24-year-old Oyo founder raises US$1bil

  • Corporate News
  • Wednesday, 26 Sep 2018

Ritesh: With this additional funding, we plan to rapidly scale our business. — Bloomberg

BANGALORE: Oyo Hotels, an Indian startup for booking reliable rooms in the country’s chaotic lodging market, is raising US$1bil to fund expansion into China and other global regions.

Existing investors including SoftBank Vision Fund, Sequoia Capital and Lightspeed Venture Partners have put in US$800mil, with commitments for another US$200mil, the company said.

About US$600mil of the total will be plowed into China where Oyo began operations only 10 months ago. The funding values the startup at US$5bil, according to a person familiar with the matter who asked not to be identified because the matter is private.

Ritesh Agarwal, a 24-year-old college dropout, founded Oyo five years after travelling around India on a shoestring budget.

He discovered wildly unpredictable standards for hotels and guest houses, and decided to start an online service to bring more reliability to the travel experience.

In the past two years, Oyo has expanded beyond India into China, Malaysia, Nepal and Britain.

“With this additional funding, we plan to rapidly scale our business in these countries, while continuing to invest further in technology and talent,” Ritesh said in the statement.

“We will also deploy fresh capital to take our unique model that enables small hotel owners to create quality living spaces, global.”

His startup, whose official name is Oravel Stays Pvt Ltd, signs on hotel owners and then gets them to upgrade everything from linen, toiletries and bathroom fittings to its specifications. It also equips hotels with staff training and standardised supplies.

It then brings them on board its hotel website, where rooms start at US$25 per night. Hotel owners pay Oyo a 25% commission.

“Budget travellers are consistently shortchanged by the lack of trust, quality, and consistency,” said Bejul Somaia, managing director of Lightspeed India, explaining that Oyo can change that dynamic.

At a US$5bil valuation, Oyo would be India’s most-valuable startup after One97 Communications, the parent of digital payments pioneer Paytm. Flipkart Online Services Pvt Ltd had been the most valuable startup in the country, but the online retailer has been acquired by US retail giant Walmart Inc earlier this year.

India’s hotel industry includes large chains with dependable hospitality experiences at the mid to top end. But the business also includes thousands of unbranded, ramshackle hotels and lodges with broken beds, yellowing linen and stinking bathrooms.

Oyo is trying to make hotels easier to find through its site and more predictable as well. — Bloomberg

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