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Housing.com posters in Bandra, Mumbai. Yadav says Housing’s focus is marketing, product and then revenue, as he wants the firm to become India’s No.1 Internet brand. Photo: Aniruddha Chowdhury/Mint
Housing.com posters in Bandra, Mumbai. Yadav says Housing’s focus is marketing, product and then revenue, as he wants the firm to become India’s No.1 Internet brand. Photo: Aniruddha Chowdhury/Mint

It’s business as usual for Housing.com CEO

After falling out with Sequoia and Times Group, Rahul Yadav's narrative has one refrain: he's ok and Housing's ok too

Mumbai: One morning in mid-March, a little before noon on a working Friday, Rahul Yadav, the 26-year-old chief executive of Locon Solutions Pvt. Ltd, a three-year-old real estate start-up that works under the brand Housing.com, is still lounging around at home—a duplex apartment in Mumbai’s Powai neighbourhood.

Yadav is wearing a black shirt, mustard-coloured trousers, and says he just woke up. The previous two nights have been long, busy, and sleepless, he adds— not surprising, given the minor controversies he created (and which he ended up managing).

Minor because mathematically-inclined engineers from good schools—and Indian Institute of Technology Bombay, the one Yadav dropped out of in his final year, is among the best in the country—who start-up companies fit the archetype of aggressive, impulsive, and not necessarily socially correct entrepreneurs.

And minor also because both controversies were engendered by electronic communications— one by an internal e-mail that was leaked, as one can expect from one marked to around 1,400 people, and another by a post on Quora—and there is something about those that encourages indiscretion.

That they are significant enough to find mention here is a function of Housing’s relevance in the space it has chosen, its ability to raise a significant amount of money, and the appeal of start-ups to investors, writers, and readers alike, in India today.

A day before the Friday when he woke up late, Yadav had mailed his employees suggesting that there was more than what met the eye in a story in The Economic Times about Housing.

MagicBricks, a Housing competitor and Times Group company, was trying to raise money in the US and maligning Housing would help its cause, he suggested. “Housing," he added, “is loved in the US."

Bennett, Coleman and Co. Ltd (BCCL), the publisher of The Economic Times, denied the premise of that email and said it considered Yadav’s statements false and defamatory.

In an emailed response to a set of questions from Mint, BCCL said: “In light of the above statements, if you still choose to make any insinuation against The Times Group, ET, BCCL, TIL (Times Internet Ltd) or ET’s journalists, the same shall be patently defamatory. If such a scenario presents itself, we reserve our right to initiate civil as well as criminal proceedings against you and Mint."

BCCL has served a defamation notice to Yadav, Locon Solutions (Housing.com) and its directors asking them to apologise forthwith.

The Economic Times competes with Mint.

And two days before that Friday, another email from Yadav had surfaced on Quora, the question and answer website which curates questions from its community of users. It was sent to Shailendra Singh, the managing director of Sequoia India, a venture capital firm. In the mail, dated 8 March, Yadav accused Sequoia of “inhuman and unethical things that you have done with Housing in the past".

He didn’t stop at that. “...Now I just came to know you personally are completely after Housing’s employees and are brainwashing them to open some stupid incubation. If you don’t stop messing around with me, directly or even indirectly, I will vacate the best of your firm. Also, this marks the beginning of the end of Sequoia Cap in India. Try me :)"

Singh responded on the thread, saying that he was deeply hurt by the email and it perhaps relates to an offer that Sequoia made to one of Housing.com’s employees to come on board as an analyst. And then, he went on to painstakingly explain how the Indian start-up ecosystem needed to grow up a little.

Yadav’s response was a two-word post, which was later deleted. It comprised a verb and an expletive.

In an emailed response to a set of questions, Sequoia said: “We unequivocally deny every single allegation Rahul has made on Quora. We are happy to respond to any specific information presented. So far, nothing specific is forthcoming."

The controversies, though, are merely incidental to the story—which is about the man, and the company. For, after the two controversies, Yadav’s narrative has one refrain: he’s ok, and Housing’s ok too.

The man

Born in Alwar, Rajasthan, Yadav’s story is a familiar one.

His dad was in the Merchant Navy and mum was a homemaker. “As a kid, I didn’t study up to 9th class," says Yadav. “So I have no knowledge of history or biology. In 10+2, I studied mathematics, chemistry and physics and then came to IIT Bombay."

He loves math the most. After spending three years at IIT, in his final year, Yadav dropped out to start a real-estate broking business with a fellow classmate, Advitiya Sharma.

That was in 2012.

It is now 2015. Housing has raised close to about $120 million in funding. And Yadav is angry.

He believes Housing is trying to solve a real issue in the real estate business, while his competitors are old fogeys who have no clue and no reason to be in business. That, in just two months, Housing.com will become No.1 in India, overtaking MagicBricks (which claims to be No.1), and that this has gotten people scared. And that journalists aren’t to be trusted.

“I’ve lost all faith in journalism," he says. “I can’t believe what they have written," he adds referring to The Economic Times article that prompted his mail.

He initially refuses to speak about the Sequoia incident but subsequently suggests—and reinforces the suggestion in a call hours after the meeting—that it has more to do with historical antipathy towards the firm which, he claims, did consider investing in Housing years ago. A day later, he also sends a mail, marking Sequoia’s Singh and Suvir Sujan of Nexus Venture Partners, a Housing.com investor, denying that he spoke about Sequoia with Mint.

