When you order food online, you mostly choose either the red or the orange app.

You know what I’m talking about, right?

With its 80 million+ active users, you might have used Zomato at some point.

Today, with a 55% market share in India, Zomato has grown into a global food-tech powerhouse, serving millions of users across more than 24 countries and over 3200+ cities.

Deepinder Goyal and Pankaj Chaddah, both from IIT Delhi, combined their tech background and entrepreneurial spirit to create this food-tech giant.

The inspiration for Zomato struck when Deepinder and Pankaj were working at Bain & Company. They noticed their colleagues struggling to find updated menus and reliable restaurant information.

This simple observation sparked an idea: what if there was an online platform that could provide comprehensive and accurate details about restaurants?

They thought of a service that could offer menus, reviews, ratings, and more—all in one place.

This led to the groundbreaking creation of Zomato which revolutionized the food delivery sector.

The Problem and the Solution:

Before Zomato came onto the scene, finding a good place to eat or getting food delivered was often a hit-or-miss experience.

There were several pain points that food lovers and restaurant-goers faced, and Zomato's founders saw these problems firsthand.

1. Inconsistent Restaurant Information:

   Before Zomato, finding basic details like menus and hours meant calling several restaurants. Information was scattered and outdated, making it tough to plan meals.

   Zomato solved this by creating a detailed, updated database with menus, photos, hours, and more, making it easy for users to find all they need in one place.

2. Limited Online Presence of Eateries:

   Few restaurants had websites, and even fewer were user-friendly. This meant discovering new places was often a matter of chance. Smaller or new restaurants struggled to get noticed.

   Zomato’s platform let restaurants of all sizes list their details easily, boosting their online presence and helping diners find a wider range of options.

3. Difficulty in Finding Reliable Reviews and Ratings:

   Traditional reviews were slow and often biased. Early online reviews were inconsistent, making it hard to judge a restaurant’s quality.

   Zomato introduced user-generated reviews and ratings, giving a range of perspectives and building a trusted resource for diners to make informed decisions.

Launched in 2008 and originally named “Foodiebay”, the platform quickly became NCR's largest restaurant directory within nine months by providing users with detailed information on restaurants, menus, and reviews.

In 2010, it was rebranded to Zomato and expanded to other cities like Bengaluru, Ahmedabad, and Pune.

In 2012, it began overseas expansion, including countries like the UK, Philippines, and South Africa.

It expanded rapidly, despite the hurdles. Let’s see how.

Initial Challenges:

Starting a business is never easy, and Zomato faced its fair share of hurdles in the early days.

Initial Challenges:

• Building a Reliable Database: Collecting menus, photos, hours, and contact info for many restaurants was a big task.

• Convincing Restaurants to List: Many restaurant owners were unsure about the benefits of being online.

• Competing with Other Apps: There were many other food apps, so Zomato had to work hard to stand out.

• Technical and Logistical Issues: Setting up a reliable delivery network and making sure the app worked smoothly was tough.

How Zomato Navigated Challenges:

• Partnership with Restaurants: Partnered with restaurants to give them more visibility and attract more customers, which helped build a strong database.

• User-Generated Content: Encouraged users to share reviews, photos, and experiences, making the platform lively and authentic.

• Investment in Technology and Logistics: Developed smart systems and invested in delivery infrastructure to ensure timely and efficient service.

In 2013, its revenue was INR 11.5 Cr.

With targeted strategies, Zomato has been able to generate a revenue of INR 12,961 Cr in 2024!

Revenue Streams:

Deepinder Goyal claims that Zomato makes a profit of INR 2-3 on an order of INR 400.

So, how does Zomato make money?

The first approach is scale and volume:

• High Order Volume: With millions of orders processed daily, even a small profit per order adds up to significant revenue.

• Market Penetration: Zomato expanded aggressively in multiple cities and countries, capturing a large customer base.

• Customer Trust: Building a reputation for reliability and quality service helped retain customers and encourage repeat orders.

The second approach is diversified revenue streams:

• Advertising and Listings: Zomato charges restaurants for premium listings and advertisements on its platform.

• Subscription Services: Programs like Zomato Gold, offering discounts and exclusive deals, generate additional revenue.

• Delivery Charges and Commissions: Fees from customers for delivery and commissions from restaurants contribute to revenue.

This business model ensures that they are not dependent on only one source, keeping them profitable.

Zomato’s acquisitions and investments helped to accelerate these strategies and drive growth.

Acquisitions and Funding:

Zomato has made 25+ smart acquisitions to grow and improve its services. Here’s how these acquisitions have helped:

• Uber Eats (India): 
  In 2020, Zomato acquired Uber Eats' India operations. This move brought millions of new users to Zomato and strengthened its position in the food delivery market.

