How Essel Group left mobility start-up ZipGo high and dry on funding

ZipGo was founded in 2014 as cab aggregator Taxipixi, a year later, it rebranded itself as ZipGo, an intra-city bus service. It raised $52 million between 2014 and 2018

Last week, emails landed in the inboxes of customers of ZipGo in Mumbai, Pune, Bengaluru, Jaipur, Hyderabad, Kolkata, and the National Capital Region, informing the recipients that the Bengaluru-based mobility start-up would not be working in their cities from the beginning of this month.

Emails like this from start-ups are rare. Customers rarely blink before switching to a competitor. 

Start-ups winding up operations are not uncommon though. But, ZipGo is different. In August last year, the company announced that it raised Rs 300 crore from Essel Green Mobility. A few months later, it announced that it was acquiring Supreme Trans Concepts, a small Pune-based firm. 

“Did it spend Rs 300 crore in six months?” asked a venture investor, who has been approached to pump money into ZipGo. “If it did not, then why is it shutting down?” Emails sent to ZipGo and Essel Group went unanswered. 

On December 28 last year, the company filed a shareholder document with the Registrar of Companies (RoC). It has many interesting names, such as Google India Managing Director Rajan Anandan, Hyderabad-based Venture East, Mumbai-based Orios Venture Partners, and Omidyar Network. Also on the list is IL&FS.

An interesting name, however, is missing: Essel. No one related to the group is mentioned. The money it was supposed to pump into the firm never came.

A source close to ZipGo, who did not want to be named, said the company was so optimistic about getting the money that it used operational cash to pay off debts early, incurring a penalty. The RoC documents support this claim.

ZipGo was founded in 2014 as cab aggregator Taxipixi, by Gaurav Aggarwal and Jitender Sharma. A year later, it rebranded itself as ZipGo, an intra-city bus service. It raised $52 million (about Rs 360 crore at current exchange rates) between 2014 and 2018, according to media reports.

So what about the acquisition it made in October?

“Ashok Aggarwal of Essel Infrastructure introduced us to ZipGo,” said a senior executive of Supreme Facility Management, the parent company of Supreme Trans Concepts, who did not want to be named.

Essel apparently told the Supreme board that they were giving ZipGo Rs 30 crore, and the Bengaluru-based firm wanted to buy Supreme Trans Concepts. “They told us that ZipGo would get Rs 300 crore over 18 months” the executive said. The stock-and-cash deal was finalised for Rs 40 crore. “ZipGo said they would pay us in January,” said the director, but in the first month of this year, they learnt that Supreme Trans Concepts was shut down.

“They said Essel had back out and there was no money to give,” said the executive, adding that Supreme is planning to sue ZipGo in the Bombay High Court. He, however, did not provide any documentary evidence of the deal. Regulatory breakthroughs have also eluded ZipGo. Most state governments do not allow a transport company that picks customers from different stops along a route. If a service is provided only between a pick-up and a drop point, that’s OK in some cities such as Pune, Hyderabad, Kolkata, and Gurugram. Ford has recently launched a similar service in Pune. Another competitor is Shuttl, backed by Sequoia and Amazon. It has been growing steadily. Ola and Uber also plan to roll out bus services by August this year.

Most ZipGo customers are likely to move on. At its offices, the mood is sombre because lay-offs are evident.  

“The company will now only run intercity services on select routes,” said a senior executive of a competitor.