Homegrown digital EMI financing platform ZestMoney, backed by Goldman Sachs, is shutting down operations after several unsuccessful attempts to find a buyer, media reported on Wednesday. ZestMoney was valued at $445 million and raised over $130 million from a range of investors, like Ribbit Capital, Omidyar Network, PayU, Xiaomi and Alteria Capital, among others.
According to a report in TechCrunch, the startup's new leadership informed the employees about the decision to shut down on Tuesday.
"The startup will fully wind down by the end of the month, the leadership said," according to the report.
There was no official word from ZestMoney on winding up its operations.
The buy now, pay later (BNPL) startup gave small loans to first-time internet customers.
In May this year, the founders of ZestMoney resigned as the fintech startup failed to raise fresh capital. A potential deal to acquire ZestMoney by leading fintech company PhonePe fell through recently. Bengaluru-based ZestMoney earlier laid off about 20 per cent of its workforce, which impacted nearly 100 employees. The company last year had a network of merchants with more than 10,000 online partners and 75,000 physical stores.
It reported a registered user base of 17 million and was live at 85,000 retail touch-points across the country.
Key factors leading to ZestMoney's downfall
Leadership transition
The closure follows the exit of ZestMoney's founders—Lizzie Chapman, Priya Sharma, and Ashish Anantharaman—in May, subsequent to unsuccessful acquisition discussions with PhonePe.
Employee dynamics
Post the founders' departure, the leadership mantle was passed to Mohit Chhajer, Mandar Satpute, and Abhishek Sharma. However, the startup witnessed a significant employee exodus, with around 130 personnel moving to PhonePe, reducing ZestMoney's workforce to approximately 100 employees from the 500 recorded in December.
Partnership woes
ZestMoney faced a substantial setback as Aditya Birla Finance terminated its partnership, citing the Reserve Bank of India's decision to increase the risk weight on consumer loans. This move was a significant blow to the fintech startup's operational stability.
Investor quest for buyers
Venture capital investors of ZestMoney have reportedly been actively seeking buyers for the company in the market over the past few months.
Financial snapshot
Despite having raised an impressive $140 million from investors like PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network, and Goldman Sachs since its inception in 2015, ZestMoney struggled to balance its financial sheets. While the startup experienced a revenue rise to ₹145 crore in FY22 from ₹89 crore the previous year, losses widened significantly to ₹398.8 crore from ₹125.8 crore over the same period.
This unforeseen closure marks the end of ZestMoney's journey, leaving its employees in a challenging position and highlighting the turbulent landscape of the fintech industry.
