A little while ago, the names of these four founders was all over the news Vijay Shekhar Sharma, the king of online payments and mega IPO, the country was using Paytm Byju Raveendran, the head of Edtech, with a valuation of $22 billion, had the country’s most valuable startup. Ritesh Agarwal, the concept of OYO rooms, which was liked by young India, was his. OYO was spreading and expanding all over the world. Bhavish, India’s Elon Musk, set fire to the market with Ola electric scooter. What are you doing? Is this a joke? Editor, why did you bring him up? This founder was also in the spotlight. He was the co-founder of Bharatpe, and he was the one who gave knowledge to startups.
Then, fraud cases were filed against him and his wife. When the case went further, he just settled and left. He has now appeared in front of Salman Khan on Bigg boss being all embarrassed, the once greatest startup founder RBI closed Paytm payment bank and it gave a big jolt Byju Raveendran’s company is on verge of bankruptcy and he is not returning to India Bhavish Aggarwal is arguing with Kunal Kamra on Twitter and misguiding competition commission regarding Ola service issues They were leaders of their industry… but today, they are not doing so well result of their overconfidence. Ritesh Agarwal could have been one of them. But something happened so he was not. He started trying to save the OYO company The problem is not all resolved but the company is better off than others.
Vijay Shekhar Sharma, Byju, Bhavish, Ashneer, startup industry should learn from them That what a founder should not do If Ritesh Agarwal is able to save OYO then it will prove that if founder sidelines ego then good result can come Our startup ecosystem needs good news Clean your mouth with dettol, brother. Editor you want raid?! In covid era, OYO business went downhill and valuation dropped, many said it’s over for the company Then OYO did what many analysts are saying is the greatest comeback in the startup ecosystem. Today, OYO is making a plan for the IPO.
The company is finally showing profit. Ritesh Agarwal has invested his own money in OYO to increase his stake. And along with that, the US-based hospitality chain Motel 6 and Studio 6 have also been acquired to increase the company’s operations internationally. But is this really a turnaround story? Or is it the result of cost cutting and financial jugglery? If we look at a morning context article, there are still many questions about OYO. In March this year, OYO’s employee cost was Rs. 531 crore One year back this number was 875 crore rupees So cost cutting happened, and business growth? After Covid, revenge travel increased, but business is still tough in India, China, Singapore, Indonesia, etc. where OYO is It is good to advise on Shark Tank but OYO’s revenue decreased.
Now what OYO will do it will be interesting to see It is important to know Ritesh Agarwal’s past to know OYO We will come to that but first If you want to invest in unlisted shares before IPO of these companies without any high commission or fees, then InCredMoney platform can help you with this. InCredMoney is also the partner of today’s episode. And you can easily invest in unlisted companies. No fees, no commission. This is the best part about InCredMoney. Your money won’t be wasted. After investing, the shares will be transferred to your Demat account. It is fully safe. Every share has a different settlement time. You will see it in your Demat.
To answer your questions and queries, there is a team of financial experts. You can also call block with them. Investing in unlisted shares through InCredMoney makes it very simple. Let me show you how. Click on the link given in the description. Go to product selection and click on unlisted shares. After selecting the share, click on invest now. You can check the financial details. How you can check the price, market cap, etc. Fill in the bank account and Demat details. And at the end, when you complete the investment, you can check your estimated delivery time on the asset page of your respective stock. On your first transaction, you will get a 0.25% discount on the stock you buy and along with that, you will also get an Amazon gift voucher of Rs. 200. So, it’s simple. Do try it once. Link is given in the description below. The story of OYO is quite simple. Let’s rewind and see where the business idea comes from.
Early 1990s, in the city of Cuttack, Odisha, when Ritesh Agarwal sees other students operating computers in his school, he too wants to use a computer. But the teacher tells him that it is not for his age, but for the elderly. But Ritesh doesn’t agree, he requests a lot, then he is allowed to operate a computer, and then a new world opens up Since childhood, he was interested in entrepreneurship. When teachers asked him, what will you become when you grow up? So, standard answer was entrepreneurship, not engineer or doctor By the way, it was not even written in his fate to become an engineer. Ritesh had even gone to Kota like millions of other kids. But he left and enrolled in a Delhi college to manage his expenses, he had to sell SIM cards in Airtel.
He used to put Airtel sign as per company policy. This idea was very useful for him. Ritesh was not interested in college He wrote a book, The Encyclopedia of Indian Engineering College. He was only 17 years old at that time. Ritesh had already had a startup in his mind. But due to financial problems, he was thrown out of his room. While roaming on the streets, Ritesh got an idea of affordable hotels for the first time. To understand this, Ritesh started staying in many cheap hotels. He did not have money for this. He used to mail hotels, ask for discounts. Some hotels used to give discounts, some hotels didn’t. But slowly, he found a big gap in the service sector of the hotel industry. Ritesh saw that in many hotels, there is no one at the reception which causes a lot of problems to the customers.
