The story of Cozo Pets starts in August 2019, as Sriram from MoneyControl puts it (1), when Matrix Partners and Sequoia Capital, two of India’s most prominent venture capital entities, were preparing to invest in the Gurugra,-based pet walking startup. They issued a non-binding agreement, a term sheet containing the basic investment details, to pour 3.5 million USD each in the company.
At that time, pet care was among the trendiest internet startup areas worldwide. Space came to life in 2000, when Pets.com made its way into Silicon Valley’s hottest startup. Eventually, the company crashed spectacularly and became the symbol of the dot-com bubble (2). However, it had little effect on the pet industry’s fortune.
It was only until recently, SoftBank-backed Wag and Roven witnessed a growth and attracted a huge amount of capital. Today, the segment even has its catchy name, Doggie Tech (3).
Like the way parents are with children, owners are also extravagant with their pets. There is a monetization opportunity for businesses, vet treatment, walking dogs, pet food, grooming, and so on. However, the industry had remained offline and fragmented for years.
It was the thriving pet industry that Cozo was targeting with pet wellness services like exercising, walking, and grooming. And then, the one-year-old company claimed that it had served over 3,500 pet parents.
More About Cozo Pets
Back in 2019, several reports were emerging about the company; Cozo was gathering attention in the startup community for the interest from prominent investors and for what it was doing.
Cozo Pets was founded in 2018 by Meenal Kaushik, Vaibhav Jain, and Yasir Khalil (4, 5). In a previous media interaction (6), Vaibhav Jain stated that from about 600 sessions in November 2018, the company closed 2019 with more than 91k “activities,” including boarding sessions.
Additionally, the company also claimed to have more than 200 trained professionals and about 550 freelancers in its team. According to Cozo Pet’s filings with the Ministry of Corporate Affairs, it has secured 3.5 crore INR from investors like Rohit Bansal, Kunal Bahl, Bipin Kumar Shah, Viren Doshi, Vistra ITCL, and Adit Parekh.
Media reports also suggest that there have been discussions with Sequoia and Matrix investing in the company. As noted, each was reported to be bringing 3.5 million USD in the startup. The report was further corroborated by Matrix’s Rupali Sharma, who posted in a Facebook group that they have invested in a pet company looking to get a core team onboard.
Even at that time, Cozo’s claims raised several eyebrows.
The Concerns Over Cozo
Cozo’s claims and investment reports garnered attention and concerns from the startup community in the light of certain facts:
- The company had inactive social media.
- It only had about 220 likes on Facebook and 389 followers on Instagram at that time, far lower than its claimed customers.
- The company claimed to have over two crore INR revenue, with an average 4k INR ticket size per customer. However, according to reports, the company charged about 800 INR a day for a pet-sitting session.
- The company claimed to have a huge team, but there were only five employees on LinkedIn, three founders, an angel investor Adit Parekh, and a nutrition consultant.
Moreover, upon asking about the filings and investment rounds, the founders refused to share any information. They kept emphasizing that the company has bigger plans and will soon come out with them.
The polarized Reality
Cozo was getting a lot of attention from investors for a one-year-old company. Another top venture capital firm, Nexus Ventures Partners, was even upset about not sealing a deal with them back then.
It is understandable for investors like Matrix, Sequoia, and Nexus to be interested in the company after Cozo claimed its revenue had quadrupled from 50 lakh INR to 2 crore INR in three months. Vaibhav Jain, the CEO, and Co-founder of Cozo spoke with confidence. Bhavish Aggarwal, the CEO of Ola, who shares a common backer in Matrix, was also planning to pump in the capital.
However, things turned when Sequoia and Matrix decided to conduct due diligence on Cozo to check its customers, numbers, and dog-walkers. They were looking to verify if all the hype Cozo was building was real or not, and little did they know, they were in for a shock.
In a locality in Gurugram, the investors found around 20 dogs walked by people wearing Cozo uniforms. All was okay up to this point.
One day, an investor asked a security guard, “Do these people come here daily to walk dogs?”
The security guard serving in the locality for several years said, “it is the first time I am seeing them.”
The investors looked up for more information and learned that those 20 dogs and their walkers were placed there at that location specifically for that day for the due diligence. The customers and walkers confessed that the company founders coached them on what to say if the investors turn up.
However, things were not done here; there were nastier surprises. Cozo was also siphoning money to founders’ relatives, sending lakhs of rupees for vague services. It also inflated its revenue.
