Amidst the recent news that have been popping up on Zo’s acquisition by Oyo, this one is the latest. As per reports, Oyo will acquire Zo in an all-stock deal within this fortnight.
The deal, structured as an asset sale, will give ZoRoom’s seven founders and investors including Tiger Global a combined 7% stake in Oyo, confirm sources related to the development. They further added, “Oyo will not be taking liability of Zo’s dues.”
Moreover, Zo’s parent Zostel Hospitality which is said to be cash-strapped, will shut down after the deal.
All seven founders of Zo Rooms – Dharamveer Chouhan, Akhil Malik, Paavan Nanda, Tarun Tiwari, Chetan Singh Chauhan, Abhishek Bhutra and Siddharth Janghu will exit post the transition. About 40% of Zo’s employees will be absorbed by Oyo.
The acquisition will help Oyo which is valued at around $350 million, to leverage Zo’s technology and a network of 11,000 rooms in 1,000 hotels across more than 50 cities and towns in India.
The case of Zo highlights the common crisis that startups these days are caught in i.e, the inability to raise fresh funds. Of late, it has been observed that each and every sector is increasingly getting populated with startups parroting the first mover’s idea with little or no innovation. Moreover, rather than finding an economical way to scale, they are using heavy discounting tactic as their only propeller of growth, which eventually ends up costing them a fortune. This tendency is further fueling investors skepticism, making them tighten their pockets.