Zomato was started in 2008 by Deepinder with Pankaj Chaddha. The website was initiated with a simple idea: of giving restaurant menus along with contact details of restaurants who took delivery orders on call. The idea was generated from a company canteen which was always delaying orders. They designed a website called foodlet.in & put up menus from several restaurants on the same. Customers had an option to order food online from the website. But in 2007, there was a dearth of online transactions. It seemed like the idea was born before time so the food delivery feature was stopped for time being. They renamed the website foodiebay.com as foodlet.com was not available anymore.

Soon restaurants saw the website getting traction and approached for advertisements on the same. Just after two years of being in business, the company was generating 6 lakh INR in cash every month with a team of 15 individuals.

By 2010, the company expanded to multiple cities. To the surprise of Deepinder he received an email from Sanjeev Bhikchandani, founder of www.naukri.com. They met at the head office and Sanjeev was convinced with this business model. It was synonymous with the classified business of Infoedge (parent company of Naukri.com). After conversation for a few hours with the Parent Management, a deal was signed –Infoedge was investing $ 1 million at 33% stake.

Mr. Bhikchandani recommended changing the name from Foodie bay as it would have conflicted with Ebay. Zomato & Forkwise were the options. ‘Zomato’ domain name was at $10k while ‘Forkwise’ was at $6. Deepinder suggested Forkwise and Infoedge insisted on Zomato.

As online food delivery was still not matured, Zomato explored new geographies. They went to Dubai where the ticket size was almost 4 times of India even though the population was lower. Thereafter, they launched in the UK, Turkey, Brazil, Newzealand, Portugal. Zomato soon realised they need to acquire local assets to be able to compete with the locals. This led them to understand the ground markets better. After launching in 10 countries within 6 months, there were half failures. Using this as a learning experience, they rectified and customized their products to the needs of the local market. This worked well.

In 2015- the 7th round of funding came from Infoedge & further a $ 60 mn came from Temsak. Zomato went bold with acquisitions of Urbanspoon at $52 mn and entered in the USA, Canada & Australia. Foodpanda was launched in 2012 and Swiggy in 2014. Zomato, although was happy not delivering and doing well in the search and discovery business globally. Though this did not last long. In 2015 sensing the changing scenario, Zomato launched food delivery option by going onboard with around 2000 restaurants in Mumbai, Delhi & Bengaluru in a matter of a few weeks. All was not gold, and lessons had to be learnt. Of the 105 food startups (in 2015) only 58 survived. They decided to retract online ordering options in the cities of Lucknow, Kochi, Coimbatore, Indore. The chances of sustaining in these markets was slick. Zomato didn’t enter China seeing the competition & concentrated on other attractive markets.

A combination of elements has to work in tandem to be able to create favorable conditions. Strength of the population of a country is vital but so are it’s strength of currency, internet penetration and population using online platforms. !!!! Around 2016, Mahesh Murthy cofounder of Seedfund, took to Twitter: “ Zomato took 1500 cr to do 97 cr sales and loss of 137 cr.” Deepinder replied – Will send books to read on how to build tech businesses which are profitable in long-term. In October of 2018, Zomato raised funds from Ant Financial, Alibaba’s payment affiliate at the Valuation of $2 bn. !!!!

Deepinder beams, “We have considered every round of funding as last round and kept our fundamentals right. If fundamentals are right investors will come. We keep away from battles that could drain us in the long term.” He owes this success to the carefully laid plans.

Categories: Finance


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