Even though digital payments were already getting prominent in India by 2019, Cozo had claimed that all of its revenue was in cash. It means that there was not a single online or bank payment from a customer.
MoneyControl (7) had pieced together this information from people who were familiar with the company’s matter. All of them had disclosed their knowledge on the condition of anonymity.
There have been no comments from Cozo, Matrix, and Sequoia.
What Happened After the Due Diligence?
Of course, Sequoia and Matrix saved themselves from the deal. None of them had witnessed something as blatant as Cozo’s shenanigans, as per people aware of their operations.
However, the matter did not end there.
Other investors of Cozo, including Kunal Bahl and Rohit Bansal’s Titan Capital (8), were wedged. The company had secured 2.5 crore INR a few months back. The capital, how it was utilized, and other questionable business decisions created a rift between the founders and investors.
There has been no comment from Titan Capital.
How It All Started?
Two former Uber executives, Yasir Khalil and Vaibhav Jain, founded Cozo Pets, Brujun Technologies Pvt Ltd. Jain’s wife, Minal Kaushik, a lawyer, and Cozo’s significant shareholder but not quite involved in the business.
Jain is an MBA from XLRI, was the operations and training leader at Uber, responsible for working with drivers and handling relationships. Before that, he was the head of learning and development and HR role at Bajaj Financial Services.
Khalil is an engineer from IIT Kharagpur. Previously, he worked at Uber’s customer support experience, and before that, he co-founded Zorro Solutions, a tech-enabled customer support company.
Adit Parekh (9), while talking with MoneyControl, recalled how he was impressed by Jain. Parekh, a part of Freshworks, a software unicorn’s Corporate Development team and an investor with Blume Ventures, has seen over 20 startups in the pet care industry.
Parekh didn’t evaluate the space the way investors normally do, diving into reports from companies about macroeconomic data, market sizes, and business model studies. He was convinced about the industry’s sector, drawing from the first-hand view of his neighbor in Mumbai’s struggles. The neighbor’s husky was hit by an auto and broke its spine. The lack of infrastructure to find vets and facilities during an emergency made Parekh, a dog lover himself, interested in the pet care sector.
He decided to invest 15 lakh INR and roped in his friend, Viren Doshi, a travel executive based in Malaysia at TUI Future Markets (10), who decided to pump in 10 lakh INR. FirstCheque, a micro venture capital firm, committed about 25 lakh INR, and Titan Capital invested another two crore INR.
They were all excited about Cozo’s growth, the founders’ reputation (according to a person, Jain himself had three pets and adored them a lot), and the market potential.
And then the due diligence happened. Soon after, the huge deal fell apart, exposing the company’s cracks.
Even though Parekh said he is over Cozo today, MoneyControl could sense the shock and hurt lingering in his voice.
He was more than a mere angel investor for Cozo. Parekh was its first-ever investor. He introduced the founders to other angel investors. He was involved with the hiring process, interviewing candidates for senior positions. He had often picked up Jain’s calls after midnight regarding company advice.
After Sequoia and Matrix canceled the deal, Cozo’s existing investors conducted their own investigation.
First, they came across related party transactions. They found out that Cozo was less a startup and more of a family business, and not in a good way.
In July and August 2019, Cozo paid 56.64 lakh INR to Zorro, a call center that Khalil co-founded via ten transactions, according to bank account statements MoneyControl reviewed. According to people familiar with the matter, Khalil is still its director and a major shareholder.
In August, Cozo paid about 27.6 lakh INR to Divisht Kaushik, CEO Jain’s brother-in-law. They made the payment six months’ advance and a six-month deposit for premises they rented from Jain’s brother-in-law and father-in-law Satish Kaushik.
Cozo paid 6.93 lakh INR to Jain’s sister-in-law Vallari Kaushik for t-shirts and caps for the company’s dog walkers during the same month.
“You know there is something amiss the moment you see RPTs, related party transactions,” said Parekh.
As per the people familiar with the matter, in general, company law places restrictions on RPT, and Brujun Technologies’ shareholder agreement restricts RPT in particular unless voted.
The company asked for an answer from Jain. His responses have been a combination of partial acceptance, denial, and half justification of what happened through the last two years said people familiar with the matter.
“It is eerie. Jain will look you dead in the eye and casually lie to you,” said one person directly involved in those discussions.
