’20 Under 20′ Thiel Fellow bags $25M for his Airbnb-esque OYO Rooms in India

OYO Rooms had its genesis as Oravel, which was modeled on Airbnb. It got initial backing from Mumbai-based accelerator VentureNursery and seed funding from DSG Consumer Partners and Lightspeed Venture Partners. But the Airbnb model didn’t quite work for Oravel, the problem being lack of control over providing a standardized experience.

So last year, it pivoted to a marketplace for branded budget hotels. Initially, it focused on Gurgaon, and in the last six months, it scaled up to 200 hotels in 10 cities across India. Sequoia Capital came in as an investor in Oravel, which was rebranded as OYO Rooms. Now it has raised US$25 million from US-based Greenoaks Capital and the existing investors.

Its young founder Ritesh Agarwal was a teenager when he started OYO Rooms’ precursor Oravel three years ago. He was selected for the 20 Under 20 Thiel Fellowship, instituted by venture capitalist Peter Thiel to encourage teenagers to explore alternatives to college. It seems to have hit the mark with Agarwal.

Although the startup is an aggregator, which does not own the listed rooms, they are called OYO Rooms on the website with a description of amenities and location, but no mention of hotel names. It’s like an Uber for hotel rooms – the customer is promised a certain level of service without much information on the owner of the property.

A big provider of budget accommodation in India is Stayzilla, which has a hybrid model: it has something for everyone, from hotels, homestays, and peer-to-peer rentals à la Airbnb to guest houses, jungle lodges, and even boat houses. It lists 20,000 properties in 1,200 locations and raised US$20 million in a series B round just last month to expand further.

But Agarwal says, “We don’t see Stayzilla as competition. Hotel chains are our competition.”

In other words, OYO Rooms wants to stay focused on its new model, having burned its fingers with Airbnb-style private accommodation. Now, with the fresh funding, it aims to partner with over 1,000 hotels in 25 Indian cities by the end of the year to get more rooms under the OYO brand.