Zomato Startup Success Story - Founders, Business Model, Funding, Case Study

Back in the days, we used to call different hotels and restaurants to place orders and call again for any corrections, directions and reservations. Then came apps and websites like Zomato, which changed the whole scenario and made it extremely easy for the consumers. Deepinder Goyal and Pankaj Chaddah founded Zomato in the year 2008 and revolunised this process of eating out and food delivery.

Zomato has hit a valuation of $12 Billion on August, 2021 after its recent funding round and IPO.

Let's Know more about Zomato Startup Success Story, It's Founders, History, Funding, Business Model, Competitors and Growth in this article ahead.

Zomato - Company Highlights

Zomato - Name, Tagline, and Logo

The founders changed startup's name from Foodiebay to 'Zomato' to make it more prominent and simple to memorize, Also primarily to end the confusion between website eBay and Foodiebay to people.

What is the Tagline of Zomato?

Zomato's tagline is "Never have a bad meal".

Zomato - Logo

Zomato - Founders & Team

Who are the Founder of Zomato?

The founders of Zomato are Deepinder Goyal and Pankaj Chaddah. Goyal and Chaddah both are IIT graduates and were working with Bain & Co in New Delhi before launching Zomato.

Founders of Zomato: Pankaj Chaddah and Deepinder Goyal

Who is Deepinder Goyal?

Deepinder Goyal is an IIT, Delhi alumnus. Goyal was an average student back at school but he eventually made his way to the IITs. After completing his graduation from there, Goyal was hired by Bain & Co, There he served as a Senior Associate Consultant for almost 4 years, after which he founded Zomato.

Who is Pankaj Chaddah?

Pankaj Chaddah is a BTech, Mechanical Engineering graduate from IIT, Delhi. Pankaj Chaddah completed his graduation and then went to join Bain & Co, where he served for 2.5 years before joining Deepinder to found Zomato. However, he resigned from Zomato in May 2018, where he served as a "conscience keeper and a support system during upheavals" as he had described his role, for more than 10 years. Chaddah founded Shyft (formerly known as Mindhouse) in 2019, where he currently serves as a Co-founder.

Gaurav Gupta, who initially joined as the Global Head of the Advertising sales of Zomato and was later promoted to the Co-founder position of the Company, then he resigned on September 14, 2021. Gaurav headed the supply of this food-tech company Zomato.

Startup Success Story of Zomato: How it Works

What is Zomato?

Zomato is an Indian food delivery startup and restaurant aggregator that zomato primarily provides concrete information, menus, and user reviews of the restaurants. Along with this, Zomato also has food delivery options from partnered restaurants of the selected cities.

Zomato's 12 Years Journey - Timeline

How was Zomato Started?

Zomato was started when the founders- Deepinder Goyal and Pankaj Chaddah were in their office and found so many people were waiting for a long time just to get a look of menu card. And at that moment, the idea to solve people problem was born in both minds and which led to launching of Zomato, formerly known as ‘Foodiebay’.

They uploaded the soft copies of the menu cards on the website first. Following this, everyone in the office started using their website which led to help people save time. Subsequently, this increased the visitors on their website and soon enough they upgraded their website to make it useful to everyone in the city.

Startup Launch of Zomato

When the founders launched this website, it wasn’t called Zomato back then, it was called Foodiebay. And it initially started out in Delhi, then the services were extended to cities like Mumbai and Kolkata.

With the tremendous user base and growth rates that Foodiebay brought in to the founders, they decided to modify it and take it international. And that’s when this venture started being called Zomato, as we know of it today. It was in 2010 when Foodiebay was officially rechristened as Zomato.

Zomato - Mission and Vision

Zomato states that their mission "is to ensure nobody has a bad meal."

Zomato co-founder Pankaj Chaddah had declared that the vision of Zomato "is to be the global platform when someone is looking for food locally."

