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How Kalaari-backed AppsDaily went from fabulous to flameout

18 September, 2017

It was a sultry summer evening in 2015. The venue was JW Marriott hotel in Mumbai’s upscale suburb of Juhu. The agenda was simple—party hard and let your hair down.

And for good reason. AppsDaily, a mobile phone insurance and security startup, had just raised $16 million (then Rs 100 crore) in a Series C round led by venture capital firm Zodius Capital. Existing investors ru-Net, IndoUS Venture Partners (now Kalaari Capital) and Qualcomm Ventures had bet more on the company. Individual investors, who had backed the firm under the banner of Mumbai Angels, had partially exited, garnering returns several times their investments.

Confidence was oozing.

Merely two years on, the company’s sixth-floor office in Mumbai’s Andheri East wears a gloomy look. The startup is mired in a web of issues ranging from delayed salaries to weakening investor confidence to a litany of customer complaints.

VCCircle spoke to several current and former staffers of AppsDaily, and reviewed WhatsApp messages sent to and from the management to understand the complete reversal of fortunes. We also looked at the company’s Registrar of Companies filings over the past 16 months.

Before we delve into that, however, here’s an upshot of the company’s business.

Founded by siblings Arun Menon (CEO) and Ajay Menon (director) in 2008, the company started off as Onward Mobility and was later re-branded as AppsDaily. Arun holds a B.Tech from IIT Bombay while Ajay had previously founded Ambrosia Infotech Ltd, a product engineering and consulting services provider across verticals like telecom, Internet, healthcare and retail.

Apart from its key offering of mobile phone insurance and security, AppsDaily Solutions Pvt. Ltd also focuses on app development and distribution. Unlike traditional players that simply launch the apps on Google Play or iTunes, it sells and distributes its own and third-party products through offline retail partners across the country. The products are sold under the brand name ‘daily’, such as ‘daily cop’, ‘daily protect’, ‘daily assure’, ‘daily complete security’, and so on.

Employee issues galore
While top management’s salaries have been either withheld or delayed since last October, the crisis worsened in January, engulfing lower-level employees, the company’s staffers allege. Salary components like meal vouchers have not been given to many employees, and travel claims of many remain unpaid since July 2016. Arrears have been piling up.

Employees’ contribution towards Employee Provident Fund has been remitted only till December 2016 for many. Employer contribution has not been deposited since July 2016, several people allege.

Some employees claim that even their tax deducted at source (TDS) has not deposited with the Income Tax department for financial year 2016-17.

As many as 300 employees have left the company over the past six months because of unpaid dues. At its peak, AppsDaily employed more than 1,200 people.

Meanwhile, CEO Arun Menon has been asking employees to find jobs at other companies, VCCircle has learnt. He has been telling them that the company was “out of funds” and looking for a fresh round of investment. AppsDaily had last raised $3.75 million in Series D funding in September last year, according to VCCEdge, the data and research arm of VCCircle. Overall, the company has raised around Rs 150 crore so far.

A WhatsApp message from Arun Menon, which VCCircle accessed, read: “I am personally f****d but am still fighting this battle with all investors because I want to make sure all of you are happy in the end…”

Investors desert the board
Kalaari Capital is the biggest stakeholder in the company with around 27% stake. Zodius owns 11%, ru-Net 13%, Qualcomm 11%, Mumbai Angels (28 individuals) owns 16% while co-founders Ajay and Arun hold 9% each.

Vani Kola, managing director of Kalaari Capital, resigned from the company’s board in April last year “to reduce the number of directorships.”

Kalaari co-founder Vinod Kumar Dham, who appointed as a director following Kola’s exit, left in November 2016 citing personal reasons.

The same month, Zodius managing director Gautam Patel quit the board saying he was “pre-occupied with other matters.”

On the very next day, Galina Chifina of ru-Net resigned as additional director citing “personal and unavoidable reasons.”

Rajiv Dadlani of Consort Capital, another investor, followed suit and resigned next month. It is not clear whether these investors have sold their shares.

Email queries sent to founders Arun and Ajay Menon, Dadlani, Patel, Chifina, Dham and Kola did not elicit a response till the time of publishing this report.

Customer complaints rise
VCCircle found as many as 1,200 complaints against AppsDaily on consumercomplaints.in, of which a minuscule 40 seem to have been resolved.

The ire of customers and employees is visible on Twitter as well.

The company’s tepid financial performance mirrors the overall state of affairs. Total income fell to Rs 77.4 crore in FY16 from Rs 99 crore in the previous financial year. Losses more than doubled to Rs 82.3 crore from Rs 32.7 crore. The company is yet to file its financials for FY17.

