Oyo Rooms
Source - Moneycontrol

Gurgaon-based India’s largest hospitality startup Oyo Rooms has raised INR 730 crores ($103.4 million) from Singapore-based ride-hailing firm Grab. The investment is a part of $1 billion funding that Oyo announced last month. Oyo has issued 2,884 Cumulative Convertible Preference shares at the price of $34,670 per share to Grab through A1 Holdings, a Cayman Islands-based entity.

There are questions circling around why the ride-hailing firm has invested in Oyo. Founded in 2012, Grab provides ride-hailing services in Singapore, much like Ola in India and Uber in the United States. The ride-hailing giant has expanded internationally to Malaysia, Indonesia, Thailand, Cambodia, Myanmar and Vietnam since its inception. Grab has also forayed into bike hailing services, food delivery and logistics.

Earlier in May this year, Grab acquired Uber’s South-East Asia operations forcing the US-based ride-hailing giant to withdraw from the international markets. Grab and Oyo Rooms has only one thing in common and that is their investor SoftBank. The Japan-based VC firm is the largest investor in both the companies.

Oyo has also expanded globally to Indonesia and China and now has more hotels in China than in India. It is speculated that Oyo and Grab could form a strategic partnership to enter new markets in some or other way.

Traditionally, startups raise money from angel investors or venture capitalists. However, this development could be a changing point of the nature of startup investments. Venture capitalists provided a lot of cash but interfered too much in day-to-day operations. It can be witnessed when Ola’s founder Bhavish Aggarwal is refusing a $1 billion investment from venture capital firm.

Startups, nowadays are raising money from large multinationals. For example, Dunzo raised funds from Google. Google continued with this investment to gather data on urban Indian consumers. Another e-commerce startup Fynd also received funds from Google this year. It is clear that multinationals like Google are interested in startups to form strategic alliances in order to further strengthen their positions globally.

Oyo Rooms and Grab are valued at $5 billion and $10 billion respectively. And both the firms have different business models which do not overlap. One reason for the investment may be that Oyo Rooms wants to capture the geographical locations that Grab has strengths in and Grab wants to enter Indian and Chinese markets with the help of Oyo.

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