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How Deepinder Goyal founded a $2.5 billion foodtech business


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Zomato, the restaurant discovery service, has almost become synonymous with the word ‘food’. It has earned itself an estimable position in the Indian startup scene. Not to mention the head-turning advertisements that it uses to market itself and its new schemes. Zomato has seen exponential growth since its inception in July 2008. It has its headquarters in Gurgaon, Haryana. With its content sets it apart, Zomato is the sole restaurant and nightlife guide with menus, pictures and map locations.

The segment that Zomato serves comprises of the young population and working professionals. The startup ensures that the users make an informed choice before spending their hard earned money on food from a particular restaurant. The team gathers information from restaurants on a regular basis to make sure the data is accurate.

Not only does the company provide information about food outlets but also allows users to order food online. One can also make reservations at a restaurant of their choice on the app. This feature was not a part of the rudimentary business model but was added later in 2015. Zomato felt the need to expand its reach with the growing competition and customer demand.

Founder and CEO, Deepinder Goyal, said in a statement, “”We want to give our app a human touch. There is a story behind every delivery executive that comes to deliver food to us – they aren’t just a dot on a map that you can track. This is our endeavour to bring the larger community closer to each other, and also enable our customers to help these delivery executives realise their dreams for themselves and their families.”

Deepinder Goyal, now Founder and CEO of Zomato, along with a friend of his, Prasoon Jain, started a venture in Delhi NCR called ‘Foodlet‘. They came up with the idea when they found that foraging for restaurants and food menus was a very cumbersome task. Thus, an idea for a restaurant directory struck their minds.

Foodlet can be identified as a less polished version of Zomato which did not go far. Prasoon Jain soon left for Mumbai leaving the venture behind. It was a tumultuous phase for Foodlet which marked a period of struggle for Deepinder Goyal. This was when Pankaj Chaddah stepped in to bolster the growth of the innovative venture. Deepinder Goyal and Pankaj Chaddah started a new company in 2008 under the name ‘Foodiebay‘ while the primary idea remained the same.

With a considerably small team of merely six individuals, Foodiebay grew beyond anyone’s expectations. In a span of only 9 months, it became the largest restaurant directory in the Delhi NCR region in the latter part of 2008. The company operated for two years and gained momentum. Owing to the growing popularity of Foodiebay, the founders felt the need to rename it to ‘Zomato‘ in November 2010.

By 2011, Zomato had started operating in Pune, Bengaluru, Chennai, Hyderabad and Ahmedabad. It further branched overseas to the United Arab Emirates, Sri Lanka, Qatar, the United Kingdom, the Philippines and South Africa. In 2013, the company launched in New Zealand, Turkey, Brazil and Indonesia with its website and apps available in five languages: Turkish, Brazilian, Portuguese, Indonesian and English. Presently, the apps and websites are available in 10 languages. Zomato expanded its services to  Portugal, followed by launches in Canada, Lebanon and Ireland in April 2014.

The acquisition of Seattle-based food portal Urbanspoon marked the firm’s entry into the United States, Canada and Australia and brought Yelp, Zagat and OpenTable into direct competition with it. Zomato also acquired MapleOS in 2015 to target a new market and build a new customer database.

In September 2017, the company claimed to have turned profitable in all the 24 countries that it presently operates in. Moreover, it had announced the implementation of a ‘zero commission model’ to help uplift small-scale restaurants and catalyse their growth. The company claimed that their revenue grew by 81% that year.

In 2015, Zomato acquired Urbanspoon in the States and rebranded the company as their own. This acquisition was a major setback having failed miserably because the venture did not work out according to plan. In the same year, the company had to lay off 300 employees to recover from losses. 10% of these layoffs happened to be from the United States.

2016 proved to be one of the tardiest financial years for the startup with Zomato having to rollback its operations in 9 countries.

The most astronomical setback that the 10-year-old startup has faced, happened in the month of May 2017. A hacker breached the security system and gained access to 17 million user records. People expressed concern about overpayment and access to card details but the company claims that only the names, user IDs, email addresses, usernames and password hashes had been disclosed.

However, they found a way out of the predicament after having a conversation with the hacker. Apparently, he only wanted to prove that there were loopholes in the security system.

