Is

Rajat Ghosh’s
future electric
mobility?

1
 n Company and background

I
N MARCH 2019, during Moneybank’s investment vehicle arm
Venture Fund’s annual meet, its India chief Namit Joshi wanted to
introduce Moneybank’s portfolio companies to the head of Middle
East’s Sovereign Wealth Fund (SWF), Tahir al Bari and Prince Akmal
Ahmad, who were on a state visit to India. SWF had committed USD42
billion to the Venture Fund.
The founders of Cashgo, Hoya, and Doordeliver, the pick of Venture
Fund’s portfolio, were assembled at a Delhi hotel except one — Rajat
Ghosh, the founder and CEO of BGS Technologies. The word on the
street was that Ghosh was fighting a battle to keep control of BGS, the

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owner of Bengaluru-based ride-hailing company Zeu.
The German conglomerate, led by Noah Fischer, was an early backer
of Zeu, having invested USD476 million in two rounds. But Ghosh
became increasingly concerned after Moneybank took a large stake
in Nola Technologies Inc in early 2018, his direct competitor, and
began talking about merging the two. Nola Technologies was slated
to go public and Noah Fischer would have wished for nothing more
than Zeu selling out to Nola so as to give the US-based company a
complete dominance of the Indian market while collecting higher
proceeds from Nola’s IPO.
Most entrepreneurs don’t mess with Noah Fischer. But Ghosh was

3
 Zeu Electric- Who owns how much?

25.00%
4.50%
7.50%
6.00%
1.00%
40.00% 15.00%
1.00%

Rajat Ghosh MoneyBank Hexon Partners Excel Fund

Zeu (BGS Technologies) Mayank Bhasin/Prakash Zaveri

ESOP Others

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an exception. Anticipating Moneybank’s moves, he launched a new
venture — Zeu Electric in April 2017 and kept it away from the parent,
BGS Technologies. He then got Prakash Zaveri who is a veteran
industrialist and angel investor, Excel Fund, and Hexon Partners to
invest INR420 crore in his new venture in a series of funding rounds
starting March 2019.
The premise was grand. Zeu Electric’s mission was to become “a
platform to work with driver-partners, cities, vehicle manufacturers,
battery companies, and others to make sustainable technologies cost-
effective and viable in daily mobility.” In July 2019, Fuji Motor company
committed USD310 million into the new venture.
This was nothing short of a coup. A startup with no underlying
technology, market access, or even customers, had fast become a
unicorn. Apparently, since it did not want to be left behind, Moneybank
also invested USD255 million in Zeu Electric in the same month.
But the big question was whether Ghosh would succeed in shared-
and electric-mobility, a segment with no global blueprint, let alone
in India. Will Zeu Electric turn out to be just another giant experiment
or will it be the “vehicle” that propels Ghosh to be the pioneer in a
completely new category of mobility? More so, at a time he was trying
to achieve profitability in core business and managing half a dozen
experiments going on at the parent company.

5
 n Financial timeline of Zeu (INR crore)
Year Revenue Profit/ Key Expenses and link to initiatives
Loss
2013- 51 -34 Fleet operator costs was INR48 crore and
2014 marketing and promotion expense was
INR4 crore. The initiative binge had not
started.
2014- 100 -755 INR920 crore fleet operation costs.
2015 INR100 crore on sales and promotion
cost; RideforYou acquired for
USD200 mn in stock deal. Losses
reflected gamble on failed initiatives."
2015- 664 -1,760 INR386 crore expense on advertising
2016 and promotions. The receivable from
Zeu Fleet subsidiary showed as INR79
crore. Losses remained high as
investments increased.
2017 1,380.74 This was the year where multiple
initiatives and discounts were still on.
2018 2,222.62 Losses come down as focus shifts to
aprofitability and inability to raise funds.

6
n The history of Zeu and Rajat Ghosh

G
HOSH isn’t faint hearted when it comes to entrepreneurial
experiments. In 2010, his Xeler institute batch mate Aditya
Singh and Ghosh started Zeu Trips. They started with a website
and took rental bookings over email and phone and fulfilled the orders
through a bunch of taxi operators they had tied-up with. Soon, the duo
launched an app that matched riders with Zeu’s “driver partners”.
Zeu has raised USD3.2 billion to date and is currently valued at USD5.6
billion. Key investors in the startup include Moneybank, Excel Fund,
Fincent, Hexon Partners, and Terex Global.
In due course, apart from upgrading its fleet with a variety of cars
from hatchbacks, sedans, and SUVs, Zeu even added auto rickshaws.
The startup had the Indian market all to itself until 2013 when Nola
entered the country. Nola (then led by its aggressive founder John
Hampton) had the capital to burn and attracted riders with discounts
and driver partners through incentives. Ghosh got a shot in the arm in
2014 when Moneybank invested in the company.
Both Zeu and Nola burnt a slug of capital, as much as USD300
million-USD400 million at their peak in 2015-16, on costumer and
driver subsidies. The playbook was similar — discounting fares and
incentivising drivers to shore up ride numbers.