Hygiene is also a big question mark. Where there were no such problems, hotels were very costly. Ritesh thought that if he could uplift the service and maintain the budget, then a huge gap would be filled in the market. At the age of 18, in 2012, Ritesh founded a company for budget stays VentureNursery noticed Oravel Stays and provided seed funding Ritesh needed more funds to expand his business. He contacted PayPal co-founder Peter Thiel for a fellowship. Ritesh had all prerequisites for a fellowship.
So, he was the only one from India to be selected for this 1 lakh US dollar fellowship. After this, Ritesh left Oravel Stays, which was a replica model of Airbnb, and started OYO, which is an acronym for On Your Own. It shows that, like many founders, they don’t stick to one idea, they don’t fight with it, they have the ability to adapt Where Oravel Stays was a copy of Airbnb, OYO was an aggregator of budget hotels. Ritesh was also getting funding from Light Speed Venture Partners, LSVP – 4 crore and 14 crore from DSG Consumer Partners, Singapore. Ritesh was getting funding from Sequoia Capital at a valuation of $60 million for OYO at age 20 At that age, we were eating samosas in the canteen and playing drums on table.
OYO’s business model was very simple at a fundamental level. You make a branding agreement with any eligible hotel. After this branding agreement, OYO will train the staff of that hotel, makeover that hotel, and at the same time, the hotel will be enabled with the OYO app. That is, bookings will be allowed. Now, this hotel becomes OYO franchise Out of the revenue, 20% goes to OYO and 80% to the hotel owner. Ritesh reduced the acquisition time of new hotels with the help of technology. He could acquire a new hotel within 3 days. Budget hotels got a brand because they didn’t have an identity.
But now they have an identity. And along with that, because this technology was being implemented, their bookings started increasing, so there was a profit for them too So, on one hand, the model was a win-win for everyone. People got bookings for cheap The hotel owner is happy. OYO is getting money. The investor is also very happy So, this model started expanding. OYO Townhouse, OYO Silver Peak, OYO Home Lux, OYO Homes with all these sub companies Ritesh was trying to touch all the segments of Hospitality. OYO started touching the international market. Due to this aggressive expansion, mistakes started happening. Federation of Hotel and Restaurant association of India noticed OYO When they found out in 2018 that OYO is making over many illegal apartments, rooms and even chawl and sending people there.
At that time, the vice president of this association, Gurbaxish Singh Kohli said that guests are being mislead and this is spoiling the image of the Indian hotel industry. Guests may have serious hygiene issues. It was not completely OYO’s fault Big players like MakeMyTrip and Goibibo were also involved. But the real problem of OYO started in 2019. The biggest and most profitable clients for OYO were budget hotels. OYO was rebranding them to earn its revenue share But OYO was accused of mismanagement, not paying payments on time. Contracts are being breached with these small hotels.
Remember, OYO had been promising to improve management, standardize administration, to improve hotels. But in 2019, when people realized that these promises are not being fulfilled, then 47 budget hotels all over the country formed an association Hotel Association Confederation of India and launched battle against OYO The hotels stopped booking through OYO due to the hidden charges. In November 2019, more than 500 hotels in India cancelled their contracts with OYO. But many hotels prolems were still not solved. the owner of Bangalore’s Srinidhi Residency, Shankar, Even after 2 months OYO is showing that they are booking hotels for them.
OYO had also held 10 lakhs of their money and other companies had made this allegation Ritesh Agarwal had discarded all the allegations because he was only concerned with expansion. But on one hand, India was facing all these problems. But on the other hand, problems started in the US In 2019, when Ritesh started the rapid expansion of OYO in 35 cities of US he might not have known the negative impact of affordable hospitality In the US, many OYO partners started raising issues that due to low prices, hotels are being prostituted, drug users are coming, children are throwing parties by booking hotels Malfunctioning software, missed payments, etc. also did not help OYO But Ritesh Agarwal’s biggest problem is when COVID-19 hits the world.
COVID-19 impacts tourism and hospitality sector. Layoffs start Ritesh sent many employees on temporary leave. Then OYO sent 60% employees on leave with limited benefits for 4 months All these employees got 30% of their fixed salary in May-June and nothing in July-August. Along with that, they were given complete freedom to leave the company without any notice period OYO just expanded, with no plan B. They just wanted to grow at any cost. The most interesting story in OYO’s expansion is from China OYO’s venture is named OYO Jiu Dian. Jiu Dian means hotel in Chinese.
In its press release, OYO announces its CEO. His name is Li Taixi. CEO and co-founder of Oyo. Do you know who Li is? He is Ritesh Agarwal who used the Chinese pseudonym to connect with the customers there. Not only that, Ritesh also started learning Mandarin. Now, he has no special love for China. He just does all this for business. As you can see, even today, Ritesh promotes his hotels and stays for religious tourism. In changing names, Ritesh turned out to be Yogi Adityanath of startup world OYO’s expansion was happening very fast in the Chinese market. OYO’s new hotel was signed up in just 3 hours. Earlier this was 3 days. OYO’s staff strength reached 10,000 in China. But fate had some other plans.
