Here are the Red Flags that Destined Zilingo for Liquidation

Once a role model for the Asian unicorn and Indian startup scene, Singapore-based B2B fashion start-up Zilingo is undergoing liquidation process, helmed by provisional liquidator EY Corporate Services PSE, and supervised by its creditors Varde Partners and Indies Capital Partners. Mounting disconnect and disagreement between co-founders Ankiti Bose and Dhruv Kapoor are just one of the many aspects that investigative authorities continue to excavate. 

For an entity that pegged Bose as the first Indian woman founder-CEO of a unicorn, Zilingo nosedived to disruption. The workforce slumped massively from its impressive headcount of 900, and investors ran out of contingency measures while deducing the feasibility of investments and diversifications when the company was running at a loss. 

Instead of solving the scenario as suggested by the investors time and again, the founders fell out on a bitter, personal note. This tarnished the public image of the core management and dissolved any hope of Zilingo’s rehabilitation. Let’s glance through the red flags that were overlooked in this unfortunately short journey of Zilingo, as market stakeholders draw parallels with the Satyam scandal. 

Expansion Unchecked

Zilingo was founded in 2015 by Dhruv Kapoor and Ankiti Bose, offering end-to-end manufacturing, logistical, and technological solutions for the international clothing supply chain, looping in manufacturers, distributors, retailers, wholesalers and more. Bose’s successful run at Sequoia Capital India and patronage by CEO Shailendra Singh backed her ambitious expansion plans on strong innovation. Kapoor handled tech and product development, and Bose front-lined administration, marketing and sales. 

Throughout 2017, Zilingo set up teams in India, US, Thailand, Hong Kong, Indonesia, the Philippines, and Australia. Various reports suggest how a B2C team was onboarded in January 2019 in Australia, only to be informed that the company has repositioned its focus on the continent to B2B, two months later. 

However, the brand achieved huge milestones in December 2019 and January 2020. It became a unicorn with valuation crossing $1 billion and achieving a transaction flow of $100 million in January. In December, the brand acquired Sri Lankan tech startup nCinga for $15.5 million. 

Financial Massacre

BOV Capital opting out of the nCinga acquisition was an alarm overlooked. An unchecked investment spree caused the risking skyscraper of Zilingo to crash. Since inception, Zilingo had the unwavering support of Sequoia Capital India, which backed every funding round, but differences between Singh and Bose reached a dead-end when in 2021 the former cautioned against the cash burn. 

This was much to the dismay of Bose, who insisted that Zilingo had all it took to go for another round of investment. This was after a Kroll Inc. probe fished out payments to the tunes of millions of dollars, such as a $7 million payment to a law firm, approved by Bose. Also unaccounted was a staggeringly expensive promotional trip worth $1 million to Morocco, which was allegedly part of the $54 million funding the company received from investors in 2018. #ZilingoEscape, as was the trip called, was lavish for 9 influencers, but its ultimate goal of getting one million new Zilingo users for the price of every dollar, tanked around 10,000 new users. 

Bose’s shift from one strategy to another only created more roadblocks than the company could dodge. From giving discounts of about 4 percent to merchants to giving out exorbitantly high loans to needy vendors monthly, Bose’s decisions were bleeding the cash coffers of Zilingo a bit too much ahead of the pandemic, that caught the world unawares. Bose’s attempt to expand in the US also fell flat in 2019. Investigation into a maximized gross market value revealed how fake email ids were used by Zilingo sales teams to mail documents pertaining to unconfirmed outstanding amounts for its vendors to its auditors in Singapore. Zilingo’s investors took the beating even when the company failed to file financial returns in Singapore for two years.

Amidst such worrying statistics, sales executives kept on using unscrupulous measures at the ground level to make the most of the chaos. They provided high discounts, often as high as 5 percent, to vendors to record their transactions on Zilingo. Also brushed under the carpet were alleged disappearance of LED screens worth crores of rupees.

Irreconcilable Differences

Bose had clashed with Kapoor on the PPE venture in 2020 after conducting layoffs, despite being cautioned by the latter that surgical masks is not a stronghold of the tech startup. When Singh raised concerns on Zilingo’s profitability, she maintained that she was selectively targeted as no other founder was pushed back like Bose.

Culminating tensions rose to a pinnacle at the beginning of 2022 when a whistleblower alleged Bose of committing serious financial irregularities, some of whom also imply the CEO using company’s funds for personal gains. Suspended in March, Boss was asked to step down as the CEO of Zilingo, battling charges of willful fraud. 

Soon after Bose was sacked, almost 100 staff members quit Zilingo. This apart, investors started recalling loans. Worsening the situation was an ongoing legal battle between the Indian government and Zilingo, with the latter charged of forging third-party inspections certificate to dispatch millions of sub-standard Chinese KN95 masks. The irregularity was spotted by two officials of HLL Lifecare Ltd., the central procurement agency of the Health Ministry. Many allege that the products were not even delivered. 

Public Opinion

As Zilingo handed over its tech assets and nCinga Innovations to Buyogo AG in January, there breeds intense furore over the company’s quest for unattainable growth, mired by poor governance. People are putting it on the lines of Sequoia Capital India’s another money-guzzling platform BharatPe, and GoMechanic.

Some say that the market has learnt to put customer validation over and above investor validation in case of relying on such ambitious start-ups. Praveen Jaiswal, Founder of cyber network intelligence company Vehere, said, “Zilingo in process of liquidation and Gomechanic in distress sale! Corporate Governance is sole responsibility of founders and not investors.”

Wake-up Call

Genuine leadership and an unfettered focus on solving pain points instead of getting waylaid by popular trends are some of the hardest lessons that the disillusioned start-up scene in India is fast adapting now, thanks to the Zilingo catastrophe. 

As multiple misconducts continue to surface, Zilingo is on its way to dissolve from its vicious cycle of kickbacks, administrative loopholes, and ego battles, bringing down a once-bright road to global success. The money that went down the drain and the dreams that were shattered will be more than enough for any mindful entrepreneur seeking ‘crazy growth’.