The image of the man that comes through is, again, not very different from many other entrepreneurs behind start-ups riding the wave: intelligent, rash, disrespectful towards the competition, and a clear if-you-are-not-with-me-you-are-against-me perspective of the world and everything in it (including journalists).

The business

There are several rumours about Housing: that it is burning through $10 million of cash every month; that investors are unhappy with Yadav’s leadership and attitude; and that investors are seeking to replace him.

There are also several people happy to dissect Housing’s strategy through the lens of instant analysis that characterises our times: that it has no business entering international markets; that the mega marketing campaign it has embarked on is a bit much and unnecessary; and that Housing has no business model where it can make money.

Yadav trashes all the rumours and the analyses.

Inside Housing, it is business as usual, he suggests.

Yadav says that the cash burn at Housing is about $2.5 million per month, which does not include one-time expenses such as a deposit that the company has paid for a new office in Mumbai. “I don’t see that going above $3 million in the next two months," he says.

Okay. But what’s with the sudden marketing splurge?

As for the advertising blitz, “we want to be the No.1 Internet brand in the country. Like Flipkart, Amazon and Uber; that’s our focus," he says. “So right now our focus is marketing, product and then revenue. So, for the next 12 to 18 months, revenue is not our focus area and that can be pushed even further."

A close look at the balance sheet of Locon Solutions (Housing) reveals that in the year ended March 2014, the company made a loss of about 49 crore, on revenue of 1.9 crore that came largely from subscription or fees paid by brokers/developers to list properties. The two big expenses which contributed to the loss were employee salaries of about 20 crore and advertising expense of 14 crore.

He also denies that the investors are seeking to replace him or that they are effectively running the company.

“I don’t talk to investors," he says. “Why should I? Our relationship is need based. Because if you go back to the investor for every small thing, then they will also think that how will you run a large company?"

Sure. Is there some merit in the rumour that they are seeking to replace him, considering that all the co-founders’ stake put together is less than 10%?

“That’s not true," he says. “I alone have about 10% stake. According to the latest cap table, all founders put together have a stake of about 20%." (Mint could not independently verify the shareholding structure of the company.)

On the bit about investors replacing him, Yadav claims it is nothing but speculation because Housing is adding new business verticals. Like land, office spaces and a TripAdvisor Llc sort of brand among many others. (Housing has recently acquired the Indian Real Estate Forum (IREF), an online real estate review community.)

“All of these will have separate business heads, whom I personally like to call CEOs," says Yadav.

It is not quite clear where this stems from, but Yadav believes that his peers are out to get him, and he has a certain disdain for them, saying that they have been around for decades and have contributed nothing towards solving the problem of buying real estate in India. “Half of their money, they make in selling banner ads," he says.

“The 99Acres and MagicBricks and all, they don’t even have an advertising solution. Go to their website and see. Now, India is going mobile. How will they fit the ad in the app? Can they put their 200 banner ads on it? No."

If that be the case, then what about Housing? Where’s the business model there?

Sudhir Pai, the chief executive officer of MagicBricks, said in an emailed comment: “MagicBricks has always strived to be a valuable part of the real estate ecosystem, for its clients and its consumers. We’re helping over 26,000 developers and brokers connect with five million home seekers. Our mobile traffic has shown exponential growth, and our clients are extremely happy with what we deliver. We prefer not to smear competition and believe that ultimately, the market and the consumer will choose the best option."

99Acres declined comment.

The way Yadav explains it, Housing’s model is simple. On the Web you can make money in two ways: (1) Advertising and (2) Transactions. Simply put, there are the two models; Amazon and Google. Amazon is transactions. Google is advertising. So is Facebook.

“At Housing, we have both," says Yadav. “So, builders can advertise their new projects and we charge a transaction fee. For specific top builders, we create advertisements. High definition advertisements. Similarly, we have transactions. Where people can pay and buy property; which is why for most new projects we have a slice view. Because what’s a property which is getting built, under construction; it is location. So, we have the best way to show that."

Yadav chooses not to reveal the number of people transacting on Housing. A bit of background might not be out of place here. The online real estate market is divided into two categories: classifieds, where companies charge the developers and builders an amount for getting properties listed; and transactions, where the company lists properties, helps the consumers shortlist the ones they want and talk to developers, facilitates the transaction, and then charge a commission on the total value that the consumer pays the developer. The transaction space has recently seen a lot of interest, in terms of deployment of technology and entry of new players including PropTiger.com, CommonFloor and, of course, Housing.

Dhruv Agarwala, co-founder of PropTiger, says the company charges a commission of 2-3% on the total value that the buyer pays to the developer. On making payments for purchase of properties online, Agarwala says that “only consumers who are buying purely for investment reasons would not mind paying online. Buying property involves payment of a large sum of money, and people like to see and buy property".

It is another matter altogether, that Yadav believes this is changing. That after e-commerce, real estate is the next big thing where young buyers, in the age group of 30-40, who understand the Internet and use it daily, will buy and rent homes online. “It will take off," he says.

“Others were in this business too early, almost nine to 10 years early. Back then the uncles and aunties didn’t even know the Internet. Our time is about to come."

Rolling off his tongue, the term uncles and aunties sounds like a pejorative.

It is probably meant as one.

Ashna Ambre contributed to this story.

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