When Covid-19 bulldozed, it had the biggest impact on China. And Oyo’s staff strength decreased from 10,000 to 1,500. Slowly, Oyo’s business started to decline in China. Ritesh understood that he would have to suffer the consequences of blind expansion And you must have heard about aggressive expansion in startup world You must have seen another example of this… Byju’s Ola also used this expansion They launched a scooter, servicing was ruined and now they are facing the consequences. This problem was increasing in OYO as well. But was Ritesh the only responsible for this? Maybe not.
There is a complex reason behind it. The biggest investor of OYO was SoftBank has around 45% ownership SoftBank had invested around 2 billion dollars in OYO from its Vision Fund. It was pushed to expand. The biggest credit of this expansion goes to CEO Masayoshi Son His vision was, and you can imagine how unrealistic his vision was so unrealistic that when OEO entered the Japan market, the target was to manage 10 lakh rooms. But what was the actual management? 7,500 rooms. So sometimes the best investors and visionaries of the world can be wrong. They are not magicians Because of this rapid global expansion, OEO’s loss was mounting. Revenue was less, and no returns As a result, SoftBank had to show a quarterly loss for the first time in the last 14 years.
After all these incidents, the recovery of OYO seemed a little difficult. The market started to fall, the footfall started to fall. Ritesh’s morale did not fall. Here, Ritesh did something different from other Unicorn founders. Crying, blaming others, the system is bad, he did not say all this. He got to work. Covid was used as an opportunity. Hotel downtime was used to correct the course. Ritesh started taking OYO masterclasses with all his stakeholders And started explaining the vision of OYO personally. Ritesh has also launched many apps in the meantime. YoChat Bot, Tariff Manager Tool, Customer Acquisition Program. In 2020, Ritesh did 169 town halls with his employees to convince them and to explain his vision.
And he did a basic re-introduction and started again He tried to understand the problems by interacting with employees, customers, travel agents and tried to resolve them There were some things which were in the favour of OYO. OYO still had a sizable inventory and many of its hotels were operating. Even during its tough times, OYO had a cash reserve of $1 billion. It is very useful when you have money during a crisis. OYO’s founding team members also stayed with them at that time At the time when people leave top management like in the case of Flipkart, Paytm, Ola, etc. OYO did not face such a situation Ritesh identified that the biggest issue of OYO is the grievance redressal. People like Bhavish Aggarwal still don’t understand this basic thing and he argues with people over this problem.
Ritesh claims that chatbots solved 3-4 issues automatically. Escalations came to call centers where human intervention was needed Another problem was that customers were not able to book at the last minute. OYO solved this problem with the help of technology Pricing was another concern. In hotels, customers who booked through OYO were denied due to the pricing. Ritesh also gave the flexibility to increase the tariffs by 10% to increase the price Most importantly, OYO changed its cheap tariff strategy. Maybe, Tata Nano made them understand that aspirational Indians or people all over the world don’t need cheap, but value for money. Whatever facility you are giving, take the right price… And cheap work should not be bad.
And the biggest change that OYO brought, made their dreams a little practical. OYO wanted to become the world’s largest hotel chain. The aim was to compete with Marriott. But Ritesh realized that this was not the right dream. He changed his company’s position like a tech platform. He focused on customer service, not just on becoming the biggest So, what happened in the end? Did OYO benefit? Will this company be saved? A user experience survey was conducted on OYO’s rooms on Booking.com surveyed the user experience of OYO rooms. By November 2019, only 20% users rated 6+. Booking.com then says that by March 2020, the rating of 6+ fell to 11%. After adopting all these strategies, the post-COVID rating of 6+ increased to 36%. When the results of the financial year 2023-24 came, it also surprised people.
After consecutive losses in last 8 quarters, OYO is now in profit. It has declared profit after tax of 229 crores, which is more than Ritesh Agarwal’s 100 crore profit estimate. At present, OYO acquired Motel 6 from Blackstone real estate in all cash deal, which generates $1.7 billion gross room revenue So, this will make international business stronger and bring green balance sheet. Ritesh has made all the mistakes that startup founders make. Hunger for expansion, over-the-top funding, over-confidence. But he has not made any mistakes that many other founders have made. Number one, arrogance. Ritesh’s success has not affected his attitude Whether you see his behavior on Shark Tank or his personal interviews, his success has not changed his attitude. Maybe that’s why he could understand the value of customer service.
Other startup founders still don’t understand that Ritesh understood the limits of his dream. He understood that it is more important to be an efficient hotel chain than to be the world’s largest hotel chain. And he changed his aim. Ritesh learned the marketing technique of selling Airtel’s SIMs and putting up boards. You can see OYO boards everywhere Resilience is very important. When the world was in a state of crisis, Ritesh did not lose his focus on business. He saved the business from bankruptcy. But that doesn’t mean the road ahead is easy… many challenges will come You have acquired a brand in the USA. But wherever OYO has tried to build itself organically, India, South East Asia, China there has not been any success. In fact, the entire profit of OYO in the world is coming from European operations.
But at least, there is a founder who is ready to work hard without any arrogance, without any show. By the way, why are we talking about Ritesh here? We made other startup founders profile…. you can watch it on our channel We have covered them in our videos, and found that there is hope from Ritesh Agarwal What do you think? Will OYO thrive? Which other business do you want us to cover? Tell us in comments
