​How Rahul Yadav changed the entrepreneur-VC equation forever

This bizarre, almost surreal account of what transpired in the last two months of real estate site housing.com is bound to change the way that VCs and entrepreneurs do business in India.

In just the last couple of months, Rahul Yadav has become India's most famous startup CEO, and it's not just because of how novel or popular his real estate website is.

That's not to say that it isn't a front runner in its category. Indeed, housing.com's heat maps, data and analytics engine, time-decay algorithms, and on-ground verification of listed apartments by a dedicated team, which I wrote about last year, has brought it a lot of attention.

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Housing.com's Rahul Yadav

But it is the antics of its small-town CEO Yadav, who migrated from Alwar, Rajasthan, to attend the engineering mecca Indian Institute of Technology, Bombay, now called Mumbai, that has branded him as either a certifiable nutjob or a persona non-grata as far as the investing community is concerned. Or he is an unadulterated, bonafide hero, sticking it to "the man" -- in this case, bullying VCs -- on behalf of all the marginalised, frustrated entrepreneurs out there.

Founded in 2012, Housing.com had already raised tens of millions of dollars by the time SoftBank came along and plonked $90 million as part of its big India drive, promptly valuing the property at $250 million. At the time, the company was known for being very different from its peers, thanks to some nifty coding that was undertaken by its 12 quant jock founders, all ex-IITans. Yadav himself decided that it wasn't worth sticking around college, and dropped out in his third year, which is not something that most engineering graduates eyeing startup glory or a career with the McKinseys of the world do.

Things were chugging along until a bomb of an email that Yadav had apparently sent to Sequoia's India managing director Shailendra Singh in early March exploded on Quroa, a site where Indian techies and entrepreneurs tend to congregate. Do read the email if you want to soak it up in all of its glory.

Here's how things unravelled: The email landed in Singh's inbox and unloaded its shrapnel from the get-go. It accused Singh of being "inhuman", "unethical", of being a poacher, and said that Yadav will personally see to it that Sequoia ceases functioning in India. Jaws across the startup landscape collectively dropped and remained open for a long time.

Yadav's email caused such a stir that Sequoia's Singh actually felt obliged to respond. So, Singh sent an earnest reply that painstakingly explained, apart from expressing how hurt he was by all of this, that while interviewing over 100 candidates for an analyst's position at Sequoia, he may have chatted with one or two Housing.com employees, one of whom went on to get the job, but that what Singh was really interested in stressing was the need to foster a better startup ecosystem, which he learned all about in the Valley, and how to be more collaborative instead of vindictive.

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Sequoia's Shailendra Singh

To which the irrepressible gunslinger that is Yadav came out swinging in the form of another scathing email accusing Singh of dirty tactics and ending with the memorable words "Go Die Motherf*****". Here is a more detailed account of why Yadav feels Sequoia undermined his company.

Whew! Suffice it to say that history has been created. Never before has a young entrepreneur said anything close to what Yadav has to the head of one of the most influential VC firms in the world. The tables have almost overnight been turned. Blows on behalf of the underdog have been delivered. This guy Yadav has cojones the size of Pamplona bulls, we say. And, equally importantly, entertainment, or as we Indians would say, "Masala", for the masses has also been engineered. Good, all around fun, but now time to get off Quora and other titillating blogs on this affair and deal with the more mundane things in life, like our jobs, lest we get fired.

Er, not quite. It seems that the enfant terrible of the startup world is addicted to creating online mayhem. This time, he has done something unthinkable, something so demented in the entrepreneurial world that it goes from bravado to scary. In early May, two months after the Sequoia spat, not only did Yadav quit, but he did so in an email to the board of Housing.com, stocked with some of the most reputed VCs in the world, by telling them that they are not "intellectually capable enough to have any sensible discussion anymore".

He also, in true quant style, stated that after subtracting average life expectancy from sleeping hours, he came up with the number of 300,000 days, which he said is not worth wasting with the board as far as his future career goes. Yadav then said that he was giving them only seven days to help in a transition, and urged them to be as efficient as possible.

