From Foodiebay to Zomato: A Success Story by IIT Grads

Zomato was started by two IIT graduates in 2008 by the name “Foodiebay” and now is set to launch its IPO at $7 B valuation. Read the full story here.

By Sameera Redkar Apr 3 2021 5:20PM 334 Read
Zomato Success Story: India’s $1B Worthy Delivery Start-up

Do you recollect, when was the last time you ordered something from Zomato? I'm sure you would come with an answer which will not be more than 6 months ago. We all might agree on this, Zomato is comfortable. It is every introvert's dream come true who doesn't like small talk. In this modern world, when we're unable to cook or bored of dal khichdi, we simply order it from Zomato (or Swiggy for that matter). But it's not only the consumers who swear by Zomato, even Restaurant owners love the idea of not having to deliver orders themselves. It saves time, giving them the ability to take up as many orders as possible for a little amount of fee.

I wouldn't ask you to imagine a world without Zomato, because I know it would be tough; for you, for me, and every millennial, Gen-Z. In 2020, Zomato reported having generated revenue of $394 million. And in the times to come, Zomato is going to launch its IPO for a valuation of $6-8 million, and with this; the company is likely to raise $750 million to $1 billion. But let's track back a little bit and understand how a small start-up became a multinational restaurant aggregator.

The Starting Point of a Startup

It all started, when 2 IITians from Delhi were working as employees for a company, namely Bain & Co. It was lunchtime, and Deepinder Goyal and Pankaj Chaddah came across their colleagues who were struggling to acquire a menu card of restaurants. And this is when the duo came up with an idea to develop an app that would give one access to every restaurant's menu card.

'Foodiebay' was founded in July 2008. It initially started in Delhi but later it got expanded to the metropolitan cities. It changed the life of their colleagues and friends. Menu cards became easily accessible with no hustle whatsoever. But there was something that bothered the duo. The fact that 'Foodiebay' sounded similar to 'eBay, another e-commerce website, and therefore to eliminate the confusion, the founders renamed it 'Zomato' on 18th January 2010. 'Zomato' became an easy to remember, a catchy name with a loyal customer base. And this is when they saw the need of making their app more user-friendly to attract and retain new consumers.

Investments

But of course, expanding and developing comes at a cost, and to meet their funding requirements, they approached Sanjeev Bikhchandani, an optimistic about the internet and owner of InfoEdge. He showed great interest in the company and ultimately decided to invest in the idea. InfoEdge India invested up to 1 million USD in 2010.

Later, in the same year, they invested 3.5 million USD, followed by 10 million USD in the next year. Today, InfoEdge owns a 50% stake in Zomato.

Zomato kept on receiving funding consistently from investors who believed in the success of the company. To name a few, a Singapore-owned government company, Temasek, invested 60 million USD; Ant Financial invested 210 million USD in 2018 and acquired a 10% stake in the company. Vy Capital and Sequoia Capital are also active investors.

Growth and Expansion

In 2012, Zomato, grabbed this opportunity, to expand its business to United Arab Emirates, Sri Lanka, United Kingdom, Qatar, Philippines, and South Africa. The company didn't stop here. In the coming years, they also expanded their operations to many other times like Brazil, Indonesia, New Zealand, and Canada.

To mark its entry in the US and Australia, Zomato also acquired Seattle-based food portal 'Urbanspoon'.

In 2011, to create excitement among the food lovers Zomato also introduced a .xxx domain. This allowed the consumers to watch food porn (yes, it's a thing)

In January 2020, Zomato acquired a rival- company 'Uber Eats' of 350 million USD. This deal opened Zomato's door to create a strong footfall in the southern states of India.

To promote dine-in, Zomato introduced a “Zomato Gold” membership subscription which later got renamed to “Zomato Pro”. This gave the subscribers additional benefits like 1+1 on food or drinks, discounts on select restaurants. This was an initiative taken for the foodies who loved dining out instead of ordering in.

Zomato during the Pandemic

When the Covid-19 pandemic hit the world, Zomato also made a point to introduce contactless delivery to combat the situation. With this, they also promoted online payment services by offering attractive discounts on them. This initiative aimed at a hassle-free dining and ordering experience for its consumers.

Since groceries were the need of the time, the company took up the challenge and introduced delivery of groceries for its customers but sadly, the business didn't profit well and instead burned more cash.

The Marketing

One of the factors that contributed to the growth of Zomato is hands down their amazing marketing strategy. From Google ads to witty tweets, Zomato has everything in the store. The Cost per Click (CPC) of Zomato is 10$ less than that of Swiggy which has a CPC of 30$. This creates a good amount of traffic for less money. With a successful SEO strategy, Zomato gets 24 million visitors on their website per month. Zomato's presence on social media platforms is also strong.

Mr. Pramod Rao, Zomato’s VP of marketing, said that they always focus on sustaining the originality of their ads and campaigns. And this has worked well for them as you may agree when I say this every Zomato ad gets our attention.

Conclusion

According to the founders, Deepinder Goyal and Pankaj Chaddah, a company's success relies on hiring the right person for the right job.

The founders didn't focus on earning money. Zomato grew organically and strategically. And now Zomato has around 11.2 million subscribers in India. It is currently present in 24 countries and over 10000 cities.

Never have a bad meal, because Zomato has got your back. When you can order from trained chefs why eat amateur meals?

Sameera Redkar
Sameera Redkar View More Posts

Sameera Redkar is an 18 years old BMS Student from Mumbai. She is an introvert but she always try to get out of her comfort zone. She aspire to specialise in the Marketing domain. She is currently studying German (B1) and a proud PASCH scholarship holder. Her dreams are big and it includes traveling and exploring the world.

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