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 In early 2015, RideForYou (RFY) was up for grabs as survival became
tough for the third player in the taxi-hailing market amid the Zeu-Nola
onslaught. Nola was close to buying RFY, but Ghosh outbid it and
acquired the company in a USD210 million stock-and-cash deal.
In mid-2015, the company launched Zeu Café (a food-delivery service)
and Zeu Store (a grocery-delivery service), only to wind them up
within months. This setback, followed by a funding drought, valuation
markdown, and tough competition from Nola forced Zeu to stick to its
core cab-hailing business. It also shuttered RFY and fired around 1,000
people in August 2016.
In 2017, Ghosh acquired Foodstep to compete with NolaEats (Nola’s
food delivery service) and adopted a similar approach of discounting
to sustain in a market dominated by two big players — Ketto and
Zolo. In 2018, Zeu went international with its core offering, entering
Canada and New Zealand, followed by the UK. The company wants to
reach 50 cities globally.

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History of ZEU’s initiatives / acquisitions
Initiative Plan
Zeu Pink Cabs for women,
2014 driven by women.
Zeu Store Quick Delivery Service
2015 with ZEU Money.
Zeu Café Hyperlocal grocery and
2015 food delivery service in
Bengaluru, Hyderabad,
and Gurgaon. Bought
Foodstep India.
Zeu Provide a hassle-free ride
Shuttle for office goers at the tap
2016 of a button.
Zeu Fleet ZEU acquired ZCabs,
2015 owned by Cadabra Cabs
India in January 2015 and
renamed it ZEU Fleet to
focus on leasing business.
Status
Discontinued
Closed
ZEU Café closed in 2016,
ZEU committed to
invest USD200 million to
strengthen Foodstep post
deal.
Closed in 2018 amid
reported issues with
transport authorities.
Saurabh Seth joined in Jan
2017 and left in Dec 2017.
With new logistics
companies entering,
competition is intensifying.
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 Zeu Plans to have 1 million Amit Patel roped in to lead
Electric electric vehicles on the initiative. Stated to be
Vehicles road by 2021 as part of Venture Fund’s interest
Mission Electric. Reported area as well.
to have invested INR500
million in 2016.

n The attrition problem

Z
EU has had a troubled history when it comes to retaining key
people. The company has many times launched new services
and hired senior executives from large firms to run it, only to
watch them leave soon. While Zeu did manage to attract key people
from large organisations, its highly contextual and nearly inexistent
process and organisational culture prevented these high-profile hires
from fitting into the company’s way of working. Coming from large
and process-oriented organisations, it was difficult for these senior
professionals to fit into Zeu’s culture. This people-organisation fit is
still an unsolved problem for the startup.
Meanwhile, there has been a lot of speculation on why senior
executives with impressive track records do not stick with the
company.

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Recent exits from Zeu
Name Designation

Rahul Verma Head of Engineering

Ahmad Khan Head of Finance

Karan Bhalla Senior Vice President

Bhim Tyagi Senior Vice President (Growth)

Lalit Chawla Corporate President (New Initiatives)

James Charles Managing Director

Miley Jones Chief Marketing Officer

Emily Rhodes Head – HR

Jake Brown Operations Manager, New Zealand

Jackson Tatum Toronto Operations Manager

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 “Zeu is an extension of Xeler,” says a Zeu employee who did not
wish to be named, referring to the alma mater of the company’s top
leadership. “Most of its founding team started Zeu immediately after
their studies. At Xeler, they would [catch up] at 11 am in the morning
and spend time up to 2 am the next day. They work the same way in
Zeu, [helping it] scale very fast, but that does not [sit] well with people
at different stages of life and career.”
Ghosh may see himself as the Hannibal taking on the Rome of Nola,
but the loss of key people deprives him of the human capital he so
desperately needs for the great battle.

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n Competition in core business and unclear
adjacencies

A
S a result of the stiff competition up to 2018, Nola and
Zeu ran out of the necessary financial resources to keep
discounting to gain market share. They had to raise fares
by around 15%-20% in non-peak hours in major cities to achieve
profitability. Consequently, both have seen a stabilisation in their
market shares.
However, for consumers this meant longer waiting times — from an

13
 n Growth
Y-o-y (%)
2016 90
2017 57
2018 20
2019 4.5

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average two-four minutes a couple of years back to 12-15 minutes
as drivers have become highly selective in search of better-
paying rides. Even though Zeu is present in more cities than Nola,
the latter dominates the metros where more trips are recorded.
Though growth has stagnated, BGS has projected that it will turn
in a profit this year.
Meanwhile, the competition is turning fierce in the international
markets. In the UK, Zeu faces Nola and at least seven other ride-
hailing companies such as Findcab and Myride. While Nola has
already turned profitable in Canada, Zeu will have to battle Garex,
Taxigo, Perch, Rider, and Chinese taxi giant Meishu in addition to
Nola.
In the food-delivery business in India, Foodstep is all but finished
even as market leader Zolo battles its close competitor Ketto. Both
have moved beyond food delivery to either set up cloud kitchens
or open up the B2B food-supply chain.
One of Zeu’s biggest investments was in Zeu Play, the connected-
cars and entertainment ecosystem. The entertainment segment
is now an intensely competitive market with streaming service
providers such as Rhythm, Webcoms, E-kart Prime, and UPlay
offering content directly on smartphones. It is unclear how Zeu
Play will find synergies with the Zeu Electric venture.

