After the latest twist in the Indian fintech ZestMoney which saw all its founders quitting, the Buy Now Pay Later (BNPL) startup has chalked out plans to revive the Goldman Sachs-backed company calling it ZeMo 2.0 or ‘ZestMoney 2.0’, internally.
The startup, in a Townhall meeting with its 150 employees on roll, has said there will be assured variable pay at the end of this month and hikes have been assured with the process starting next month, sources told Moneycontrol. “The company has also conveyed to the employees that there is enough runway to reach profitability in the next six months,” sources said.
The resignation of all three founders has raised a lot of questions about the cash-strapped ZestMoney's survival. On Tuesday, one of the cofounders who announced their resignation, Lizzie Chapman wrote on LinkedIn that a new leadership team will run the company going forward.
“As we go on to the next chapters of our own journeys, we are confidently passing the baton to Mohit Chhajer, Mandar Satpute and Abhishek Sharma to lead the company into the future. They have all been with us on the journey for a long time, having helped build and scale the company to be the largest digital lending franchise in the country. We have 100 percent belief in ZestMoney’s potential and the 175 incredible 'Zesties' who are more than ready to take on the huge opportunity that lies ahead for the company,” Chapman wrote.
Abhishek Sharma is the head of growth, Mandar Satupte, chief banking officer and Mohit Chhajer is the vice president of finance and financial operations (FinOps).
In fact, Goldman Sachs and PayU-backed BNPL player laid off close to 20 percent of its workforce or 100 employees as part of its business continuity and survival plan in April. The firm had a total of around 450 employees on roll.
PhonePe has also absorbed some of ZestMoney’s employees.
"The Tech IP copy was purchased with the company's founders, board, and investors' consent. The employees were hired with ZestMoney's consent since they had to downsize...We wish ZestMoney a bright future and are rooting for them to turn things around," Sameer Nigam, cofounder and CEO of PhonePe wrote on Twitter after the resignation announcement.
Founders of ZestMoney Lizzie Chapman, Priya Sharma, and Ashish Anantharaman resigned on May 15 just two months after PhonePe walked away from a deal to acquire the BNPL platform. PhonePe’s Sameer Nigam,in an interview with Moneycontrol, said that PhonePe’s due diligence on ZestMoney was unsatisfactory. PhonePe calling off the deal had left the BNPL platform in urgent need of cash.
“The way it works is first you talk to investors or the management and you agree on a number and then based on that number, you enter due diligence (DD). Now DD can be short, DD can be long and we generally do long DDs,” Nigam had told Moneycontrol, talking about the PhonePe-ZestMoney deal for the first time publicly.
“We usually do long DDs. We have learned in the past what we need to know beforehand, so we were more rigorous in our DD and it didn’t really meet our bar,” Nigam added.
ZestMoney was also given a loan of about $18 million last year by PhonePe, which acted as a ‘lifeline’ for the company, Nigam told Moneycontrol, adding that the BNPL platform was on the verge of getting bankrupt when he first met them.
In April, Moneycontrol reported that PhonePe might extend manother credit line to ZestMoney. Nigam later accepted the development and said that there were discussions happening in the background and his finance team knows more about it.
PhonePe’s decision to pull out from the ZestMoney acquisition deal highlighted the stress in the BNPL sector that was hit by the Reserve Bank of India (RBI)’s crackdown on digital lending last year.
The RBI issued a notification forbidding operating non-bank institutions or fintech companies, including many of the 'buy now, pay later' services, from loading credit lines onto Prepaid Payment Instruments (PPI) such as wallets and prepaid cards. Since then ZestMoney was looking for a buyer, sources told Moneycontrol.
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