Zomato is understood to have entered into an agreement with Ant Financial or Alipay, the financial investments arm of Chinese giant Alibaba, where the Chinese investor will gain some key powers in the decision-making process in the company.
This will be in exchange for the funding of around $200 million in Zomato made by Ant Financial about 6 months back. As per an Economic Times report, this information has emerged from the Articles of Association that has since been updated to reflect this new arrangement.
Some of the new conditions include the right bestowed on Ant Financial and through it the parent Alibaba to become the largest shareholders in Zomato. The current largest investor, Info Edge, holding around 31% stake will lose this tag and the process may be operationalized over a period of one to three years from the date the investment is made in Zomato by Alipay.
Some observers see these types of conditions being brought to the table by many strategic investors in startups and there are others who see the trend among some Chinese investors being involved in a proxy battle with their rivals. There are companies such as Tencent, Amazon, Google and others whose interests in the marketplace are quite similar to Alibaba’s. While the American giants are directly involved in the Indian market, the Chinese have stayed in the background by gaining control through huge investments made in startups.
Some of their concerns, however, towards protecting their own turf, cannot be faulted. For example, there is one stipulation which states that Zomato cannot make an entry into a territory where ‘Ant Ecosystem Wallet’ is not present or make an exit from a market where ‘Ant Ecosystem Wallet’ is also operating without obtaining the consent of Ant Financial. They have gone on to define the Ant Ecosystem Wallet as a business where Alipay has a stake of 15% or above. There are other similar stipulations relating to Zomato’s plans to expand its operations to countries Australia and New Zealand.
With the food order delivery startup in the midst of a serious rivalry with Swiggy to gain subscribers, it is also busy trying to finalize fresh funding arrangements to the tune of $400 million.
There may be lessons for the other founders of startups too, from the Zomato experience and they may have to either accept the inevitable or look for other solutions such as higher voting rights.