How Deepinder Goyal’s Zomato entered into the Rs 1,000-crore club

Zomato, started in Deepinder Goyal’s home, went into the Rs 1,000-crore club the day he became a dad. Here’s the story of India’s hottest start-up.

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NEW DELHI: On the morning of 29 October, from about 9 am, Deepinder Goyal sat outside the labour ward in the corridors of the Max Hospital in Gurgaon, signing on dotted lines that his lawyers pointed him to.

His wife went into early labour the previous night and they had driven to the hospital. But he couldn't avoid work. His company was closing a new round of funding and as CEO and founder, his signatures couldn't be done without. So he had asked his colleagues to come to the hospital.

By 10:30 am, his undivided attention was called for inside as his wife went into labour. At 11:50 am, the 30-yearold engineer held his firstborn child — Siara, a baby girl — in his arms. At half past noon, he stepped out and turned his mobile phone back on.

Some colleagues were waiting with the final set of papers. He placed a bag on the nurse's counter for want of a table in the corridor and signed off on a major investment into his company.

The deal valued Zomato, the company he started in his bedroom four years ago, at Rs 1,006 crore ($161 million).

The founders' equity — the stake held by him, his co-founder and some employees — was now worth Rs 328 crore.

That morning, he became a father, and by the reckoning of some — particularly his investors Info Edge and Sequoia Capital — the entrepreneur best positioned to build a formidable global internet company out of India.

Zomato, if you have not used it yet, is a restaurant discovery website and mobile app. It lists information on restaurants — menus, photos, reviews curated for credibility and contact info — for 180,500 restaurants in 36 cities. It is currently in 11 countries (including India) and plans to be in 22 new countries in the next two years. The current round of funding is meant to bankroll this expansion.

It makes its money from ads restaurants place on their pages. Restaurants advertise with Zomato because of better targeting. They can pay only to be displayed when someone is searching for a location — 'Colaba', for instance — and further narrow it to be displayed only for 'take outs in Colaba'.

Goyal says revenues are now hitting Rs 3 crore each month — on an average, 35% of revenue is from overseas markets. All the money comes from the website. They are yet to start monetising the popular mobile app.

Deepinder Goyal and Pankaj Chaddah started Zomato (Foodiebay, in an earlier avatar) while still working as consultants at Bain & Co in Delhi. By the latter half of 2009, the website gained some traction and user feedback was excellent.

Goyal decided to give it a good shot and quit his job the day his wife, a Mathematics PhD, got a teaching job at Delhi University. Chaddah, younger to Goyal by two years, followed a few days later.

Even though they had both attended IIT Delhi (Goyal studied math and computer science, Chaddah graduated in mechanical engineering), they had only met at Bain. Both told their parents about their decision to quit only after actually quitting — that way there was no room for being talked out of it.


Among Foodiebay's growing throng of users was Sanjeev Bikhchandani, the founder of Naukri.com. He liked the service. His company, Info Edge India Ltd, put in $1 million in seed funding early on, in August 2010. The



company funded Zomato through four subsequent rounds, cumulatively investing $25.4 million. It now owns a 50.1% stake in Zomato.

Startup valuation is nearly as controversial as the Narendra Modi versus Rahul Gandhi pitch in an election year. Unsurprisingly, there are some who think that Zomato's current valuation is completely unjustified. "It's a completely cuckoo valuation.

An investor who has entered will be looking to exit at three times the valuation in a few years. Can Zomato get a valuation of Rs 3,000 crore in a few years? And who would the buyer be? Yelp? Would Yelp or someone else pay half a billion dollars for a company that didn't even make $2 million in the latest fiscal? Perhaps, but only if the greater fool theory holds. I don't think that's likely though," said Mahesh Murthy, an investor and outspoken critic of sky-high valuations for other tech companies such as Flipkart.

But there is no sure way of valuing a startup and big bets on companies with little revenue have paid off on occasion. Zomato clocked revenue of Rs 11.5 crore for the fiscal ended March 2013, up from Rs 2 crore the previous year. According to Goyal, this year, it is expected to clock Rs 30-40 crore in sales.

NAME-SHYAM KISHOR SINGH
              PGDM -1sem