• TechEagle Innovations: 
  Zomato acquired this drone startup in 2018 to explore drone-based food delivery. This could revolutionize the way food is delivered, making it faster and more efficient.

• TongueStun: 
  With this, Zomato expanded its reach into office catering. This allowed Zomato to serve large corporate orders, opening up a new revenue stream.

• Runnr: 
  Acquiring this logistics startup helped Zomato improve its delivery network. This ensured timely deliveries and better service for customers.

• Blinkit: 
  Acquiring Blinkit, a grocery delivery service, allowed Zomato to enter the quick commerce space. This means customers can now order groceries and essentials from Zomato, increasing its service offerings.

The integration these companies helped Zomato to strengthen its market position and enhance its service offerings.

When it comes to growing a startup into a global powerhouse, funding plays a crucial role.

Let’s take a closer look at the major funding rounds that helped shape Zomato’s path to success.

Zomato’s story began with a modest seed funding round of INR 4.7 Cr or $1.03 million in 2010.

This initial boost came from Info Edge, one of India's leading internet companies, which saw potential in Zomato’s innovative approach to restaurant discovery.

As Zomato started gaining traction, more investors came on board, recognizing its potential to transform the food-tech industry.

• Series A:
  In 2012, Zomato raised its Series A funding round, again led by Info Edge, with $3 million.

• Series B:
  The Series B round of $2.3 million in 2012 brought in additional funds from Info Edge and other investors.

• Series C:
  By 2013, Zomato was ready for its Series C round, which raised $37.5 million.

In over 18 rounds and from 47 investors, it has been able to raise a total of $1.69 billion in funding. You can read the full list here.

Currently, Deepinder Goyal holds a 4.2% stake in the company.

With these acquisitions and investments, Zomato was able to expand its operations and grow fast.

Through these fundings and growth, Zomato achieved unicorn status in 2018 with a valuation of $1 billion.

After a month of this, Pankaj Chaddah exited from the company.

Start-up to IPO:

On July 23 2021, Zomato Ltd. made a strong debut on Indian stock exchanges, opening at a 50% premium to its issue price of Rs 76 and reaching a market cap of over Rs 1 lakh crore.

This was a big moment for both Zomato and the Indian startup scene.

1. Reorganizing Shareholding:
Zomato adjusted its shareholding structure and managed secondary transactions to lower Ant Group's stake, allowing new investments from US funds like Tiger Global and Fidelity.

2. Cap Table Evolution:
By reducing Ant Group's stake and increasing investments from US funds, Zomato strengthened its position.

3. Impact of DoorDash's IPO:
The successful IPO of DoorDash on the NYSE, with an 85% stock price surge, influenced Zomato’s strategy positively.

4. COVID-19 Recovery:
Despite the pandemic's initial impact, Zomato and Swiggy bounced back by cutting losses and boosting sales.

5. IPO Timing:
Zomato’s IPO was well-timed, taking advantage of a favorable market, low interest rates, and global liquidity.

6. Global Market Influence:
The strong global IPO market, especially in the US, created a good environment for Zomato's listing.

Zomato’s careful planning, strategic shareholding adjustments, and favorable market conditions were key to its successful IPO.

Key Insights

Starting a business is a thrilling ride with its highs and lows, and Zomato's journey offers great lessons. Here are some key takeaways from their success for new entrepreneurs.

• Identify a Real Problem:

  The founders of Zomato, Deepinder Goyal and Pankaj Chaddah, noticed people had trouble finding reliable restaurant info.
  This common issue led to the creation of Zomato.
  You should focus on solving real problems to build valuable products or services.

• Persistence and Adaptability:

  Zomato faced many challenges early on, like building a restaurant database and convincing eateries to join.
  Despite obstacles, the founders kept going and adapted their strategies.
  You need to stay focused on their vision and be flexible when faced with setbacks.

• User Feedback and Continuous Improvement:

  Listening to users and improving based on their feedback is crucial. Zomato encouraged user reviews and suggestions, creating a user-driven platform.
  This feedback helped them stay relevant and enhance their offerings.
  You should prioritize user feedback to keep evolving their product.

• Strategic Funding and Partnerships:

  Funding is essential, but it’s more than just money. Zomato’s funding from investors like Info Edge and Sequoia Capital brought resources, credibility, and market access.
  Partnerships with restaurants also expanded their network.
  You should seek investors and partners who offer strategic support.

Zomato’s rise from a simple idea to a global food-tech leader shows the importance of solving real problems, being persistent and adaptable, leveraging user feedback, and securing strategic funding and partnerships.

These principles can turn turn your start-up dreams into reality.