India’s Oyo, once valued at $10 billion, has withdrawn its IPO application from the market regulator for the second time.
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The company says it’s refocusing and prioritizing fewer initiatives that will have the biggest impact on customers and add value to the business.
© 2024 TechCrunch. All rights reserved. For personal use only.
Oyo, the Indian budget-hotel chain startup, is negotiating with investors to raise a new round of funding that could cut the Indian firm’s valuation to $3 billion or lower, three sources familiar with the matter told TechCrunch.
The startup is engaging with investors, including Malaysia’s sovereign wealth fund Khazanah, for the new funding, the sources said, requesting anonymity as the matter is private. The new funding round is likely to see some secondary transactions as well that will value the startup at as low as $2.5 billion, the sources added.
The proposed terms, if they materialize, would represent a steep drop from the peak valuation of $10 billion at which Oyo raised a funding round in 2019. A valuation of $3 billion or less would also be lower than the amount of capital Oyo has raised against equity and in debt over the years.
The deliberations for the new funding are ongoing, and its terms may still change, or a round may not materialize, the sources cautioned.
The curt in valuation is hardly a surprise. SoftBank, which owns more than 40% of Oyo, internally cut the valuation of the Indian startup to $2.7 billion in 2022. Oyo said at the time that there was “no rational basis” for the markdown of its valuation.
Oyo – which counts SoftBank, Airbnb, Peak XV Partners, and Lightspeed Venture Partners among its backers – disputed the “rumors,” asserting there wasn’t any “concrete transaction.” Khazanah didn’t respond to a request for comment. The terms about the proposed valuation haven’t been previously reported.
The deliberations for the new funding follow Oyo reportedly withdrawing its draft red herring prospectus for an initial public offering for the second time. The Indian startup originally filed the paperwork to go public in 2021, seeking to raise about $1.2 billion at a valuation of $12 billion at the time.
India’s market regulator, SEBI, has not approved the startup’s application for an IPO.
According to local media, Oyo’s founder and chief executive, Ritesh Agarwal, told employees that the company expects revenue for the fiscal year ending March to be more than $682 million.
Checkr, a 10-year-old startup that offers employee background checks and was last valued at $5 billion in April 2022, has laid off 382 employees as companies are not significantly hiring talent.
TechCrunch exclusively learned that Checkr conducted the layoffs across all departments and different levels on Tuesday. The San Francisco–based startup confirmed the layoffs in an email.
“In response to economic conditions that have impacted companies’ hiring, we made the difficult and painful decision to reduce the size of our team. This will allow us to operate more efficiently and ensure the long-term health of our business,” a Checkr spokesperson said in the statement.
The job cuts — which affected 32% of the company’s workforce — came nearly two years after Checkr announced the acquisition of Inflection, the startup behind GoodHire, a background-checking platform for small- and midsized businesses. At the time, The Wall Street Journal reported the deal was worth $400 million.
Backed by storied investors, including Durable Capital Partners, Fidelity Management & Research, Franklin Templeton, BOND and Coatue Management, Checkr lets companies do background checks by looking into driving and criminal records and basic identity confirmation of their potential employees. The startup offers an online form to let companies run those checks or use its API, which can be integrated within their hiring systems or onboarding software, including Workable and Zenefits.
Founded in 2014, Checkr counts Uber, Instacart, Netflix, Adecco, Airbnb and Coinbase among its key customers. Its customer base grew to more than tens of thousands of companies ranging from small and medium businesses to Fortune 500 employers in 2022. Initially, the startup was limited to Silicon Valley, but it expanded its presence beyond the Valley in 2016.
Checkr has given the affected employees a minimum of 10 weeks of severance and health insurance, as well as career and mental health support, the spokesperson said.
The startup did not answer questions about its runway and fundraising plans. To date, it has raised $679 million, with the last round of $250 million announced in September 2021.
Consolidation continues apace in the world of security. Sources tell us that Lacework — a cloud security startup that was valued at $8.3 billion post-money in its last funding round — is in talks to be acquired by another security player, Wiz, for a price of just $150–$200 million.
Sources close to the negotiations said that the two companies have already signed a letter of intent and described the state of negotiations as “somewhere in the middle.” That is to say, the acquisition is not yet completed and the deal could still fall through. Although both work in the wider area of cloud security, sources tell us that there is relatively little competitive overlap between the two companies so it would likely be a technology-plus-talent-plus-customer acquisition play. We are still trying to find out more terms of the deal, such as whether it would be in stock, cash, or a mix.
Wiz has said on a number of occasions that it’s looking to hit $1 billion in annual recurring revenue ahead of an IPO. We understand that its soft deadline is end of 2025, but considering it announced ARR of only $350 million in February 2024, the company has to get aggressive on bulking up to get there. Laceworks, we understand, has ARR of around $100 million.
The Information has reported some of the above details today too.
The deal underscores a story of two parts.
Part one: Security startups continue to attract a lot of funding attention, but some companies that have reached high valuations over recent years are struggling to justify those numbers and are considering their options as they come close to the end of their funding runway.
From what we understand, Laceworks’ investors — the longer list includes Snowflake Ventures, GV, General Catalyst, Tiger Global, and many more — were shopping the company around to potential buyers, which is how Wiz came into the frame.
Laceworks, we should note, is not the only security business getting a valuation haircut. Just last week, TechCrunch broke the news that Noname was in talks to be acquired by Akamai for $500 million, after last being valued at $1 billion.
Part two: Other players are emerging as consolidators in this process. Wiz — valued at around $10 billion — is one of them.
The company is positioning itself as a one-stop-shop for all things cloud security en route to its IPO. Earlier this month Wiz acquired Gem Security for $350 million, and it sounds like the M&A will not end with Laceworks.
“Wiz has experienced unprecedented organic growth since its inception, and we are dedicated to pushing this growth even further,” a spokesperson from Wiz said in a statement provided to TechCrunch. “Simultaneously, we recognize that consolidation is the future of the security industry and therefore are actively engaged in discussions with companies across the industry. We are always exploring compelling M&A opportunities that will enhance both our technological capabilities and business expansion, as we strive to build the world’s leading cloud security platform.”
Lacework, founded nearly nine years ago and based in San Jose, Ca., has raised over $1.8 billion from investors over the years. Most of that funding — $1.3 billion — ties to a late November 2021 round that, at the time, valued the company at $8.3 billion.
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