ZestMoney founders pull out as Goldman Sachs-backed fintech struggles to raise money

Image credit: ZestMoney

The founders of ZestMoney have pulled out of the startup, the latest twist in the fortunes of the Indian fintech, whose ability to underwrite small-ticket loans to first-time Internet customers once won the backing of many high-profile investors, including Goldman Sachs.

Lizzie Chapman, Priya Sharma and Ashish Anantharaman, the founders of ZestMoney, informed employees of their decision on Monday.

“Over the past few weeks, we’ve done a lot of thinking, and it’s been difficult for us to come to this conclusion,” Chapman wrote in an email seen by TechCrunch. “We have tremendous faith and belief in the potential that ZestMoney has. We will also make sure to fully support the incoming leadership team and do everything we can to support them in the next 4 months to ensure a smooth transition.”

The departures come weeks after a potential deal to buy ZestMoney from PhonePe fell through. There was a lot of hype surrounding the potential acquisition, as ZestMoney has exhausted nearly all other sources of funding over the past three quarters, as investors become wary of funding late-stage, loss-making startups.

ZestMoney eliminated about 100 jobs at its startup last month, and its founders rushed to help those who left land jobs elsewhere in the industry.

“We’re proud of how far we’ve come on that journey and the progress we’ve made in truly democratizing credit access in the country using our cutting-edge technology. We’re also incredibly proud of the incredible team and unique culture we’ve built at ZestMoney – which was only highlighted to us in recent weeks as we saw how everyone came together to support each other during one of the most difficult times a startup can go through,” Chapman wrote.

ZestMoney, which was valued at $445 million in its previous equity round last year, raised over $130 million from a number of investors, including Ribbit Capital, Omidyar Network, Quona, Australia’s Zip, PayU, Xiaomi and Alteria Capital.

ZestMoney is among a handful of Indian startups that use alternative data points to build credit profiles on consumers, qualifying them to make their first online purchases.

India’s low credit card penetration has left a majority of the population without traditional credit scores, which banks rely on to assess creditworthiness before issuing loans. Furthermore, small loans do not provide a significant return for the banks, which prevents them from issuing such financial products. In response, ZestMoney, along with other new startups such as Axio and LazyPay, have sought to carve out a niche in a market traditionally dominated by financial giant Bajaj Finance.

Chapman said she and the other founders remain shareholders in ZestMoney.