Car-sharing startup Drivezy has sued its investor Yamaha, alleging the Japanese automaker stole its private intellectual property after it offered a full takeover. Drivezy contacted the Civil Court in Bengaluru in September, alleging Yamaha had offered a cash injection and takeover worth $100 million, but then refused to pursue the deal, two sources with knowledge of the dealings said. of the start-up.
The first source said Yamaha accessed Drivezy’s private and confidential data, including stacks of technology software and business and franchise partner contacts to instead launch a competing business in Karnataka. The development was first reported by start-up news site Entrackr on Wednesday.
“Drivezy was originally looking to raise a large Series B funding round in September 2019 and we almost reached a term sheet deal with a large private equity investor. But Yamaha then offered a more favorable deal at that time, so we took the deal with the Japanese MNC,” the source added.
Yamaha, however, insisted on due diligence before the term sheet, which Drivezy agreed to as he urgently needed cash for his expansion. “Yamaha’s board in Japan wanted to make a direct investment through its automotive arm rather than its registered venture capital arm and they agreed to an investment of $15 million.
Drivezy then decided to go ahead with the deal and hired one of the big four auditing firms to certify its books and the requested valuation of $100 million,” the source added. Calls and letters to Yamaha seeking comment on the matter went unanswered until press time.
Prior to the signing of this deal, Drivezy was one of the most funded mobility start-ups in the country, alongside other names such as Zoomcar, Bounce, Yulu, Revv and others. At the end of 2019, Drivezy had a large vehicle rental fleet of over 15,000 bikes and around 3,000 cars on its platform. The company also crossed a monthly gross merchandise volume (GMV) of $4 million (about Rs 27 crore) in July 2019, and the majority of cars were leased on the franchise model with operations in over 21 cities before. the pandemic.
Although Drivezy had a peer-to-peer sharing model, it had improved unit economics with hundreds of franchise partners it worked with in many cities. As part of the franchising agreement, franchise partners would lease multiple vehicles from Drivezy for a commission, while the startup also offered partners credit for vehicle purchases.
“During the due diligence phase, Yamaha had access to the contacts of these franchise partners, individual customers who shared the vehicle with Drivezy and the start-up’s proprietary vehicle tracking and software dashboard for owners. cars and bikes,” the previously mentioned sources said.
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However, after the Covid hit, Yamaha turned the deal into a merger offer where it offered up to $35 million for the acquisition of the Indian operations of Drivezy (DRIVEZY INDIA TRAVELS) who owned the assets on the ground. The Japanese manufacturer then created a new entity MOTO BUSINESS SERVICE INDIA (MBSI) to initiate the acquisition, according to the filing seen by FE.
“But the impact of Covid on mobility businesses has been very grim, and Drivezy has had to divest much of its vehicle assets to pay off debts which amounted to Rs 100 crore and more. However, the start-up has managed to pay over 80% of the outstanding debt to franchisees and other individual vehicle owners by early 2021,” the source familiar with Drivezy’s operations added.
The lawsuit further alleged that Yamaha’s proposed merger with Drivezy and MBSI was called off in May 2022 “with a confusing email.” The previously quoted source said that Yamaha India officials then started poaching Drivezy’s own employees and even started approaching franchise partners to acquire their assets without the knowledge of the start-up. “Drivezy has learned that the MBSI unit has also purchased a separate car rental license in the state of Bengaluru with the intention of operating its own vehicle rental platform,” the source said.
The lawsuit in the Civil Court of Bengaluru further named various Japanese employees of the main unit of Yamaha and also sought an injunction against MBSI and other entities of Yamaha India to start a car rental business in the country. The Bengaluru Court of Sessions has already admitted the lawsuit and issued a summons to Yamaha and set the next court date for November 14, 2022.
“Plaintiffs (Drivezy) are compelled to bring this lawsuit by reason of various illegalities committed by Defendants (Yamaha) seeking the remedies, among others for declaration, permanent injunction and restitution of accounts,” the lawsuit added.
Co-founded in 2015 by Ashwarya Singh, Abhishek Mahajan, Hemant Sah, Vasant Verma and Amit Sahu, Drivezy (formerly JustRide) has to date raised equity investments of $149 million. Investors in the Y Combinator-backed company include Das Capital, Axan Partners, Any Pay, Kima Ventures and IT-Farm.