ZestMoney, once a trailblazer in the Buy Now, Pay Later (BNPL) space, has announced its decision to shut down operations by the end of December. The company’s leadership, under the helm of Mohit Chhajer, Mandar Satpute, and Abhishek Sharma, revealed this unfortunate news during a town hall meeting on Tuesday, marking the end of an era for the Bengaluru-based startup.
Despite the fervent efforts of the new management to revive the struggling company, ZestMoney faced insurmountable challenges, ultimately leading to this decisive outcome. The failure to secure a follow-on funding round or find a suitable buyer proved to be the final nail in the coffin for the once-prominent fintech enterprise.
The impending shutdown follows a series of setbacks, including the departure of ZestMoney’s original cofounders – Lizzie Chapman, Priya Sharma, and Ashish Anantharaman – in May. The leadership vacuum resulted from unsuccessful acquisition talks with fintech major PhonePe, forcing the company to undergo a significant downsizing, shedding 30% of its workforce.
In a bid to soften the blow for its outgoing employees, ZestMoney has committed to providing two months of severance pay and outplacement support. This gesture reflects a sense of responsibility towards the dedicated workforce that contributed to the company’s journey in the competitive financial technology landscape.
Founded in 2015, ZestMoney initially gained recognition for offering BNPL services, allowing customers to make purchases and pay in three interest-free installments. The startup garnered substantial support from renowned investors, including Prosus, Quona, Zip, Omidyar Network, and Ribbit Capital, accumulating over $130 million in funding during its operational tenure.
At its zenith, ZestMoney boasted a valuation ranging between $445 million and $450 million, making it a poster child for the BNPL ecosystem in India. However, the company’s fortunes took a downturn as mounting losses and a series of loan defaults eroded its financial stability. In the financial year 2021-22 (FY22), ZestMoney reported staggering losses, reaching INR 398.8 crore – a threefold increase compared to INR 125.8 crore in FY21. Despite the financial challenges, the company managed a 1.6X year-on-year growth in revenues, amounting to INR 145 crore in FY22.
ZestMoney’s demise adds to the growing list of startup closures that have marked the Indian startup ecosystem in 2023. As reported by Inc42, a total of 15 major startups have shuttered their operations this year, collectively consuming $85 million of investor capital. The reasons for these closures vary, ranging from the inability to secure follow-on funding rounds to a lack of product-market fit (PMF).
The demise of ZestMoney underscores the challenges faced by startups in navigating the dynamic and competitive business landscape, emphasizing the importance of adaptability and sustained financial viability.
