|
The
30-Something with Rs.1,000 cr & A Dream to Conquer the World
Zomato
started in Deepinder Goyal’s home, and the company went into the .
1,000-crore club the day he became a dad. Here’s the story of India’s
hottest start-up and its founder’s global ambition
On the morning of October 29, 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-year-old 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 . 1,006 crore ($161 million). The founders’ equity — the
stake held by him, his co-founder and some employees — was now worth . 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 . 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, 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.
Start-up 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 . 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
others such as Flipkart.
But there is no sure way of valuing a start-up and big bets on companies
with little revenue have paid off on occasion. Zomato clocked a revenue of
. 11.5 crore for the fiscal ended March 2013, up from . 2 crore the
previous year. According to Goyal, this year, it is expected to clock .
30-40 crore in sales. If you take . 11.5 crore as revenue, Zomato’s
valuation is a multiple of nearly 100 to sales. If you take the latest
monthly revenue and annualise it to assume revenue of . 40 crore during the
current fiscal, the valuation is a multiple of 25 to sales.
“Young companies like Zomato don’t get valued solely based on revenue
multiples,” Mohit Bhatnagar, the Sequoia MD, who handled the Zomato
investment, told ET. “The product is world class and we have conviction in
the founders. Deepinder is probably as good a founder as anyone anywhere in
the world. It is the first Indian consumer Internet company with global
aspirations and that is the single-biggest excitement for us.” Goyal
doesn’t have to worry about the debate over valuation just now. He says a
25x valuation is par for the course for a fast-growing consumer Internet
company like his. At any rate, he says he can grow the revenue manifold if
he can expand his sales team.
“Our space utilisation is currently just 20%. We need to hire 400 sales
people in India alone to exploit our ad real estate.” He recognises that
growth from India will likely plateau at some point. But then there is the
whole world, and then, the holy grail of the business — the US market. So
far, his international foray has been encouraging. In UAE, where the
company launched last year, it is already profitable operationally. In most
other markets, there is no serious competition and the product is loved in
every new market it launches in. In Indonesia, Portugal and Turkey, Zomato
speaks the local language. Zomato’s moment of reckoning will come when it
comes head to head with Yelp, the listing and recommendation service that
is popular in major western markets. Its IPO last year valued Yelp at $1.5
billion. In the UK, where Yelp has been around for much longer, Zomato is
now number 2. In New Zealand, where Yelp is six months old and Zomato just
two, according to Goyal, Zomato gets more users than all of Yelp’s
categories put together (While Zomato only does restaurants, Yelp does
local search and recommendations across categories). So he is confident of
his product for all markets, but the US. Zomato’s performance in the US
will determine whether it can hit the global big league or not. Revenue
potential in the US is bigger than the combined potential of all the 33
markets Zomato plans to be in, put together. Goyal says the company will spend
time fine-tuning the product for a US launch. “We will probably also need
to raise more money for a US launch,” he said.
Goyal is soft-spoken and unassuming. But when he speaks about his business
and his learnings, you get a glimpse into an unswerving focus and clarity
of thought that forms the philosophical core of Zomato’s growth. A couple
of years ago, the company expanded into two other verticals — ticketing for
events and helping restaurants market themselves through digital and social
media platforms. “We started doing everything badly. So then we decided to
shut down those businesses and just focus on the one thing users loved and
do it very well,” Goyal says. But he also turned necessity into a virtue.
He used the staff that became redundant to expand overseas. “It was not
their fault that our strategy was poor. So instead of letting them go for
no fault of theirs, we sent them to Dubai to grow our business there.” And
that worked. Goyal says success hasn’t changed him or his co-founder significantly.
“That comes with having been friends first. We can yell at each other and
it won’t really matter.” An Audi sedan is the only significant material
acquisition he has made. And he doesn’t plan to buy a house. “Real estate
in India is hugely overpriced. It doesn’t make sense. I’d rather have that
cash invested in my company. Here I have at least partial control of what
happens.”
sruthijith.kk ET131112
|
No comments:
Post a Comment