The much-speculated merger of homegrown ride-hailing unicorn with larger rival Uber is reportedly off the table. This development has took place because of Ola’s attempts to limit the influence of its largest investor, SoftBank Vision Fund, which also has a stake in Uber.
Recent news of Flipkart’s CEO change and forced sale of Snapdeal are the two prime examples of how a power shift in the boardroom can impact a founder’s control on the company. Alarmed by these shifts, Ola’s founder Bhavish Aggarwal has been limiting the control of its majority stakeholders including SoftBank and Tiger Global.
The company has recently added new investors on its board in the ongoing $500 Mn equity funding round. The new investors include South Korean automaker Hyundai and its affiliate Kia Motors, Flipkart cofounder Sachin Bansal and Mirae Asset-Naver Asia Growth Fund.
According to recent reports, Bhavish was also not present in the last month’s gathering of SoftBank portfolio companies. The meeting was reportedly called for the founders to meet the head of Saudi Arabia’s Public Investment Fund, Yasir Al-Rumayyan who has committed $45 Bn investment into SoftBank Fund.
Related Article: Ola Restricts SoftBank’s Rights To Avoid ‘Snapdeal Like’ Fate
Concerned by the receding shares and influence of founders in the company, many international startups such as Facebook, Alibaba Group, and Under Armour, have adopted differential voting rights (DVR) structures. DVR helps founders to maintain control over their companies inspite of holding relatively small shares.
Ola’s Consistent Efforts To Retain Power In Its Boardroom
Last month, IndiaTech, an advocacy group which represents Ola among other Indian startups, had reached out to Indian government asking for differential voting rights (DVRs) for Indian startup founders and promoters.
Commenting on the need for DVRs, IndiaTech CEO, Rameesh Kailasam told Inc42, “The absence of such enabling provisions similar to what exists in the US and other jurisdictions may see many of our promising startups that have acquired some critical mass getting sold or acquired soon as founders have no safeguards to control and run their companies further while their counterparts in other jurisdictions would have one that will become the differentiator.”
In 2017, Ola has also amended its Articles of Association to restrict its investors from increasing their stakes in the company. The amended clause mentioned that the transfer of equity shares by Ola investors with more than 10% share will need approval from the company founders.
In addition to this, Ola had added terms on SoftBank’s ability to influence the company’s boardroom matters too. Amendment has restricted SoftBank from appointing anymore director on the board without the approval of the founders.
[This development was first reported by ETtech]