Zomato - Business Model and Revenue Model

The main source of revenue for Zomato now is the advertisements channel that the portal offers to display. This accounts for most of its revenue followed by the commissions that it charges to the restaurants. It works on a commission business model.

Startup Challenges by Zomato

The most significant hurdle in the Zomato journey was to find a way to cover all the restaurants in all the areas in all the pivotal cities so that the consumers who hinge on them do not miss the finest restaurants in the locality. This milestone has been omnipresent since its inception and continues to drive considerable efforts on the venture’s part.

But this is not it. From time to time, Zomato faced numerous serious challenges that were "make or break" situations for the team. In 2015, Zomato had to lay off 300 employees to curb losses, which obviously had large-scale implications on the organization as 10% of this layoff was in the US. In the same year, in the States, Zomato had acquired Urbanspoon and rebranded the company as their own. Unfortunately, the rebranding did not come out as expected and the venture failed miserably.

In 2016, things went so out of control that as a result, Zomato had to roll back its operations in several countries including the US, UK, Chile, Canada, Brazil, Sri Lanka, Ireland, Italy, and Slovakia. And when they resumed presence, Zomato had to resort to remote services.

Then came the year when Zomato's existence went at stake when in 2017, it faced its biggest cyberattack with a hacker that had breached into 17 million user records from the company database. While its concerns were overpayment and user card & account details being accessed by the hacker, Zomato soon claimed that only the hacker could only have access to the names, user IDs, email addresses, usernames, and password hashes. Soon after, this breach was resolved by communicating with the hacker and as it came out he just wanted to prove that there were security loopholes in the system.

In 2019, the #logout campaign surfaced when the restaurants listed on the portal called out on it for eating into their profit margins through Zomato Gold and Infinity Dining features, a Zomato feature that provided heavy discounts. And it so happened that the restaurant association highlighted these issues like “unreasonably high commissions, payment terms and arbitrarily applied additional charges” that the restaurants were being charged to be a part of the Zomato initiative, Zomato Gold.

Post this campaign, Zomato discontinued the Infinity dining service, also revised and altered Zomato Gold rules while laying off, and also faced tremendous protests from the partnered restaurants.

Despite all of this, Zomato registered a rise of 177% of restaurant partners and got on board an additional 73K restaurants. Zomato has over 1.4 million listed restaurants and 12K+ restaurant partners aligned with its app, as of August 2021.

Zomato has seen a number of controversies and one of the recent is the incident where a customer service representative of the company didn't know Tamil and instead of giving a customer from Tamil Nadu a refund lectured him on the importance of knowing "Hindi", as the national language. The customer eventually took to Twitter and soon the #RejectZomato trend was popularized on October 19, 2021. This incident questioned the commitment of the food delivery major towards its non-Hindi speaking community of India and led to the expulsion of the customer support staff on the grounds of her behavior being “against the principles of sensitivity”. The leading food tech company also promised of establishing a local Tamil call center soon in Coimbatore. However, the customer support agent was reinstated after 3 hours of this incident. Zomato CEO, Deepinder Goyal later tweeted:

“An ignorant mistake by someone in a support center of a food delivery company became a national issue. The level of tolerance and chill in our country needs to be way higher than it is nowadays. Who’s to be blamed here?”

Competitors of Zomato

Though Zomato is very predominantly present in the industry, it does face a lot of direct and indirect competition. Zomato faces direct competition from Swiggy, and indirect competition from regional food delivery applications like SendMe, DoorDash, and others.

Zomato - Funding & Investors

To date, Zomato has raised close to $2.1 billion in funding. Recently (Feb 2021) Zomato closed a $250 million funding round, led by existing investors Tiger Global, Kora, and Fidelity. Zomato's valuation touches $5.4 Billion. In this round, Kora pumped in $115 million, while Fidelity invested $55 million and Tiger Global has invested $50 million.

Zomato raised funds worth Rs 4,196 crores from its marquee anchor investors, which is supposed to be a part of the anchor book allocation. This fundraising round comes a day before the brand goes public, as per the reports on July 14, 2021.  