Clearly, a heavily-funded startup with marquee investors ought to have done something terribly wrong to be in the soup that it’s in.

VCCircle has learnt that AppsDaily is trying to bring in a new investor so that it can fund its operations. However, time alone will tell if Menon brothers are able to pull the company back from the brink.

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Hasan . 10 months ago

They duped .. their 3000 employees, 800 distributors n million customer…

Mangesh Hate . 10 months ago

@Appsdaily LTD its a well planned fraud by Menon brothers. EPF & TDS deducted from employees but not deposited. Since Jan 17, employees, channel partners & customers were kept on hold. Employees were asked to attend customers, at the pretext that investment will be in & they will get their outstanding salary. Even Mr. Arun Menon took a concall on 1st week of May 17 & confirmed that documentation is done & its a matter of day to resolve everything. But in June 17 we were told to look out for other options. Menon brothers stopped replying us.

Ajay Pandey . 10 months ago

I am from tech sector and i was working with Appsdaily. The work ethics was very poor and tech management ( Parth / Nagraj) were involved in lot of backdoor politics and promoting only those persons who blindly follows them , to hide their failures they use to fire junior employees or those who were not into politics. I am not surprised that employees salary are not paid as far as my knowledge there are some employees who have left the company one year back but still they have not received the FNF.

Rahul . 10 months ago

I was part of Tech Team too for 2 years and whatever i have saw i am telling by my own experience

Blatant Lies By Appsdaily Solutions Pvt Ltd

A. Employees (Tech / Sales / HR) duped
1. Taxes were deducted from employees salary but was not deposited to the Income Tax department, now they are not providing Form 16 for the same because of this reason.
2. Provident fund was deducted from the employees salary but only employees contribution was deposited, employers contribution still not deposited.
3. Gratuity was deducted from employees salary but since they have not even given salaries for the last 6 months, what about the employees who have worked for more than 5 years for the company ?
4.Arun menon kept on saying that investment is 100% sure and every time he use to give date of next month and when that date comes another date of next month was given. This way he made employees work for more than 6 months without salary as every one was knowing that if they left the job all the previous month salaries wont be given as was the case with employees who have resigned long back and still running for their full and final settlement.
5. Some 2 years back variable component (to be paid quarterly) was added as salary component ,however it was passed on as fixed variable by the Tech Team management(Parth nemana / Nagraj nayak – I dont know what other dept heads told to their team ) so that appraisal amount looks more. But after 1st quarter they didn’t paid even a single penny in variable. and when questions were asked all the fault was shifted to Sudeep Mitra (Hr Manager) by them since he was not there to tell the real thing.
6.Hire and Fire – so many employees were fired without any proper reason and they were told to leave on the same day without giving 1 month salary or any notice period.But if some one wants to resign and if there is some pending work he was not released even after serving the notice period. Many employees were told to first finish their project within the notice period even if the work is of more than 3-4 months time.
7.Whenever because of poor management decisions cost cutting needs to be implemented or top management needs to save their ass (since in tech team i don’t see CTO’s drawing such a big salary for doing nothing) junior employees were fired,

Customer Duped
1.It was a well thought plan to dupe customers, first of all they closed all the connect centres in the name of DIY in all the states were customer use to deposit their damaged handset so that they can’t approach them in case of any fraud and no customer would be traveling to Mumbai for their grievances.Customer support was also shut down as well as company address of mumbai is also non existent.So no way customer can approach anyone for their problems except the email id (that too is not working).
2. Customer has to deposit minimum 1500 before sending his handset via courier and once his/her handset reaches he is at the mercy of appsdaily since no way he can communicate or know about his handset status.
3. There are still many customers who are still waiting for thier handsets for more than 6 months which is complete opposite of what Appsdaily claims that it will return the handset within 15 days excluding transit time.
4.Many times customers good handset was kept by the management guys and refurbished phone was returned to them having duplicate parts.
5. Validity of phone insurance was 1 year, what about the customers who have purchased Appsdaily damage protection plan for as much as 7000 or more but have no where to go.

Please don’t consider this as fraud of some lakh rupees but if we total the amount of unpaid salaries + Appsdaily damage / Theft protection plan sold to lakhs of customers it will run into crores of rupees and not only menon brothers/Investors be held responsible but also Ratanlal ranasaria (Appsdaily chief account officer) under whose nose this tax fraud occurs.

sachin . 10 months ago

It was well planned fraud

How Kalaari-backed AppsDaily went from fabulous to flameout

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