Marital discord, it seems, has engulfed another Indian unicorn. This time around, Tiger Global-backed e-commerce marketplace ShopClues’ co-founder and former CEO Sandeep Aggarwal, who stepped down after his arrest in the US for insider trading, has accused his wife, co-founder and chief business officer Radhika Aggarwal, and co-founder and CEO Sanjay Sethi of thwarting his re-entry into the company and having an affair.
Last year, India’s only profitable unicorn MuSigma also saw leadership crisis following a divorce case between founder Dhiraj Rajaram and wife Ambiga Subramanian, who was briefly CEO of the company. After they parted ways, Rajaram took back the CEO post, bought her shares and got investors’ support while Ambiga quietly moved on.
However, at ShopClues, the dispute seems far more acrimonious with Sandeep Aggarwal publicly discrediting his wife’s professional credentials and personal conduct. Both have filed cases against each other in various courts.
Sandeep Aggarwal’s allegations
While Sandeep has levelled a number of personal allegations against Radhika Aggarwal and Sethi, VCCircle would limit the scope of this report to issues concerning the company. Sandeep has accused both Radhika and Sethi of denying him his rights as a co-founder and largest individual shareholder of the company. He claims to have 12% stake in the company while Radhika and Sethi each own 2% each in common stock and 3% each in stock options. He cites the certification of incorporation issued by the state of Delaware in 2011 to show that he was the sole operating officer at the time of the company’s inception.
He alleges that:
1. The ShopClues board, Radhika and Sethi denied him the right to nominate a board member without his explicit consent and kept him in the dark for nearly two years till October 2016;
2. His board nomination rights were changed in April 2014 at the time of Series C fund-raising by inserting four words in a 1,100-page document that was sent to him to be signed in three hours;
3. One of the board members wanted him back in ShopClues but Radhika and Sethi stalled his re-entry;
4. Radhika and Sethi are trying to erase his primary role in building the company as the original founder while both of them were hired by him as employees. Sethi was allowed to use the title of co-founder and Radhika was allowed to use the title of founding member (ShopClues’ history page on its website says “2011: Sandeep writes the Business Plan in Silicon Valley and Radhika and Sanjay join Sandeep as Core Team members); and
5. Even after stepping down from the post of CEO, he worked behind the scenes to help ShopClues raise capital but Radhika and Sethi tried to erase his legacy and contribution.
VCCircle is yet to hear from the ShopClues management on the allegations. The investors, including Tiger Global, Nexus Venture Partners and Helion Ventures, which hold board seats in ShopClues, too, did not immediately respond to mails seeking comment. Meanwhile, Radhika, in her capacity as chief business officer, responded:
“I am shocked by unfounded and baseless allegations being made. In the interest of privacy of my family I will not be commenting on any personal matters, however, ShopClues was always a team effort and by God’s grace and hard work of a strong team, ShopClues has become a force to reckon with and I want to focus my time and energy to do what I owe to my employees, my investors, my country and myself,” she said.
Sethi did not respond to messages.
In financial year ended March 2016, ShopClues’ standalone revenue more than doubled to Rs 179 crore while losses nearly quadrupled to Rs 381 crore. The company has talked about a public listing several times, but it recently deferred its IPO to next year. ShopClues has positioned itself as a marketplace for many low-cost items targeting the lower middle section of online buyers, which is yet to expand. It claimed $700-million GMV run rate in October last year, and said it was likely to grow to $1.2 billion by March-end.
Meanwhile, the company wants a third of its total revenue to come from the various services it offers to hundreds of thousands of small merchants on its platform. ShopClues claims to have half-a-million merchants on its platform.
It is said that the company is in now looking to raise fresh capital from venture investors. It last raised venture capital in January 2016, when Singapore’s sovereign wealth fund GIC led a Series E round valuing the company at around $1.2 billion. Many feel that ShopClues may be merged with one of the more-funded e-commerce platforms in the country. A few months back, there were media reports about Alibaba planning to acquire ShopClues with an intention to merge it with Paytm’s marketplace. Also, there is speculation that the two Flipkart investors, Tiger Global and GIC, which sit on the ShopClues board, may guide the company into Flipkart’s fold.
Impact on business
Sandeep, who was convinced that his return to ShopClues would not be easy, has founded automobile marketplace Droom, which has raised around $45 million from a clutch of venture capital investors. While Sandeep’s legal issues in the US have not settled yet, investors seem to have some belief in the company’s future, as they pumped in around $30 million in the company in mid-2016.
The episode could hurt ShopClues’ image even more, with the founding CEO, who holds a significant stake in the company, publicly taking on his estranged wife and founding partner.