Troubled times are here for fintech startup ZestMoney after all three of its founders resigned following an unsuccessful acquisition deal by PhonePe. ZestMoney founders Lizzie Chapman, Priya Sharma and Ashish Anantharaman informed employees about their resignation on May 15.
The future of the Goldman Sachs-backed fintech firm and its 150-something employees remain uncertain. However, there is a new management team coming in to take over the company; promising variable pay to all its employees by the month's end, hikes, and even profitability goals.
Lizzie Chapman made the announcement of the founders' resignation in a post on LinkedIn.
We Founders will continue to be significant shareholders in the company and will continue to be the biggest cheerleaders and supporters in every way.
- Lizzie Chapman
- Chapman also introduced the new team consisting of Mohit Chhajer, Mandar Satpute, and Abhishek Sharma, all of whom have been with the company for a while.
- Reports say the trio has chalked out a plan to take the company forward as ZeMo 2.0 or ZestMoney 2.0.
What's happening at ZestMoney?
- The resignation of the three founders has raised questions about the health of ZestMoney. The unsuccessful PhonePe deal also put the spotlight on the Buy Now Pay Later (BNPL) service industry.
- ZestMoney was founded in 2015 and tapped into the BNPL services in India. It allowed users to pay their shopping bills in three installments at a 0% interest rate.
- The resignation of the founders comes within months of the PhonePe acquisition deal falling through.
- Earlier, ZestMoney let go 20% of its employees (nearly 100) after the unsuccessful deal.
What happened to the deal?
- According to LiveMint, talks between PhonePe and ZestMoney began in November 2022 and the former had plans to acquire the BNPL firm for $200-$300 million. However, reports say due diligence (DD) by PhonePe into ZestMoney did not meet the company's standards.
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.
- ZestMoney's loan books were reportedly not up to the standards with its credit losses an estimated 1.5 times that of the revenue numbers.
- The acquisition would have given PhonePe access to an NBFC and a foothold in the digital lending sector.
- Matters were made worse by RBI policies on NBFC lending. RBI restricted fintech companies and non-banking institutions from loading credit lines onto Prepaid Payment Instruments (PPI) such as wallets and prepaid cards.
- Currently, PhonePe's Sameer Nigam said that they have only bought a copy of ZestMoney's LSP tech IP and separately hired some 130 employees who were laid off.
- PhonePe also extended a credit line of nearly $18 million in 2022 which is reportedly waived off now. Moneycontrol also cited Nigam as saying that when he first met ZestMoney management, they were on the verge of bankruptcy.
- There are also reports that PhonePe might give ZestMoney another loan.