SoftBank has delicate task managing its Indian tech investments

SoftBank of Japan looks to have averted the first dotcom implosion of India's new internet boom by persuading the co-founder and chief executive of start-up Housing.com to retract a scathing resignation letter, in which he slammed his investors as "intellectually incapable".

But following "frank and healthy discussions" at a hastily-convened board meeting on Tuesday - led by SoftBank, Housing.com's largest investor - Rahul Yadav said he would not be leaving after all. He said he was sorry for his "unacceptable comments" and pledged "full harmony" with investors in future.

The Japanese telecoms and media group founded by Masayoshi Son led a $90m funding round for Housing.com last December, as part of his aggressive plan to plough up to $10bn into Indian technology companies over the next decade, in the hope of repeating his spectacularly lucrative investment in China's Alibaba.

But his bold bet on the young Mumbai-based property listings site looked decidedly shaky last week, after Mr Yadav quit and lambasted his board and investors in a brief but contemptuous email.

"I don't think you guys are intellectually capable enough to have any sensible discussion any more," the 26-year-old wrote in the valedictory message, dated April 30. "I'm available for the next seven days to help in the transition. Won't give more time after that. So please be efficient in this duration."

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But by Wednesday, people familiar with SoftBank and Housing.com were playing down the episode, describing it as a temporary hiccup for a company with a "passionate" founder and huge potential in an Indian ecommerce market that is projected to grow from $3bn last year to $102bn in 2020, according to Morgan Stanley.

Even so, the furore has been interpreted by many as a cautionary tale of the vaulting ambition and associated hubris brewing in India's start-up ecosystem.

"Housing.com's rise and this incident seem to reflect the irrational exuberance and huge valuations that we see in Indian ecommerce," says Sharad Sharma, a Bangalore-based angel investor. "Some kind of correction is overdue."

After a string of recent stories in local media suggesting that investors were unhappy with Mr Yadav's leadership, the fact that this bust-up happened at Housing.com has not surprised observers of the country's technology sector.

The company, which was founded in 2012 by a group of university friends, recently blanketed the streets of Indian cities such as Mumbai with a lavish billboard advertising campaign. Beyond attracting consumer attention, it also raised fears that it was burning through much of the $140m it had raised before it had developed a sustainable business model.

Mr Yadav himself has also been hit by negative publicity in the past. A similarly brusque email he reportedly sent to the Indian head of Sequoia Capital, the Silicon Valley venture capital firm, in a row over the staff poaching was leaked online in March.

For SoftBank the episode raises more searching questions, specifically over how Alibaba's largest shareholder plans to manage its growing investments in inexperienced Indian technology companies.

The cash-rich Japanese group appeared to take closer control of Housing.com this week, announcing a "reconstituted" board and establishing a new three-person executive committee - to include Mr Yadav and SoftBank's board representative Jonathan Bullock - to monitor operational progress.

SoftBank has funded only a handful of other Indian start-ups, including a sizeable $627m infusion last October into Snapdeal, the online marketplace, which Mr Son suggested "could become the Alibaba of India".

These other investments appear untroubled. But the scale of Mr Son's Indian ambitions suggest that he will have to act astutely to avoid the type of looming dotcom blow-ups that some observers feel are now inevitable.

"Soon enough the valuations of one of these ecommerce companies is going to implode, and the risk is that this will set off an avalanche of implosions at other start-ups with unreasonable growth expectations," Mr Sharma says.

"But given how fast everything is happening here, there is actually a case to hope that this will happen this year, rather than next year when things get even bigger, because then at least the correction will be less painful."

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