioning is different from fulfilling. Let’s know how.

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Index:

Founder Details:

Yogendra Vasupal along with his two college friends Rupal Yogendra and Sachit Singhi founded Stayzilla in 2005. Stayzilla got its name in 2010, earlier the company was known as Inasra. Yogendra Vasupal started his entrepreneurial journey at the age of 19. He was 2 times drop out of college having no interest in academics. He was an avid traveler and realized the problem of the under-supply of rooms in India.

They covered about 55,000 hotels, guest houses, homestays, and boathouse across 900 cities in India. In India, without the presence of agents, it was a tedious task to book lodging in tier 1 and tier 2 cities, but they established a successful homestay platform.

Revenue Model and Sources:

Their website provided the best deals for the customer to find hotels, guest houses, rentals, lodges, homestays, and any kind of accommodation from travelers to non-travelers. They act as a broker providing concierge service to its customers and hotels. The primary revenue model involved ‘commission per transaction’. They also had other means to earn like any other website like advertising.

Funding and Investor Details:

Their startup idea for India attracted various investors. It was estimated that Stayzilla has raised more than $33.5 million from 4 rounds of funding.

  •  First round Angel funding in 2012: $500k
  • The second round of Series A funding was received from Matrix Partners but the amount was not disclosed.
  • Third round Series B funding in 2015: $20 million from Nexus Ventures
  • Fourth round Series C funding in 2016: $13 million from Matrix Partners
  • Matrix Partners and Nexus Ventures were the major investors for Stayzilla.

Business Model

Initially known as Inasra was an online travel agency. In 2010, changes were brought from agency to a hotel aggregator model.  India has a very fragmented kind of ‘stay’ business and this needed to be changed. Unlike other startup companies Stayzilla not only focused on Hotel bookings; they wanted to cover every kind of accommodation available in the smallest of the smallest zillas of the country.

This niche was completely fresh for the country, a convenient stay in budget, with pre available choices for easy travel within the country. In 2013, Stayzilla was successful in 500 bookings per day covering over 1100 cities across the country.  It was a major turnover in the travel and tourism sector where Stayzilla played the role of ‘The Godzilla of homestays’.

Competitor Analysis

MakeMyTrip and Goibibo were Stayzilla’s competitors. But competition was not as much at that time because the idea was fresh to India. The real competition was the digital revolution, which was on brick in India. Many people were not well-versed with technology.

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Moreover many didn’t have basic internet nor knew how to take advantage of such services. This made it difficult to reach the vast majority of the population.

Failure Analysis:

Challenges faced were endless throughout the 12 years of their operation:

  • Even the basic necessity of customer satisfaction was not fulfilled. This the first step that startups are built on, i.e., solving problems for the audience. Mismanagements in customer service lead to very bad experiences for the users. Complaints regarding confirmation of bookings yet resort records show no bookings and deducting the number of services not available to customers but no refunds at the same time. The downfall was near with rising complaints.
  • It was very difficult to educate and encourage the host and the guest to use this concept of a homestay. Being the first company in this sector using technology was death before starting to their earnings as people are not familiarised with its advantages.
  • They could not receive as much fundings according to the planned revenue. Funding was just enough for them to create a platform for alternative homestays but this could not make up the practical homestay demands. More cash for burnt then obtained on bookings.
  • Basic services like technology, logistics, and public goods were missing.

The startup completely derailed after a few years of functioning. The failure of Stayzilla wasn’t its own failure but a failure for the whole country’s trust in startup companies. Stayzilla’s failure led to many controversies with the arrest of co-founder Yogendra Vasupal.

Possible fixes

The company from the start had no clear goals noticed in their planning and strategy. They lacked in various aspects from quality service to assist in solving grievances. No actions were taken to solve the problems arising. Mismanagement, fraudulent activities, and lack of communication among stakeholders completely ruined the goodwill of the company in the existing market. Customers eventually lose their trust in the company. Bringing up an idea and meeting practical demands is where reality hits. That’s why it is important to have thorough market research and practical application on a small scale. Founders completely lost focus midway of functioning due to improper planning.

Do tell us what you think!

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Tell us what you think of our Dead startup analysis on “Stayzilla: Startup Failure Analysis” in the comment section. 

Also, don’t forget to download our Android app which contains startup case studies and business book insights, verified business concepts, and no bullshit!!

Related Articles:

What was Stayzilla?

Stayzilla was once known as Airbnb of India. Why did it have such a tragic end? They were the trailblazers of an online marketplace for accommodation booking in India.

Who Founded Stayzilla?

Yogendra Vasupal along with his two college friends Rupal Yogendra and Sachit Singhi founded Stayzilla in 2005. Stayzilla got its name in 2010, earlier the company was known as Inasra.

  1. frolep rotrem

    Awsome post and straight to the point. I don’t know if this is truly the best place to ask but do you folks have any ideea where to employ some professional writers? Thanks 🙂

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