Meanwhile, in the months leading up to this resignation, Housing had forked out close to $13 million in just over a few months just for its brand campaign that went live in March, blanketing the city with billboards and newspaper jacket ads. And then, just as soon as he had quit, a few hours later, it was bizarrely announced that Yadav was back.

SoftBank, ostensibly reeling from another one of mercurial Yadav's Mike Tyson-style blows and watching its gigantic investment -- it has a 38 percent stake in the outfit -- gush down Mumbai's sewers, raced to conjure up a solution. By then, SoftBank's blue-eyed boy Nikesh Arora had been appointed successor to Masayoshi Son, and was ejected from Housing.com's board. His replacement, Jonathan Bullock, didn't "want SoftBank to be known for ousting founders", and stitched together a compromise where a committee of five headed by Bullock would oversee all major decisions. And what about Yadav? He sent a breezy email to Housing employees: "Was just a usual day at Housing, I am still your CEO. Have fun:)"

By all accounts, most firms with investments of $130 million should have a captain of the ship that radiates a sense of stability, calm, and respectability, where events surrounding the firm dominate, and not the shenanigans of the CEO. In fact, the CEO should not ideally have any shenanigans. But this isn't the case at the house that Yadav built.

Yadav then decided to go all In. Yadav announced, a few days later, that he would pledge his entire stake of around $63 million (at today's value) to the 1,000 or so employees of Housing.com. He didn't want any of it. He then called on the CEOs of Zomato, a Yelp competitor valued at $1 billion and headed by Deepinder Goyal, and Olacabs, an Uber competitor also valued at $1 billion and headed by Bhavish Aggarwal, to pledge not all, but at least half of their individual net worth to their employees. There is no proportionality between the net worth of founders and VCs and those of the hard-working employees of startups, he chided.

The CEO of Zomato responded by saying "Aw Cuutee!" Yadav's rejoinder was a photo of Goyal and a scanner, implying that all Zomato does is scan menus for its business model.

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Yadav mocks Zomato's Goyal in a social media post

The world has been chock full of entrepreneurs who have dared to flip their middle finger at the establishment. Steve Jobs comes to mind. But most people from humble backgrounds in India want to crack exams, get into the best schools, and earn a good living. Today, that may also mean starting a tech company and cashing out. To do that, almost everyone toes the line, sucks it up, and does whatever it takes to bring that large paycheck home. Certainly, no one has even dreamed of flipping the bird to your own board, never mind other individuals or unconnected VCs -- a potential career-ending sentence.

So, is Yadav an angry, unstable kid who simply hasn't experienced enough of life's bitter pills to understand the meaning of humility? Could he have a condition of sorts? Is he just too talented to care, armed with the realization that with his undeniable skills, he will always be able to earn a living? Could he be that rare, gutsy individual who bats for the underdog? Or is he just an attention-seeking diva used to being coddled even after throwing epic tantrums? Who knows how much the answers to each of these questions make up the persona that is Rahul Yadav, but something tells me that the world hasn't heard the last of him as yet.

Meanwhile, the world has changed. The equation between VCs and entrepreneurs will no longer be the same after the Yadav Chronicles. Long-time VC Mahesh Murthy, partner at Seedfund, who has been a well-known investor, observer, and critic of the space -- his favouite target to unload on in the past years has been India's largest e-commerce site Flipkart, which he thinks is ridiculously overvalued -- had this to say:

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VC Mahesh Murthy

"Now, I have no idea if Sequoia did whatever is alleged to other startups -- but I do know that some of our lot have unfairly treated entrepreneurs. Among my brethren are folks who have made firm commitments to founders and then reneged on them, some who have had their firms fund their spouses' companies, and some who have even asked every question they wanted to during an investment pitch and then used it while they funded a rival."

Murthy said that in this brave new world of communication, a new equilibrium has been set, where social media will now force a fresh transparency where all-powerful VCs will not be able to operate as per their whims, and that "if any of us -- investor or an entrepreneur -- plays fast and loose, there's this new wired society that will kill us professionally just as certainly".

And just for that, no matter how tawdry or unpleasant the whole Housing.com saga has turned out to be, it will ultimately be more than worth it for the way the entrepreneurial battleground appears to be realigned.

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