Deepinder Goyal is the co-founder and CEO of Zomato. Goyal hails from Muktsar, Punjab. He is an IIT Delhi Graduate. He graduated in 2005 with a degree in Mathematics and Computing. Prior to starting Zomato, Deepinder worked as a management consultant with Bain and Company in New Delhi.

It was at Bain that Deepinder conceived the idea of an online restaurant directory after noticing a surging demand for food menus and good restaurants among his colleagues. He left Bain in 2008 to start Zomato (then Foodiebay) out of his apartment and has since overseen strategy and product development in the company.

On the other hand, Pankaj Chaddah was the COO of Zomato in addition to being the co-founder. He is from Gurgaon, Haryana. With a degree in BTech, Mechanical Engineering, he graduated from IIT Delhi in 2007.

He worked at Bain and Company in New Delhi before founding Zomato in 2008. Chaddah worked at the position of overseas sales and operations manager. He was also responsible for mobile development and distribution of the company across various platforms. Pankaj Chaddah recently hung his boots at the food technology firm that he co-founded. He quit in the month of March in 2018.

Between 2010-13, Zomato received its biggest funding of approximately US$16.7 million from Info Edge India, giving them a 57.9% stake in Zomato. In November 2013, it raised an additional US$37 million from Sequoia Capital and Info Edge India.

In November 2014, Zomato completed another round of funding of US$60 million at a post-money valuation of ~US$660 million. This round of funding was being led jointly by Info Edge India and Vy Capital, with participation from Sequoia Capital.

In April 2015, Info Edge India, Vy Capital and Sequoia Capital led another round of funding for US$50 million. This was followed by another US$60 million funding led by Temasek, a Singapore government-owned investment company, along with Vy Capital in September.

In October 2018, Zomato raised $210 million from Alibaba’s payment affiliate Ant Financial. Ant Financial received an ownership stake of over 10% of the company as part of the round, which valued Zomato at around $2 billion. Zomato had also raised an additional $150 million also from Ant Financial earlier in 2018.

Currently, Zomato has 1000-5000 employees working under it. Its net worth is 237 Crore as of March 2018 after the latest funding round. The revenue of the startup is $74 million as of 2018 which shows a 45% growth in revenue as compared to last year.

The operating cost as of 2018 is $11 million as compared to $15 million in 2017. The company has 280k+ active subscribers across their two subscription programs: Zomato Gold and Zomato Treats. The app has been downloaded more than 10 million times on Play Store.

Zomato has a host of competitors that are trying to make their mark in the food technology business. Some of them are: Dine Out, Uber Eats, Foodpanda, Swiggy et cetera. While Uber Eats is rather new, it has 30 million app downloads on Play Store. It is in close competition with Zomato and its parent company, Uber, has given it an impetus in the market owing to the already established trust.

The estimated annual revenue of Uber eats is $10.8 million while Dineout’s estimated annual revenue is $11.5 million. Swiggy earns annual revenue of $20.3 million with Sriharsha Majety as its CEO. Foodpanda, on the other hand, earns $2 million as annual revenue. These startups can potentially affect the growth of Zomato in the near future.

Earlier this month, Zomato acquired Lucknow-based drone startup TechEagle Innovations. TechEagle was founded by Vikram Singh Meena, an IIT Kanpur alumnus and manufactures unmanned aerial vehicles with a focus on custom-made drones capable of carrying up to 5 kgs of payload.

For the past few years, there had not been any technological conversations about food tech players in India. They remained in the stories only for offering huge discounts and grabbing large chunks of venture money. However, Zomato’s latest development may open up a whole new chapter for food tech businesses in India. And with the announcement of India’s drone policy, startups like Swiggy and Uber Eats may also enter into the drone delivery sector to compete with Zomato.

The waters have been choppy for Zomato in the last few years but things are certainly leaning on a positive side since 2017. With potential products and services such as Zomato Gold, Zomato Base and Zomato Treats, the startup is definitely gaining popularity among the masses. Zomato has experienced its share of crests and troughs but has always put its best foot forward. Do you agree? Please share your opinions in the comments.

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