15
 n Challenges in electric mobility

I
NDIA faces the same set of problems as the rest of the world when
it comes to electric vehicles (EVs). The main problem is the battery.
Lithium-ion batteries are expensive and they have a limited shelf
life of only a few thousand charge-and-discharge cycles. This means
frequent expenditure on new batteries, a significant capital cost.
The next biggest problem is the charging infrastructure. Unlike a fuel
station where one can refill in four-five minutes and drive for another
350kms-400kms, most EVs take much longer to charge fully. But even
after that their range may be limited to 120kms-150kms. Given the
state of global research on Li-ion batteries, end-use technology is still
a few years away. Zeu Electric has started on-boarding cycle rickshaws,
but most of them run on lead-acid battery technology which works for
short commutes.
Unlike Zeu cabs, for which a mobility industry ecosystem already
exists, Zeu Electric must build one comprising EVs and Li-ion battery
makers, charging stations, supply chain and reverse logistics as well as
inducing supply-demand for ride hailing.
The government of India has said it will create policies conducive to EV
mobility, but it is not clear if operators and customers will be joining
the marketplace any time soon. A 2016 report by a globally accredited

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consulting firm puts Indian market in the ‘hesitator’ category for the
adoption of electric passenger-vehicles.
This would imply that the players may choose to wait-and-watch.
Zeu’s core competence has been technology — creating app-based
platforms that bring suppliers and buyers together. Stitching together
a new ecosystem might prove to be a big challenge for a company
whose culture revolves around building platforms rather than knitting
up partner networks with shifting loyalties.

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 n Stakeholder dynamics

T
HE startup world is well aware of the tension between Ghosh,
Moneybank, and Excel Fund — the fund that backed one of
India’s e-commerce giant Yeskart. The heart of the problem is
the control of the company. However, unless Zeu starts generating
positive cash flows and profits, Ghosh must continue to depend on
the deep-pocketed funds for financial support. Dealing with Noah
Fischer, widely seen as a maverick, hasn’t been easy either.
Moneybank did come on board with a USD255 million funding in
Zeu Electric, but it did so after the latter had already secured sizable
funding from Hexon Partners, Excel Fund, and Prakash Zaveri.
Moneybank has been investing in renewables, including EVs, in other
countries. While Ghosh may have reasons to believe that he has
earned some protection against takeover, especially after the funding
in September 2019 by Fuji Motors and Fin Motors, he may have to
watch Moneybank’s moves very closely.

18
n Where does Ghosh go from here?

Z
EU Electric is an audacious attempt in a nascent market and
success can almost surely make it a dominant player. However,
the curse of being a true pioneer (like Zeu Electric) is that there
are no established playbooks. When Ghosh started Zeu, he could look
at Nola, Plift, Biza, and Meishu to borrow ideas. But Zeu Electric has no
such examples to follow.
Further, EVs need to solve the range and charging infrastructure
problems before they see mainstream adoption.
While it is no surprise that platform strategy has remained at the heart
of Zeu Electric’s stated vision, it is unclear whether a platform approach
will be enough or whether Ghosh should focus first on building an
industry ecosystem of partners and other stakeholders.
Putting together a coalition of diverse players with shifting loyalties and
changing contracts is easier said than done, especially on a scale that he
has never attempted before.

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 Here are some unanswered questions:
n What are the strategy levers available to Ghosh, and how does he put
together a coherent winning strategy for Zeu Electric?
n Can Ghosh script a success story in a segment where there are no
playbooks to refer to? How will Ghosh negotiate this challenging path
while managing Zeu and its half a dozen initiatives?
n Can Ghosh assemble a team, delegate effectively and find a business
model to succeed? Does he have the organisational muscle to manage
the complexity when most of his trusted lieutenants have left and new
leadership hires are proving to be short-lived?
n Maintaining a robust charging infrastructure will be key to success.
What will be the implications on the overall ecosystem and business
model if non-conventional players make an entry into this domain or
some existing conventional partners go out of business? How can Ghosh
ensure a future-proof ecosystem of players?
n How can Ghosh manage the constantly evolving consumer and
supplier segment? Is it sufficient for Zeu Electric to be platform-centric?
Are there elements of strategy that should go beyond an IT platform?
n How can Ghosh create a partnership model that obtains B2B players’
alignment to the common strategic dimension, but yet remains
sufficiently flexible to operate?

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