The Indian startup ecosystem has been hit by another shocking controversy, this time involving Nestaway, a home rental platform once celebrated as a game-changer. From being valued at Rs 1800 crore and securing Rs 700 crore in funding, the company was sold for a jaw-dropping Rs 90 crore, raising serious concerns about investor practices, corporate governance, and the struggles faced by Indian startups.
Table of Contents
Nestaway: Company Overview
| Category | Details |
|---|---|
| Founded | 2015 |
| Founders | Amrendra Sahu, Jitendra Jagadev, Deepak Dhar, Smriti Parida |
| Business Model | Tech-driven rental platform with no brokerage, property management, and tenant verification |
| Key Features | Fully furnished rentals, tenant screening, co-living spaces, virtual property tours |
| Peak Valuation | Rs 1800 crore (2020) |
| Funding Raised | Rs 700 crore from Tiger Global, Goldman Sachs, Chiratae Ventures |
| Presence | Major cities: Bengaluru, Delhi NCR, Mumbai, Hyderabad, Pune |
| Key Milestones | Managed 60,000 homes, housed 200,000 tenants |
Reasons for Decline
| Factor | Details |
|---|---|
| Impact of COVID-19 | The pandemic caused tenants to vacate properties, leading to rising vacancies and revenue decline. |
| High Operating Costs | Managing a large portfolio of properties across cities led to significant cash burn. |
| Co-Founder Exits | All co-founders except Amrendra Sahu exited by 2020, leaving leadership instability. |
| Investor Pressure | Tiger Global allegedly pushed for a distress sale at an 80% valuation loss, despite potential funding. |
| Governance Issues | Allegations of conflict of interest, unethical practices, and mismanagement among key investors. |
| Forgery Allegations | Reports of forged signatures during the sale process added to trust and governance failures. |
| Delayed Payments | Key stakeholders, including the CFO and co-founder, alleged unpaid dues and ignored resolutions. |
| Pandemic Adaptation Failure | Unlike competitors like Zomato or Airbnb, Nestaway failed to adapt creatively to pandemic challenges. |
| Lack of Strategic Focus | Insufficient focus on stabilizing core business and improving tenant experiences during tough times. |
The Dramatic Valuation Collapse: From Rs 1800 Crore to Rs 90 Crore
In 2020, Nestaway appeared to have a bright future. With a valuation of Rs 1800 crore, substantial funding, and a strong presence in the home rental market, it was a name many looked up to. However, the COVID-19 pandemic changed everything. It created uncertainty and disrupted the rental market, leaving the company struggling to maintain its momentum.
To make matters worse, all co-founders except Amrendra Sahu exited the company during this period of turmoil. Despite these challenges, Nestaway stayed afloat by selling non-core assets and maintaining enough cash reserves to operate for at least two years. It seemed like there was a glimmer of hope for recovery.
But then came the twist. Despite receiving a Rs 50 crore investment proposal from Gruhas, led by Zerodha’s Nikhil Kamath, Nestaway’s lead investor Tiger Global allegedly pushed for a distress sale. The result? A sale at an 80% loss, leaving many stakeholders questioning the rationale and fairness of this decision.
Conspiracy, Forgery, and Governance Failures
The distress sale has sparked outrage, and serious allegations have surfaced about the practices of Nestaway’s investors. Minority shareholders, former employees, and even the co-founders have raised their voices, accusing the investors—including Tiger Global, Goldman Sachs, and Chiratae Ventures—of conspiring to force the sale.
Reports suggest that board member Jitendra Jagadev, who had insider information, negotiated the deal on behalf of the buyer. This blatant conflict of interest has become one of the most talked-about aspects of this case.
What’s worse, there are claims of forgery. After Amrendra Sahu resigned, it is alleged that his signature was forged to finalize the sale. To add to the controversy, shares were transferred to the buyer before the Share Purchase Agreement (SPA) was finalized, violating its terms.
Even payments under the SPA have faced delays. For instance, Goldman Sachs reportedly extended deadlines unilaterally, leaving Sahu waiting for his dues. Similarly, the company’s former CFO, Sandeep Daga, is still awaiting his payments—a full year after the investors received their proceeds.
Could Nestaway have been saved? Absolutely. Lessons from Nestaway’s Downfall
Nestaway’s story is a perfect storm of external challenges and internal mismanagement. While the pandemic undoubtedly hurt the business, much of the damage was self-inflicted.
- Lack of Transparency: The investors failed to communicate openly with stakeholders, leaving minority shareholders and employees in the dark.
- Poor Governance: Allegations of forgery and conflicts of interest reflect governance failures that could have been avoided with stronger oversight and independent board members.
- Missed Funding Opportunities: Instead of exploring bridge funding options like Gruhas’s Rs 50 crore proposal, the company’s lead investors allegedly prioritized a quick sale.
Successful companies in similar situations have shown how resilience and strategic thinking can make a difference. For instance, Oyo Rooms expanded into long-term rentals during tough times, while Tata Motors revived Jaguar Land Rover through decisive leadership and ethical governance.
The collapse of Nestaway could have been avoided with smarter decisions, better transparency, and adaptability. For example, the company could have focused on improving its core rental business, much like how Zomato streamlined operations during the pandemic. Instead of rushing into a distress sale, bridge funding from investors like Gruhas could have provided much-needed financial support.
Open communication with stakeholders would have helped build trust, preventing the mistrust caused by questionable behind-the-scenes deals. Avoiding conflicts of interest, such as board members negotiating on behalf of buyers, would have ensured ethical governance. Diversifying its offerings, like Oyo did with long-term rentals, could have opened new revenue streams. Ultimately, a united leadership team and adherence to ethical practices would have helped Nestaway weather the storm. With these strategic moves, the company might have avoided such a steep fall.
Legal Action: A Wake-Up Call for India’s Startups
Amrendra Sahu has now filed an FIR against the company’s investors and co-founders, and the case is under review at the Odisha High Court. The outcome of this legal battle, with the next hearing set for January 9, could have far-reaching consequences for India’s startup ecosystem. It may redefine investor-founder relationships and set a precedent for ethical governance and fairness in the industry.
My Take: A Lesson for the Startup Ecosystem
As someone who follows the Indian startup space closely, I believe this is a wake-up call for both entrepreneurs and investors. Startups, by their very nature, are high-risk ventures, but that does not justify unethical practices or poor governance. The Nestaway case highlights the darker side of investor influence, where the rush to maximize returns can come at the cost of trust, transparency, and long-term value creation.
This case also underscores the urgent need for regulatory reforms. India’s startup ecosystem has grown rapidly, but the rules surrounding shareholder rights, conflict of interest, and investor accountability haven’t kept pace. Stricter policies and better enforcement could prevent similar incidents in the future.
Conclusion: A Cautionary Tale with Lessons for the Future
Nestaway’s fall is not just a story of mismanagement—it’s a cautionary tale. It reminds us that success in the startup world isn’t just about funding and innovation. It’s also about trust, transparency, and ethical leadership.
While it’s heartbreaking to see a once-promising company collapse, this case could set an important precedent for the industry. It’s a call to action for better corporate governance, investor accountability, and founder protection. If the lessons from Nestaway are embraced, India’s startup ecosystem can emerge stronger, more resilient, and more ethical.