Info Edge India is Zomato's largest shareholder with over 18.4% stake

Here is a list of all the funding rounds of Zomato -

Acquisitions by Zomato

In 12 years of its existence, Zomato has acquired close to 14 companies. Their most recent acquisition was Uber Eats - India on Jan 21, 2020. They acquired Uber Eats - India for $206M.

Zomato has declared that it would be acquiring around 9.3% stakes in Grofers as per the latest filing with the Competition Commission of India. Though this stake is a minor one, the company is looking to acquire Grofers in the long run, added some sources on request of anonymity.

Through its tweet dated August 13, 2021, the Competition Commission of India (CCI)  has sanctioned the Zomato-Grofers deal where the former company will be acquiring 9.3% stakes in Grofers.

Zomato - Growth and Revenue

Zomato has grown far and wide ever since it brought in the disruptive idea of food delivery in the Indian ecosystem of startups. Here's a look at Zomato's growth highlights:

• By 2011, Zomato had successfully established a monopoly in Delhi NCR and had moved to other Indian cities like Pune, Bangalore, Chennai, Hyderabad, and Ahmedabad.
• Zomato also kept up with the smartphone boom and timely launched its mobile application. This greatly contributed to its growth.
• By 2012, Zomato had begun its overseas operations, full-fledged in countries like UAE, Sri Lanka, Qatar, United Kingdom, Philippines, and South Africa.
• In 2013, it added Turkey, Brazil, and New Zealand to its ever-growing list of expansions.
• In 2017, Zomato claimed that it was operating profitably in all 24 countries along with rolling out a zero-commission model. The company claimed that its revenue grew by 81% in this particular year.
• In the same year, the online ordering services of the company crossed the mega milestone of 3 million orders per month.
• If we look at the numbers, Zomato has recorded a 225% rise in revenue in the first half of Financial Year 2020.
• Zomato delivered its 1 billionth order in July 2021.
• Zomato launched Zomato Wings, a platform that is designed to connect investors with the restaurants. “We hope to build the go-to platform for venture capital firms, angel investors, family offices, etc. that are looking to make private investments in restaurants and cloud-kitchens,” Zomato CEO Deepinder Goyal mentioned in a blog. However, Goyal has already made it clear that Zomato would only be a facilitator of fundraising for the restaurants and will not be investing in any of its partner restaurants.

Zomato decided to shut down their grocery delivery service as per the reports dated September 13, 2021. The company has informed its grocery partners via email that the company will put an end to its pilot service with effect from September 17, 2021. While addressing the same a Zomato spokesperson said, "We have decided to shut down our grocery pilot and as of now, have no plans to run any other form of grocery delivery on our platform," a Zomato spokesperson said.

The food aggregating giant had started its grocery delivery business when the Covid-19-induced lockdown was announced in 2020 and the restaurants and eateries were closed all of a sudden. However, ever since India started unwinding, Zomato has been back in line with its food delivery service. This is why the company had earlier stated that it would be scaling down its grocery deliveries in September 2020, within barely five months of its launch. However, Zomato again resumed delivering groceries online through its apps post-IPO, but the company has finally decided to shut it down completely, as of September 13, 2021.

The cause of such a decision can be associated with poor customer experience, gaps in order fulfillment, and the sudden surge in competition from its rivals post-lockdown. The food delivery giant has invested around $100 million in the grocery delivery platform, Grofers, and believes that the investment would be generating better income for the company than its effort to boost in-house grocery delivery.

Zomato reportedly closed its Singapore and United Kingdom (UK)-based subsidiaries in August 2021. The closure of the businesses of Zomato has also been disclosed in its stock exchange filing on September 1. Previously the company has also wound up its US subsidiary Nextable Inc.

