ReshaMandi Reduces Staff by 80% Owing to Funding Shortage

Bengaluru-based ReshaMandi, a potential B2B platform for the textile and fashion industries, lay off 80% of its personnel after an unsuccessful attempt to acquire Series B funding, serving as a sobering reminder of the instability within the start-up environment. This significant cut demonstrates the extreme financial hardship the business is experiencing.

Financial Struggles and Layoffs

The Economic Times reported that ReshaMandi, which had been a beacon of innovation in the digital supply chain management sector for sericulture farmers and silk reelers, has significantly scaled down its operations due to financial instability. Since last year, the agritech start-up has grappled with funding shortages, leading to a reduction in operations and workforce.

The situation took a dramatic turn last year when employees were asked to work for three months without pay, only to later discover that there were no funds available to cover their pending salaries, according to a report by Inc42. Employees are still waiting for their dues, reflecting the dire financial mismanagement within the company.

Mounting Debt and Legal Troubles

As of August last year, ReshaMandi had overdue payments exceeding $36 million, delayed by 30 to 40 days. The financial strain led to the freezing of the company’s bank accounts. Debt investors Northern Arc Capital and Aditya Birla Finance Ltd. have reportedly filed complaints against ReshaMandi with the National Company Law Tribunal (NCLT). Some creditors, facing a debt of more than Rs 300 crore, are considering filing for insolvency against the company.

The company acknowledged these challenges in a statement to Mint, indicating ongoing discussions with bankers to resolve the delays, though they emphasized that such processes take time.

Rise and Fall

Founded in 2020 by Mayank Tiwari, Saurabh Agarwal, and Utkarsh Apoorva, ReshaMandi quickly rose to prominence, securing substantial capital and achieving a valuation of $74 million by July 2023, according to data platform Tracxn. However, despite raising $69.8 million overall, with $5.6 million in its last funding round in July 2022, the company’s aggressive expansion into multiple verticals strained its resources.

At its peak, ReshaMandi reported impressive revenues, reaching Rs 413 crore in FY21–22. Yet, the start-up’s rapid growth trajectory soon became its Achilles’ heel. By mid-2023, financial pressures and a shrinking runway of operational funds led to delayed salaries and significant workforce reductions, plummeting from 500 employees to just 100 within a year.

Controversial Moves and Criticisms

In a controversial move, ReshaMandi brokered a deal with Genzr Solutions Private Limited, a Noida-based entity formerly focused on education, which raised eyebrows and raised questions about the financial prudence and corporate governance of the company’s leadership.

Critics and insiders allege that ReshaMandi’s founders facilitated this transition to sidestep liabilities, further disillusioning former employees and leaving investors to contend with substantial losses. The company’s valuation, once $175 million, plummeted when it attempted to raise $5 million in January 2024 at a valuation of just $25 million but failed to secure any funds.

A Cautionary Tale

ReshaMandi’s downfall serves as a stark cautionary tale within India’s start-up ecosystem, emphasizing the critical need for sustainable growth and ethical business practices. The episode sheds light on systemic issues such as over-ambition, insufficient market validation, and the necessity for diligent investor scrutiny.

As ReshaMandi navigates its legal challenges and creditor demands, its story underscores the importance of balanced expansion and the responsibilities of all stakeholders in ensuring the health of the start-up environment. This incident prompts a deeper reflection on how such ventures are nurtured and the safeguards necessary to prevent similar downfalls in the future.

For now, the future of B2B fashion supply chains in India remains uncertain, reshaped by the dramatic rise and fall of one of its most ambitious players.