Start-up OYO, budget hotel aggregator , is raising $1 billion to fund expansion into China and other global regions. Existing investors including SoftBank Vision Fund, Sequoia Capital and Lightspeed Venture Partners have put in $800 million, with commitments for another $200 million, the company said on Tuesday.
At a $5 billion valuation, OYO would be India’s most-valuable startup after One97 Communications, the parent of digital payments company Paytm.
About $600 million of the total will be plowed into China where OYO began operations only 10 months ago. The funding values the startup at $5 billion, Bloomberg quoted a person familiar with the matter who asked not to be identified because the matter is private.
Ritesh Agarwal, a 24-year-old college dropout, founded OYO five years after travelling around India on a shoestring budget. He discovered wildly unpredictable standards for hotels and guest houses, and decided to start an online service to bring more reliability to the travel experience, according to Bloomberg. In the past two years, OYO has expanded beyond India into China, Malaysia, Nepal and Britain.
“With this additional funding, we plan to rapidly scale our business in these countries, while continuing to invest further in technology and talent,” Agarwal said in the statement. “We will also deploy fresh capital to take our unique model that enables small hotel owners to create quality living spaces, global.”
His startup, whose official name is Oravel Stays Pvt, signs on hotel owners and then gets them to upgrade everything from linen, toiletries and bathroom fittings to its specifications. It also equips hotels with staff training and standardized supplies.
It then brings them on board its hotel website and the hotel owners pay OYO a 25% commission.
Oyo began with one hotel in Gurgaon and has grown to 125,000 rooms in India, where it says it’s tripling year-over-year in terms of transactions. In China, where it began operations last November, it has expanded to 171 cities with 87,000 rooms. It is now in over 350 cities with 211,000 rooms.