Oyo, the Indian budget-hotel startup backed by SoftBank, is laying off a significant number of its sales and support staff in the US, two sources directly familiar with the cuts told Business Insider.
The job cuts come three weeks after the Gurugram, India-based startup said it was eliminating 1,800 jobs at its much larger offices in China and India. Company leaders had described the layoffs as part of a reorganization, consolidating jobs in an effort to juice the company's revenue.
Skift, a market research firm for the travel industry, has reported since this story published that Oyo laid off 350 employees in the US, more than a third of its staff.
An Oyo spokesperson told Skift, "While we are proud to have grown so quickly, we recognize that we sometimes got ahead of ourselves and are now implementing those learnings." Representatives for SoftBank and Oyo did not return Business Insider's request for comment in January.
Oyo's layoffs come as other SoftBank-backed companies also restructure with a new focus on profitability. A Business Insider review of SoftBank's portfolio found 2,600 job cuts across Oyo, Rappi, Getaround, and Zume in the first week of January and more than 7,000 layoffs in the past year across 14 companies. The total number of cuts doesn't include groups of employees like WeWork's 1,000 janitorial staff who are being outsourced in the US and Canada.
A new focus on profits
In a memo sent to Oyo staff on Wednesday that was seen by Business Insider, the company's chief operating officer, Abhinav Sinha, cited sustainable growth as the reason for sweeping cuts. He wrote that many roles would become "redundant" under a new business plan that prioritized profitability over growth.
"We will be primarily redirecting resources from sales and sales support functions to functions that build our operational capabilities like revenue management, data science & machine learning, engineering, and other areas," Sinha wrote in the memo.
Sinha continued: "These decisions have been really difficult to make. But I am confident that these are the right decisions for the business today."
Oyo's US layoffs occurred in two rounds, two sources with knowledge of the layoffs said. Sinha traveled to the US to deliver the news about the first set of cuts in an all-staff meeting in Dallas on January 22, and further layoffs came January 29, one source said.
The second round of layoffs will mostly affect sales personnel and sales support staff, according to the memo. The startup announced an expansion into the US market in a press release last year, setting up a second headquarters in Dallas and offices in Chicago, Miami, New York, San Francisco, and Seattle.
One source told Business Insider that the startup moved its headquarters from a WeWork location in Dallas in January.
A LinkedIn search found that several sales employees in Dallas had indicated they departed the company in January, but it is not clear whether those employees were part of the larger layoffs made public Wednesday.
The memo seen by Business Insider said affected employees would receive "all possible assistance and support" but did not detail a severance package. A source familiar with the layoffs said employees were offered up to three weeks' severance pay.
Questionable business practices fueled massive growth
Following the implosion at the coworking startup WeWork, Oyo was considered SoftBank's saving grace among its portfolio of cash-burning companies.
The startup had raised more than $3 billion in funding since its founding in 2014, though its latest round included $700 million from its founder and CEO, Ritesh Agarwal, to buy back shares from the investors Lightspeed Venture Partners and Sequoia Capital. The deal raised Oyo's valuation to $10 billion. SoftBank has been on the startup's capital table since 2015.
Oyo used some of that money for staff expansion, much of it in India, per job postings analyzed by the alternative-data company Thinknum. In the US, the company has had fewer than 20 job postings since July and is now down to fewer than 10.
Globally, Oyo's job postings have dropped steeply in the past year, down to 23 from August's high of 775.
Oyo's premise is relatively simple and based on similar short-term rental or hotel-booking startups in the US, and it has been called "SoftBank's jewel in India" for being one of the country's most valuable private companies.
Customers can book hotel rooms in more than 80 countries through an app by marketing local hotels as Oyo franchises. The startup then fronts the costs associated with overhauling the often-struggling hotels, including adding things like WiFi and updated interior decorations. In turn, Oyo takes a percentage of every booking.
But The New York Times reported earlier this month that the startup, and Agarwal in particular, had engaged in questionable business practices to accelerate growth, a common theme among some of SoftBank's hottest investments. The investigation showed that Oyo rented thousands of rooms at unlicensed hotels and guesthouses, and let the police and other officials use the service free to avoid trouble with the authorities.
Do you work at Oyo or another SoftBank-backed startup and want to share your story? Contact this reporter via encrypted messaging app Signal at +1 (331) 625-2555 using a nonwork phone, email at mhernbroth@bjinnox.com, or Twitter DM at @megan_hernbroth.