The company has also announced to pull down the shutters on its nutraceutical business hours after it declared to exit its grocery delivery business. The nutraceutical line of products consisting of health and fitness products was started in 2020. In view of tapping this opportunity, Zomato appointed Chief Operating Officer Gaurav Gupta as the head of this division for five years. Gupta was also quoted as saying, "This business can potentially be a large value driver for Zomato in the future," as soon as he was suggested the job role.

However, the company finally decided otherwise and had to take this harsh decision at a time when the government is looking to become stringent about private label norms for marketplace businesses in the country.

Zomato - Latest News

January 22, 2022 - Zomato's stocks dip to an all-time low (8.90% lower than the previous day), at Rs 114.10 on the BSE at the end of the week.

January 17, 2022 - Zomato shuts down its South African operation after putting an end to its US and UK subsidiaries. With the closing of Zomato South Africa Proprietary (Pty) Ltd., the company aims to further its hold in India.

January 3, 2022 - In an unprecedented order spike during the New Year's eve, food delivery giant Zomato recorded to deliver over 2.5 mn orders packing in 7100+ orders per minute. The Deepinder Goyal-led food delivery unicorn reported to deliver 4250 orders per minute during the same time in 2020.

OMG! 2 million orders! First time in a single day. Three more hours to go... https://t.co/ahODGjXWdF pic.twitter.com/2omWRQSRve

— Deepinder Goyal (@deepigoyal) December 31, 2021

December 3, 2021 - Zomato has invested close to $100 mn in Curefit at a valuation of around $1.56 bn and is one of the leading investors of the fitness brand.  

December 1, 2021 - Zomato is currently looking for ideal candidates to join the team having experience in investment banking. It is also inviting early and mid-stage institutional investors who want to explore equity investments in restaurants and cloud kitchens. The new Zomato Wings will serve as a "platform to connect restaurants with investors. We are identifying budding restaurants who could become the next big chain if they receive equity funding from growth-focused investors," mentioned Siddharth Jhawar,  Zomato VP, Global Growth, on a Linkedin recruitment update.

November 30, 2021 - Zomato launches Zomato Wings as a platform to connect investors with the restaurants.

November 10, 2021 - Zomato sells out its fitness facility arm, Fitso to Cure.fit for $50 mn, which in turn, makes the foodtech giant the owner of around 6.4% of the shares of Cure.fit, worth $100 mn.

October 19, 2021 - Zomato fires its customer service executive after linguistic preference issues and raging reviews on Twitter. The company again reinstates the person in question after 3 hours.

September 14, 2021 - Zomato, Co-founder, Gaurav Gupta, who headed the supply of the food-tech startup, has resigned.

September 13, 2021 - Zomato also ends its brief stint with nutraceuticals and has removed the Nutrition tab on its app, which used to contain fitness supplements, wellness, and other nutraceutical products.

September 13, 2021 - Zomato has decided to shut down its grocery delivery service business with effect from September 17, 2021, as per the company's email to its grocery partners. It will not run any grocery delivery services anytime sooner, said Zomato spokesperson.

July 1, 2021 - IPO-bound food delivery giant, Zomato is at the final stages of acquiring around 9.3% stakes in Grofers, the rising e-grocer of the country as per the latest filing with the Competition Commission of India. Furthermore, Zomato is also looking to acquire equal stakes in Hands on Trade Private Limited, the wholesale entity of Grofers.

February 23, 2021 - Zomato has closed a $250 million funding round, led by existing investors Tiger Global, Kora and Fidelity. Zomato's valuation touches $5.4 Billion.

January 25, 2021 - Zomato Plans come up with an IPO in the first half of 2021. They will launch upto $1 Billion in IPO. After the recent fundraise of $500 million, the company is valued at $5.5 Billion.

January 22, 2021 - Zomato raised $500 million from their existing investors along with Ant Group and Sunlight Fund.

December 19, 2020 - Zomato raised $660 Million in the funding of Series J round led by Kora, Tiger Global Management. This round shot Zomato valuation up to $3.9 Billion.

To help the restaurant sector, we will also forego the payment gateway charges incurred on all such orders.

