Lightspeed and Sequoia hit the jackpot with Oyo
Lightspeed, which put in $20 million, will get $1 b for half of its 13.4% stake in company; Sequoia to take home $500 million
Lightspeed, which manages assets of about $310 million in Asia’s third-largest economy, is set to earn an estimated $1billion from the sale of half of its current 13.4% stake in Oyo, a company it had first invested in 2014. In all, Lightspeed has invested about $20 million into the six-year-old company, thereby earning 50X returns on its five-year-old investment.
The firm, along with consumer-focused investment firm DSG Consumer Partners, had first written a cheque for about $600,000 in 2014, which also had secondary components, picking up a 26% stake in the then year-old venture. Separately, Sequoia Capital, which manages assets of about $3.9 billion in the country, will take in about $500 million from the partial stake sale, having put in about $27 million into Oyo, across rounds, having also first partnered with the SoftBankbacked company in 2014.
Equally important, given that these stake sales are partial, both firms, will still own over 5.5% each in the company, which is being valued at $10 billion, and are likely to participate in its upcoming capital raising rounds.
The massive paydays for the two firms, once the transaction receives the necessary regulatory clearances, will put in shade the $3 billion estimated to have been earned by New York-based Tiger Global Management, the hugely-influential investment firm, post the sale of Flipkart, India’s largest online retailer, to Walmart last year.
“This is pathbreaking, and is also unique in several aspects for the ecosystem, along with massive value building. After Flipkart and Paytm, this is now the most valued company in the country. It also proves that you can build India-unique models hereto and take it to the world. Agarwal’s move has answered a lot of questions now,” said Krishnan Ganesh, promoter of GrowthStory.
Tiger Global, which was also credited in shepherding Flipkart’s rise to the top, had put in about $1billion in the company at the time of the latter’s sale to Walmart for $16 billion, and its returns from the transaction last year, till recently, was considered the gold standard of venture capital exits in India.
“Only founders have the longterm horizon to build institutions. We need companies to go to IPOs. And for that, founders need higher equity and control. This is a very elegant way of giving control to founders. While Ritesh is the star here, let's not miss the role of the VCs here who have supported such a transaction,” Anand Lunia, managing partner of IndiaQuotient.
Agarwal’s estimated $2.2 billion transaction will see the founder of the hospitality chain raise his stake in the company about threefold to around 30%. The SoftBank Vision Fund owns almost 48% of Oyo, which said that the investment is being made through Cayman Islands-registered RA Hospitality Holdings. Agarwal, along with the management, will emerge as the second-largest shareholder after Soft-Bank Vision Fund, which owns almost 48% of the company.
The investment is being made through Cayman Islands-registered special purpose vehicle RA Hospitality Holdings.
“Only founders have the long-term horizon to build institutions,” said Anand Lunia, managing partner of early stage investment firm India Quotient. “We need companies to go to IPOs. And for that founders need higher equity and control. This is a very elegant way of giving control to founder. While Ritesh is the star here, let's not miss the role of the VCs here who have supported such a transaction.”
Overall, exits continue to be relatively rare phenomenon in the country’s startup ecosystem. According to report co-authored by Bain & Co and the India Venture Capital Association last year, till September 2018, VC investors had recorded exits of $19.6 billion, compared to $4.2 billion in the year-ago period. However, this is skewed by Walmart’s $16 billion acquisition of Flipkart.