Bikayi Disarray: Fraud allegations and seller exodus hit Sequoia-backed startup

Bikayi Disarray: Fraud allegations and seller exodus hit Sequoia-backed startup

After allegedly opaque internal audits, Bengaluru-based Bikayi laid off many of its 500-600 employees in February, more than halving its workforce in the past few months.

In April 2022, Bikayi’s revenue was around INR 1.9 Cr, but by July 2022, it was just under INR 10 Cr due to product pricing challenges and challenges with sellers.

The Sequoia and YC-backed startup is pivoting to target enterprises despite serious holes in its business model.

We became unicorns in January, according to office chatter. We were told that the company is raising funds. My job at Bikayi ended four months later.”

Bikayi, the retail tech startup backed by Sequoia and Y Combinator, has seen its fortunes soar in the last four months. It was anticipated that Bikayi would raise a new round of funding at a unicorn valuation in 2020 and 2021 as a result of the digital transformation and retail tech boom. That goal, however, has not been seen to come to fruition.

As of July 27, 2022, Bengaluru-based Bikayi now has 244 employees, down from around 500-600 employees in February of this year.

Several sources report that revenue has dried up since early 2022, and sellers were de-platformed. Following a series of audits and internal investigations, several employees have resigned or been terminated.

Multiple sources within Bikayi indicate the company’s core business of facilitating eCommerce stores for small retailers has been severely affected by pressures from retail brands seeking to combat counterfeit products.

The lack of technical fixes, marketing performance reports, and refund requests has also been criticized publicly by existing Bikayi merchants in recent months.

The push to grow has led to many operational failures, layoffs, and customer issues. As a result, India’s SMBs and small sellers cannot offer many customers lifetime values. The company, which saw its revenue growth stagnate, is now focusing on a new product in an extremely competitive market.

The Bikayi Revenue Puzzle

Bikayi, founded in 2019, is a managed eCommerce platform for small retailers and SMBs that includes payment and shipping services, as well as digital marketing features.

Due to the digital transformation wave, Y Combinator and Sequoia-backed Bikayi in the first couple of years and managed to get a significant number of customers. A total of $12.8 million has been raised in the company’s lifetime.

SMB customers provide payment processing and delivery services, as well as digital marketing services and related add-ons.

As far as revenue is concerned, CEO Nathani stated that the company will generate $3.5 Mn in revenue by April 2022. Due to the absence of financial information for FY20, FY21, or FY22, these claims cannot be verified.

It is estimated that the company generated INR 1.9 Cr in sales in April 2022 to calculate that ARR based on data shared by sources. Since then, revenue has plummeted so badly that an ARR of $3.5 Mn seems too optimistic.

Taking a look at Pikayi’s internal sales reports, Inc42 can see that sales have declined dramatically since April 2022. In March, the company exceeded its sales targets.

Until July 27, 2022, Bikayi’s sales force had achieved only 3.1% (INR 9.5 lakhs) of its monthly revenue targets of INR 3 crores.

In April, sales income was 1.9 Cr; in May, it was 42.4 Cr; in June, it was 54 Cr; then in July, it fell 82%. In December 2021, revenues reached just INR 1 Cr.

Bikayi CEO Nathani emphasized the company’s “aspirations to grow” despite these grim numbers but made no specific timeline for achieving profitability.

Conundrums around pricing & technology stack

As a result of Bikayi’s low price in its initial days, its prospects were bleak when it came to profitability. By March 2022, the subscription price will be increased from INR 5K to INR 15,000-INR 18,000 (from INR 5K in January 2021).

To make positive unit economics, Bikayi had to offer digital marketing credits as an add-on to its subscription plan at INR 5,000.

Due to the constraints on Bikayi’s revenue margins, the company tiers its products, in addition to adding more features and partnering with third parties. There was a problem selling the more expensive plans.

In this customer segment, even at INR 18,000 per year, subscriptions were hard to sell. Sources claimed – 90% went with EMIs. In addition, after April 2022, you will no longer be able to make part payments or EMIs for your subscription.

In addition, many sellers complained about how marketing credits had been spent on app stores and Twitter. We were told that this had a significant impact on Bikayi’s reputation.

Despite paying INR 12,000 towards marketing credits in April 2022, Mumbai-based beauty label Facetonic’s proprietor, Sanaa Saif has not yet received the marketing analytics or performance report.

Only six Bikayi owners were contacted of the 25+ stores Inc42 contacted, with many dormant Bikayi stores remaining.

Bikayi was praised by just one seller – SA Foods. Mumbai-based retailer Bikayi featured as a star customer in its 2021 pre-funding pitch deck. A ‘lifetime’ contract has been signed between the owners of the company and Bikayi, which is set to last until 2051, according to Inc42.

Due to its technical issues and challenges in customer support, Bikayi is not ideal for stores with large customer bases.

Ganesh Dryfruits, based in Mumbai, signed up for the 5K annual plan in January 2021 and found many weak points in its tech and customer support operations. Their previous version could not even be restored from a backup.”

Customer support and technical issues could not be resolved via a ticketing system. During Inc42’s review of Bikayi’s customer support operations, WhatsApp group chats dominated.

Several issues were introduced without the owner’s consent by the startup’s technical and customer support teams.

Cutbacks are caused by sales fraud and audits

Over 11,300 startup employees have been laid off as a result of the slowdown in funding and pivots to find profitability.

The company’s decision to end remote working and move into a Bengaluru office has forced a majority of its workforce to resign, while one-third was let go for misconduct.

A screenshot of an internal meeting calendar for the week of July 16-21 shows dozens of meetings related to resignations and relocations, which also routinely end in resignations, according to employees. Bikayi’s current team strength as of July 27, 2022, is 244, with 54 employees in the sales department.

Those laid off claim a covert internal audit began in May 2022, which led to them being told to leave whether they were directly associated with any misconduct or not.

Others quit voluntarily, but only because they ran the risk of losing their full-and-final settlements, employment letters, and pending sales commissions. The payments still have not arrived for some of this group.

An auditing team has been appointed to vet sales, according to Nathani’s Slack messages.

The audit involved Bikayi salespeople forging signatures from sellers and Kirana store owners to sign up for subscriptions based on EMI payments. Most of the down payments for these customers were contributed by Bikayi’s salespeople from their own pockets.

A NACH mandate was used to facilitate EMI payments. Despite this, many Bikayi sales representatives did not fully assess their customers’ ability to repay EMIs as they pressed to meet weekly targets.

Inc42 reviewed screenshots from CEO Nathani’s Slack messages to verify employee claims about salesperson forgeries.

The company’s revenue is not affected strongly by these sales, according to Nathani, who declined to disclose the amount.

edited and proofread by nikita sharma