“A new phone every month” was Bengaluru-based Creo’s ambitious goal. But only nine months after it raised $3 million with Sequoia Capital as its lead investor, it is in the final stages of being acquired by instant messaging app, Hike. The other investors in Creo are Beenext Ventures and India Quotient.

Multiple sources close to the deal confirmed this. They say that the deal is likely to go through soon and that it is likely to be an acquihire (buying a company largely for its staff, more than its products or services).

Creo’s mandate was to create a modified version of Google’s Android OS, called Fuel OS, which would help localise the former to the Indian market. And because no phone manufacturer would adopt an upstart OS for its devices so easily, Creo had later taken the plunge into producing smartphones as a technology demonstrator to show what the software could do. The Mark 1, its flagship (and only) phone, was meant to showcase the prowess of Creo’s Fuel OS. Unfortunately, Mark 1 would end up becoming the tail that wagged the Fuel OS dog, and its death knell.

The deal comes as a painless burial for Creo. The company invariably pivoted to becoming a handset manufacturer, which has been a drain on its cash reserves. Customers have not taken to the phone and its popularity remains limited. “Sequoia was not very kicked about the smartphone strategy. If you ask me, they should have stuck to the smart sticks and sold it to someone like Reliance Jio,” says a source close to the deal.The assimilation may not be a problem for Creo either. “Kavin Mittal is an investor in Creo and Gulsher Singh, head of products at Creo used to work with Hike so there was some comfort there,” the source adds.

But for its marquee investor Sequoia Capital, the investment is unlikely to count as a win, especially with a nine-month exit while taking the acquihire route.

Hike, meanwhile, has been in the market looking for acquisitions, the same sources say. Mittal, Hike’s CEO, has, in the past, spoken about trying to build a platform that isn’t just a messaging app. The Bharti-Softbank backed company, with a war chest of $250 million, is building its platform on the lines of WeChat, complete with stickers and in-app shopping. This acquisition takes it closer to that ultimate goal. Currently, the Gurgaon-based company has over 100 million users, a majority of them, Mittal claims, are college students.

The Ken reached out to Sequoia, Hike, and Creo. None of them responded to the emailed questionnaire or calls. We will update this story when they do.

Quickly, back to Creo. The ambitious startup clearly has been struggling for a while and investors have been impatient. “The investors were questioning Creo’s strategy on smartphones as well as its mobile operating system Fuel OS,” says another source privy to the deal.