‘Zilingone’: How the S’pore fashion unicorn sank after missing the boat that saved Sea, Grab

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It’s said that success has many fathers but failure is an orphan, and we can see this observation play out in real time as Zilingo, one of Singapore’s unicorn startups, entered liquidation, going from over a billion dollars in valuation to zero in just a year.

As it often happens, everybody involved tries to place responsibility for the downfall on someone else — in this case, most fingers pointing at the company’s co-founder and former CEO, Ankiti Bose.

Bad apple or an entire orchard?

The news reports are awash with accusations of how bossy and controlling she was — that she “ruled with fear” — what surely must have contributed to the collapse of the business, which had for long been, apparently, burning more money than anybody was aware of.

Interviews with more than 60 people, including current and former staff, merchants, investors, entrepreneurs and friends of the key players, suggest that Zilingo struggled for years under Bose’s leadership. Bose’s management style alienated employees and undermined the business, according to staff who worked under her.

The problem with this theory is that you could just as well apply the same description to some of the most successful people in tech.

In fact, just read Steve Jobs’ biography — a mad, dictatorial lunatic, piggy-backing on somebody else’s ideas, crushing people around him and then failing to launch commercially viable devices that led to the ousting from his very own company in 1985.

Besides that, who isn’t an assh*le in tech? Bill Gates was, Jeff Bezos and Larry Ellison still are, Razer’s Min-Liang Tan is accused of being one too. Are they bad at running companies?

We’ve now learned that Zilingo failed to file annual financial statements in 2020 and 2021, and as much as the CEO should be taken to task for it, one must ask — what have other C-level executives and board members been doing all this time?

You want to tell me investors poured in over US$300 million into the business that was an opaque black box which the CEO refused to provide access to and, somehow, when she did, it was already too late?

Right.

I think it’s more an example of a culture of permissiveness for such infractions among startups, as long as the company’s valuation is on the up and up. And once things go south, the CEO is thrown under the bus.

The key to success is timing

Timing is everything in every single domain of human activity.

In music, obviously; in most sports, where scoring a goal or point ultimately depends on being able to perform at the right pace in the right time; in dining (hitting the right spot on your dish), in medicine (diagnosing problems at the right time), in research (before someone else does) and in business, where it’s often not the first or even the biggest company at any given time to ultimately dominate the market.

Google wasn’t the first search engine, Windows wasn’t the first operating system, and Facebook wasn’t the first social media platform.

This extends to specific business activities with the crucial one being financing.

No idea is ever truly unique. Someone, somewhere most likely has come up with whatever you have too. What separates achievers from failures among modern startups is the ability to fuel their operations with new money until they are able to sustain themselves.

Besides its CEO’s character, Zilingo’s failure was also attributed to how the company’s profligate spending drained the US$226 million it raised in 2019 in less than two years.

Reportedly, after refocusing on B2B services (connecting small fashion manufacturers to retailers), the company was effectively subsidising transactions between them to incentivise usage of the platform, losing money on every deal made.

That may sound like a terrible business idea until you ask yourself — aren’t other businesses doing just that in one form or another?

Aren’t e-commerce platforms giving out excessive discounts, coupons, vouchers to attract customers? Haven’t ride-hailing apps been sponsoring drivers with hefty handouts just to get them to drive around, so that users could learn to rely on their service?

Spending US$226 million in under two years may sound like a lot until you realise that a company like Sea Ltd has until recently been burning through US$1 billion per quarter — which would exhaust the money it raised during the latest funding round of US$6 billion (done through the stock market in 2021) in about a year and a half.

Similarly, Grab, after raising US$4.5 billion in its IPO, has so far been losing an average of half a billion per quarter, and that is only after it had desperately started cutting losses.

In other words, while seemingly excessive, Zilingo’s spending wasn’t exactly out of line in the tech world and neither were its practices of sponsoring activity on its platform. So, why is it that Sea and Grab are very much afloat while Zilingo is going down?

Again: timing.

Both Sea and Grab took advantage of the wave of money that flooded the capital markets in the wake of pandemic response around the world.

Grab held its IPO just when the window of opportunity started closing in December 2021, as inflation began rearing its ugly head in America.

Meanwhile, Sea, which listed in 2017, held two large fundraising efforts in December 2020 and September 2021, right around the time its market cap hit a historic high of close to US$200 billion. As I argued in October last year, these well-timed decisions have likely averted a very real risk of bankruptcy which Sea could be facing today if it didn’t have the funds.

Just like Zilingo is, after missing its chance.

Bose previously expressed IPO ambitions in a Bloomberg TV interview in 2021, but nothing concrete came out of it. By early 2022, she was out fundraising again, looking for US$200 million that would place her company’s valuation at about US$1.2 billion, but there were no takers.

It was already too late.

Inflation started spreading globally, interest rates rose sharply, and money retreated from capital markets, pushing company valuations down.

In late February, when rumours of Zilingo’s funding efforts were reported, companies like Sea or Grab were already down by 70 per cent. Not even giants like Amazon, Alphabet or Facebook were spared in 2022.

Who in their right mind would throw a couple of hundred million into a fashion platform that had already been undermined by the pandemic, when even big companies were tanking?

Given the circumstances, more scrutiny from investors followed, which led to the suspension of Bose just two months later over irregularities in the company’s accounts, and her ultimate firing in May, setting off a domino ending in Zilingo’s liquidation.

Fake it till you make it

It’s really difficult to blame it on some gross malpractice when many of these behaviours — that average onlookers would call questionable — are very common in the startup scene.

After all, these companies are not considered valuable on the basis of what they do today, but the mere promise of what they may become a few years down the road.

Which is precisely why cutting corners is often ignored as long as growth is still reported. Get customers on board first, and figure out how to make money later.

You just need to make sure you have enough fuel in the tank to keep going. Failing to fill up at the right time is not only on the CEO, but everybody else invested in the business too. There was the right time to top up on cheap cash, but none of them took or advised it.

And when the storm hit, the company didn’t have enough left to reach the shore.

Featured Image Credit: Michael Petraeus via Vulcan Post