We have already seen more than 200% increase in takeaway order volume in the last few months.

[2/n]

— Deepinder Goyal (@deepigoyal) November 18, 2020

Zomato - Hyperpure

Hyperpure by Zomato is changing the way restaurants work. It is Zomato’s B2B foodtech vertical.  Hyperpure allows restaurants to buy everything online from vegetables, fruits, poultry, groceries, meats, seafood to dairy and beverages. It claims to be working directly with farmers, mills, producers, and processors to source these products thus ensuring quality and consistency.

It is an initiative by Zomato to provide fresh, hygienic, high-quality ingredients and supplies.

Zomato - Zomato Payments

Zomato announced the incorporation of a new subsidiary, Zomato Payments Private Limited, which will be wholly owned by the company. While filing, Zomato has disclosed that it has incorporated the subsidiary with a subscription of 10,000 equity shares of Rs 10 each aggregating to Rs 1,00,000.

The Indian food delivery giant is looking to work as a payment aggregator and offer payment gateway services, as per the RBI guidelines with its freshly incorporated subsidiary. The all-new Zomato payments will serve as a payment and settlement system, along with offering payment gateway services, and will also act as a payment solution for paying goods, services, and utility bills with the help of mobile phones.

Zomato - Zomaland

Zomaland is India's Grandest Food and Entertainment Carnival that brings together some of the top eateries, musicians, DJs, comedians, and interactive installations and carnival games, under one roof. It is like the offline version of its Zomato Collections, where it curates and brings the best restaurants in the city together.

It is a flagship event of Zomato. In 2018, The debut edition of this carnival across Delhi, Bengaluru, and Mumbai saw over 100,000 visitors. Since then it has grown to be held in over 10 cities and has also partnered with major brands including the Singapore Tourism Board.

Zomaland

Revenue

Zomato's FY20 revenue is Rs. 2,486 Crores. Its revenue was Rs. 1312.6 Crores in FY19.

Zomato's Revenue Breakdown is as follows:

Zomato has filed its quarterly earnings report for the first time ever after it has gone public in July 2021. According to the report, Zomato has adjusted gross revenue of Rs 1,160 crore, which consists of Rs 844 crore of revenue from operations and Rs 316 crore worth of customer delivery charges.

Zomato - Awards and Achievements

Zomato won a range of prestigious awards throughout the years. The foodtech giant even bagged the top honors at the seventh edition of The Economic Times Startup Awards, including the Startup of the Year award in 2021.

Zomato - Partnerships

Being active since 2008, Zomato has also seen a lot of partnerships with a diverse range of national and international companies including restaurants, cafes, fintech companies, and more. To mention some of the prominent partnerships of Zomato are:

Zomato has partnered with the government of India for a street food project on February 5, 2021

Zomato joined hands with InCred to extend credit facilities to restaurant partners on December 21, 2020

Zomato collaborated with RBL Bank on March 2, 2020, to launch "Edition Credit card" powered by Mastercard

Zomato and BioD Energy had collaborated to reduce the wastage of cooking oil in the country on October 21, 2019

The company partnered with Paytm to expand its food ordering business online in India on January 18, 2019

Zomato - Future Plans

Zomato is currently looking to focus on its Indian food delivery business as of now after closing most of its international businesses. Zomato is forecasted to grow at a CAGR of 40%.

Zomato - FAQs

What is Zomato's Tagline?

Zomato's tagline is "Never have a bad meal".

Who are the Founders/Owners of Zomato?

The founders of Zomato are Deepinder Goyal and Pankaj Chaddah

When was Zomato founded?

Zomato was founded in 2008 by Deepinder Goyal and Pankaj Chaddah at Gurugram, India.

How does Zomato make Money?

The main source of revenue is the advertisements channel that the portal offers to display. This accounts for most of its revenue followed by the commissions that it charges to the restaurants. It works on a Commission Business Model.

Is Zomato Indian Company?

Yes. Zomato is headquartered in Gurugram, India.