Next week will mark one year since Roomi announced a fresh $11 million in funding, a cash injection that came just as the New York-based shared housing marketplace declared it had hit the magic 1 million user milestone.
That series A round was intended to spearhead a major domestic and global expansion drive — and that, on the surface at least, is what happened. In March, Roomi snapped up New York-based roommate matching service Symbi before establishing a footprint in European markets by buying out Study Abroad Apartments. A few months ago, Roomi acquired Mexican shared rental platform DadaRoom.
Roomi appeared to have been healthy and making good on its promise to grow its global presence beyond North America. But VentureBeat received a tip last week that the startup had laid off most of its workforce — up to 50 of its 63 employees — which was in addition to a handful of departures earlier this year. The company confirmed that most of them received no severance payout.
More than that, several former employees VentureBeat talked to recounted tales of frivolous spending, nepotism, and an often intimidating work environment.
In the wake of mass layoff reports last week, Roomi issued VentureBeat the following statement:
Roomi has made the exceptionally difficult decision to let go of a number of staff due to unavoidable changes to our funding structure. We would like to thank our dedicated team for all their hard work and contribution towards the Roomi mission to make housing safer.
In a separate statement provided to CNN on Friday, shortly after the publication ran a lengthy feature on the startup, Roomi said that one of the reasons for the layoffs was that an anticipated round of funding had fallen through, with founder and CEO Ajay Yadav adding that it “took us all by surprise.”
But according to people close to the situation who spoke to VentureBeat on the condition of anonymity, the company’s predicament should not have come as much of a surprise to anyone, due to the manner in which it was spending money.
For example, the entire company embarked on an all-expenses-paid, 10-day team bonding trip to Thailand last year, which Yadav blogged all about. Roomi also spent significant sums of cash, which sources tell us may have been in the region of $1 million, on outdoor advertising in New York and London.
Freewheeling spending isn’t a new phenomenon in the startup world, and such activity can sometimes be put down to naivety or inexperience. It may be reckless, but there is nothing inherently sinister about it.
However, the fact that investors have not been willing to put more money into the startup, so far at least, could be a sign of something more serious. And our sources tell us that Roomi wasn’t as close to closing a fresh round of funding as it has claimed. VentureBeat did reach out to Roomi’s series A lead investor Atami Capital for input, but at the time of writing, the firm has yet to respond. VentureBeat did manage to get responses from Yadav, however.
“Not true,” Yadav said, in response to suggestions that Roomi may not have been close to completing a fresh round of funding. “As a startup, we are always in conversations about our funding situation. However, our interactions with investors are confidential. We can’t disclose anything publicly, due to legal agreements in place with investors.”