It is highly likely that Cozo did not have any customers except those it created artificially, said the people aware of the matter. They also suspect that the so-called cash transactions, shown as “revenue,” were possibly investors’ money when deposited in the bank.
When investors and micro venture capitalists invested, they didn’t check for customers. It is not unusual because when angel investors approach a company early, the startup doesn’t have any system, process, and records to show for due diligence. The arrangement was fine for Cozo since it may not have too much to show.
Even in late 2019 and afterward, for several months, Jain had several meetings with the investors. He had promised to return the money when they confronted him with fraud evidence and funds mismanagement. However, he has only returned a portion of the total investment.
While the investors were getting jittery, the company was always coming up with excuses for the delay.
“Part of angel investment is about spending time with the founders, making relevant business connections, and helping with scaling the business,” said Parekh. “However, once the trust is broken, it is only a sinking feeling.”
Taking the Legal Approach
On September 25, when the investors finally had enough, they sent a 13-page legal notice to Cozo’s promoters and directors. Apart from Titan Capital, other investors asked to be paid 65,37,033 INR, which includes their 50 lakh INR investment, 18% interest per annum, and a 3.75 lakh INR incurred for legal costs to complain to the Income Tax Department, Registrar of Companies, and Serious Frauds Investigation Office.
According to the notice, investors asked for the money because of Cozo Pet’s “illegal and intended fiscal irregularities corporate governance non-compliance, fraudulent activities commission, funds siphoning, misappropriation of funds, breach of trust and fiduciary duties, acts of mismanagement the Affairs of the Company.”
There had been no official response from Cozo for some time, and it only asked for a 45 days grace to follow the notice. The investors followed up on October 9 with another notice with the same allegations and a threat to sue.
That time, Khalil replied with a three-page long reply, alleging, among other things, that investors “used investment as a tool to stall the business and the company to start their ventures, invest in existing or new competitive ventures.” According to Khalil, Cozo was cordial all along while the investors took the ugly legal road.
The response reads, “It appears that you never wanted the company and its business to be a success. Investors approached us with a malicious aim, to destroy the business and start their own venture or invest in existing or new competitive ventures for more profits.”
Incidentally, Titan Capital recently invested in a digital pet care company, Super Tails.
In the response, Khalil stated that the company is ready to give back the money it raised; however, it only returned 10% of the invested money. Despite repeated promises, calls, texts, and WhatsApp messages, the rest has not come.
What is Happening Now?
Now, it seems that Cozo Pets have pivoted from its dog-walking plan to online vet consultations (11, 12). The strategy is in line with the coronavirus pandemic shifting operations of numerous businesses online.
While the Cozo Plus (13) vet consultation platform is available on Google Play Store (14), it is not accessible on App Store in India. Even the Android version doesn’t appear to work when other people from Money Control and we tried it out. It asks for your phone number to send an OTP, but it never comes.
The investors of Cozo have no idea what the company is up to now. The founders have not responded to their messages or calls for over the last six months, and unless they go to court, according to people aware of the matter, they may never recover their money.
The investors are hesitant about going to court since there is no guarantee of how long the legal process will take. Even if the judgment is in their favor, there is no clarity whether the founders have any money to return.
But, Why Did They Do It?
Cozo raised about 2.5 crore INR in total, which is not much in the startup community. Several startups have raised a lot more with flawed (but at least not fraud) business models.
The three founders, who are well-educated and have corporate careers, could have made arguably the same salary over the next few years.
So why did they build a company on a pack of lies and deceit as the investors accuse them?
Well, no one can tell.
“It is not about losing money; it is their brazenness that hurts. They have no morality and took us all for a ride,” said Viren Doshi. “Even today, I am not sure why Jain did it. He could have easily made the same money legally. He is a smooth talker, a cold-blooded scamster.”
Some well-connected investors still talk about Cozo in hushed tones. It has taken them ages to reconcile with what happened.
Early-stage investing is all about trust, no matter how much due diligence an investor does. All the largest success stories of today, let’s say, Freshworks, Swiggy, or Flipkart, have all succeeded because of trust. However, every once in a while, a Cozo comes and shakes things up.
Today, the incident holds particular significance when India is in the middle of an unprecedented startup and funding boom. Several business models around are still work in progress (15). Some work while some don’t. However, eyebrows are raised when they do not work because of non-business reasons.