RISE of Zomato - Never have a bad meal

The most enduring startup journey usually starts with solving a problem faced by the founder. Even if the idea is great, there’s a big difference between having a great idea and execution of the idea and then creating a successful startup company.

Business Model

The main income source for Zomato is the revenue that it collects from the advertisements that their portal has to offer. They also have commission model where most of the revenue is collected as commissions that it charges to the restaurants. It works on a commission business model.

HOW IT ALL STARTED

Deepinder Goyal had noticed that he and many of his colleagues used to queue up at the pantry to look for menus to order food. It used to waste a lot of their essential time. This gave him an idea to create an online directory of food menus. The idea that brew in his mind led to the foundation of the most successful companies.

Later, Deepinder with his friend Prasoon started a little online directory called Foodlet. However, in the times when running a startup was as best a side business, Prasoon moved to Mumbai and left behind Foodlet as a venture. This didn't stop Deepinder. He never gave up on the idea and collaborated with Pankaj Chaddah, a junior of his from IIT Delhi to collect the menus for their consulting friends, they launched FoodieBay.com.

Goyal used to work on the website on the weekends along with his wife and her younger sister. Since all of them had full-time jobs, they would drive around the city over the weekend, collecting menus from different restaurants, scanning them, and putting them online.

The website was made live on 26th January 2008, which also happens to be Goyal’s birthday. With menus of about 1400 restaurants, FoodieBay became the biggest restaurant directory in the Delhi NCR region. The free service was taking off and such was the interest of customers with the venture that they started giving response about various restaurants and their food.

By 2010, Zomato had firmly established as the market leader for online listings in Delhi-NCR. They started building a presence in other cities like Pune, Bangalore, Chennai, Hyderabad, and Ahmedabad as well. It was advised to Goyal and his team about how the last 4 letters of Foodiebay refered to another prominent internet company. Changing its name now would get rid of any copyright and trademark issues in future.

Goyal and team agreed and over the next few weeks, FoodieBay became Zomato. The word Zomato was taken as it rhymed with tomato, and was nonsensical at the same time. In November 2010, one day when Chaddah and Goyal were having lunch at a cafe in Ambience Mall, Gurugram it dawned on them that most people visiting the mall did not know about all of the eating joints on the mall’s fourth floor. The co-founders got into a discussion while they continued eating. By 2010, Zomato was now an application on Google’s Android operating system. It helped that the smartphone wave was around the corner and mobile apps had become all the rage. The application began to take off.

The company had around 35K menus on its app and was clocking in revenues of roughly INR 60 lakhs a month, which were doubling every quarter. Zomato exploded out of the gates in 2012. The company soared from 1Mn monthly unique visitors in 2011 to 8Mn unique visitors by the end of 2012. With sufficient capital and fast-growing business, Zomato decided to take its

service globally. Innovation, experimentation and evolution as a way to expand and grow would become Zomato’s trait.

With great success in the country, the company was expanded outside India to Dubai. Company saw its foray into South Africa, UK, UAE, Philippines, Sri Lanka and Qatar while 2013 saw it entering Brazil, Turkey and New Zealand. The company expanded to as many as 11 countries and established a presence in 35 cities in the year. To quickly build its presence in new markets, it went on a monthly acquisition spree. In Jun 2014, it acquired New Zealand based company MenuMania. In early 2015 it acquired Urbanspoon to swooped into the US market and marked its sixth acquisition. With a presence in 22 countries and 1Mn restaurants globally, it became a unicorn with a Series F round in Apr 2015. In Sep 2015, it also entered the last-mile delivery business through Zomato Order seeing the rapid rise in last mile as a market.

In August 2019, the restaurants called out on Zomato for eating into their margins through Gold* and Infinity Dining feature, which provided heavy discounts. The restaurant association put the highlight on the issues such as “unreasonably high commissions, payment terms and arbitrarily applied additional charges” that restaurants have been manipulated to be a part of Zomato Gold. After #logout campaign, Zomato discontinued Infinity dining service, altered Gold rules in the middle of multiple rounds of layoffs. The controversial Zomato Gold service has registered a 180% increase with 1.4 Mn users.

Listening and building for the customer would become key to Zomato’s DNA. According to CrunchBase, Zomato has raised a total of $972.6M in funding over last 16 rounds. Zomato is funded by 14 investors. Zomato has acquired 13 organizations. Their most recent acquisition was Uber Eats - India on Jan 21, 2020, for $206M.

Update* - Zomato gold is now Zomato pro.