There aren’t many Billion Dollar Unicorn companies coming out of India. But here is an interesting story of restaurant search and discovery portal Zomato, which is showing remarkable growth both within and outside the country.
Gurgaon, India-based Zomato was founded in 2008 by IIT graduates Deepinder Goyal and Pankaj Chaddah. Prior to setting up Zomato, Deepinder had started an online ordering food portal soon after graduating from college. But the service did not take off. Deepinder quit the business and joined Bain and Company for three years. But his entrepreneurial spirit was still alive. While working at Bain, Deepinder met up with Pankaj who had joined Bain after graduating from college.
The idea of Zomato came into being when the two founders noticed that a lot of people were lining up in their office cafeteria to look at the menu cards and order food. They realized that they could help these people by simply putting these menu cards online. Soon, Zomato, which was then known as Foodiebay, was born. Once they saw this business take off, the founders quit Bain and focused on Zomato full-time.
Zomato is an online and mobile restaurant search and discovery service that has a portfolio of over 300,000 restaurants across 22 countries. Through their portal, users can access restaurant menus, photos, locations for GPS, and even share ratings and reviews of restaurants. Zomato also has an active social network as it allows its users to create their own network of foodies. Through the social feature, users can check in at restaurants with friends and save a personal foodie timeline of their food memories. They have grown significantly since inception and have a following of over 30 million monthly visitors globally.
Earlier this year, Zomato also entered the US market with the acquisition of Urbanspoon. The terms of the deal were not disclosed, but analysts value the deal at around $50 million-$60 million. The acquisition will help Zomato increase its traffic from an estimated 35 million monthly visitors to over 80 million a month.
They have also acquired payment platform MaplePOS and integrated it into their point-of-sale system Zomato Base. The integrated service will now be able to offer restaurants a cloud-based POS system with features like menu and inventory management and analytics.
Zomato has also been expanding their service offerings and recently announced plans to offer food delivery. The food ordering service has been launched in India and will allow users to order food directly from their platform with their 2,000 restaurant partners. Zomato plans to expand this to over 10,000 restaurants. As part of the offering, Zomato will accept the orders that are placed on their website. They have also provided iPads to restaurants, which will be fitted with an app to convert it into an order hotline from Zomato. Once orders are delivered, users will be asked to rate their experience and these ratings will be displayed on the restaurant’s Zomato profile page. Zomato is looking to charge a commission from the restaurant for each order.
As of now, though, Zomato earns revenues primarily through advertising. They have native advertising on their apps and site and also earn advertising revenues by charging restaurant owners a fee for publishing promotional offers through Zomato’s listings. They do not disclose their detailed financials, but according to market analysts, the company ended its fiscal 2014 with revenues of $16 million.
They have been venture funded so far with $163.8 million received from investors including Info Edge, Sequoia Capital, and Vy Capital. Their last round of funding was held in April 2015 when they raised $50 million at a valuation of over $1 billion, helping them enter the Billion Dollar Unicorn club.
Obviously, the revenue and the valuation of the company don’t exactly line up. The Indian venture market is in a bit of a bubble right now, and this is one of the companies that will have a hard time if and when the bubble bursts. It is wildly over capitalized, and at terms that make no sense.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.