Zomato & Problems Faced By Them

Zomato: An Indian Startup acquiring the world INTRODUCTION Zomato is a restaurant search and discovery service founded in 2008 by Deepinder Goyal and Pankaj Chaddah. It currently operates in 23 countries, including India, Australia and the United States. It features restaurant information such as scanned menus and photos sourced by local street teams, as well as user reviews and ratings. The company also provides cashless payment, online ordering, white-label apps, table reservation, and point-of-sale systems. Zomato was initially named as Foodiebay. It is a restaurant searching platform providing indepth details with autonomous reviews and ratings. Foodiebay, the initial name was changed to Zomato in November 2010 to increase their reach among people. Zomato is a restaurant discovery platform providing comprehensive menus, reviews and contact details for restaurants. Territories include India, USA, United Arab Emirates, Sri Lanka, Qatar, the Philippines, South Africa and now London. Founded in New Delhi in 2008, Zomato employs approximately 1000 staff over the globe. To differentiate themselves from their competitors, Zomato concentrated on adding approx 18,000 new places to eat from. Along with they also decorated many special features, such as pointed to particular dishes or opening times”.

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Type Private Founded July 2008 Headquarters New Delhi, Delhi, India India, Australia, United States, Canada, Chile, Czech Republic, Indonesia, Ireland, Italy, Lebanon, New Zealand, the Area served Philippines, Poland, Portugal, Qatar, Slovakia, South Africa, Sri Lanka, Brazil, Turkey, United Arab Emirates, United Kingdom, Malaysia Founder(s) Deepinder Goyal, Pankaj Chaddah CEO Deepinder Goyal Key people

 Surobhi Das (COO)  Gunjan Patidar (CTO)

Industry

Consumer Services

Services

Restaurant Search & Discovery, Online Ordering, Table Reservations & Management, Whitelabel Apps, POS Systems

Employees Website Type of site Advertising Registration Users

2000+ zomato.com Online restaurant search and discovery service Yes Optional on the website 19 million visits monthly English, Turkish, Portuguese, Indonesian, Spanish, Czech, Available in Slovak, Polish, Italian Current status Online Native iOS, watchOS, Android, Windows, Windows Phone client(s) on

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THREE PROBLEMS THAT WERE AT ZOMATO - By Pankaj Chaddah Our engineering team is always cranking to improve our services and make your food hunt easier. As a small update, here is what’s keeping us awake at night these days:

1. Building a dish database : Wouldn’t it be great if we could search for restaurants serving a specific dish? For example, it would be great to be able to find the best places that serve a Tenderloin Steak. The only way to make this happen is if we have structured data for every dish served in a restaurant. We’ve already made some effort in this direction the manual way - by typing out a few thousand menu cards in every city that we are in. However, given the churn rate of the restaurant industry (about 25% restaurants shut down every quarter), it is getting difficult for us to manually keep pace with all the new menu cards that come our way. We are trying to create intelligent OCR systems to supplement our existing dish ontology. Misspellings (in the menus) and from the OCR mechanism just make it all the more complicated.

2. Spam control : Two years ago, this wasn’t a problem. Why? Very simply, a restaurant’s rating Zomato didn’t make or break its business back then. Nowadays, it does make a difference, to a certain extent. Since a lot of restaurant owners also realise this, they try to game the system by planting fake reviews on the platform. We have, over time, learnt how to identify most of these cases, but some intelligent spam tactics skip our automated filters. Our filters currently range from simple data analysis and pattern matching to user behaviour mapping over a few months. However, we realise that we constantly have to keep track of what is making its way onto the platform to help maintain its neutrality and usefulness to our users. Also, we need to evolve these systems to outsmart everyone who tries to game the system (despite following the rules). It’s an ongoing effort, and I don’t think we will ever be able to say this problem has been solved for good.

3. Lower server latency for our geographically widespread traffic : This isn’t something new, and a few companies have already done this very efficiently. Most companies our size don’t even care about this. However, we want to serve all our traffic (in the Philippines, as well as in London) from servers that sit close to our users’ physical locations. Lower server latency = users get to food faster. Replicating all our infrastructure in various locations on a master-slave basis and then keeping everything in sync is not easy for us as of now, and this is something we are trying to address over the very short term itself.

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ZOMATO SUCCESS STORY SEEING TROUBLE ?

In the Indian startup industry which is still largely in the nascent phase, Zomato is one success story that every Indian entrepreneur wanted to emulate. Investors too, who are otherwise mesmerized by the e-commerce startups, look at Zomato as a company that has the ability to scale globally and create a world class product. The company also keeps making it to headlines due to the aggressive growth route taken by its founders by embarking on a shopping spree. Started in 2008 by Deepinder Goyal and Pankaj Chaddah, the company today is valued at $1billion i.e. it has hit the unicorn status. Lately, Zomato has been in news again due to the trouble the company has gotten into. In this article, we take a look at Zomato journey so far and try to contemplate at what the future might look like for this company.

 Behind The Making of Zomato : Zomato is an online restaurant search and discovery service which provides information on home delivery, cafes, and restaurants along with menus, photos, reviews and contact details for credibility. It was started by two Indian Institute of Technology, Delhi alumni Deepinder Goyal and Pankaj Chaddah in the year 2008 as Foodiebay.com. Deepinder was born and brought up in Punjab and fits perfectly into ‘You can take food away from a Punjabi but you cannot take a Punjabi away from food’. He recalls how the idea of Zomato originated from him waiting daily for the free-delivery menu cards at lunch time. It was burning down a substantial part of their free time daily. It was then when it occurred to Deepinder to why not to avert off all the trouble by providing everything online. He named it as Foodiebay.com and in initial phase, it was just a website which displayed menus of restaurant, reviews and recommendations. In November 2010, Foodiebay.com was renamed as Zomato.com (interestingly, only because it rhymes with tomato!). However, the website was drawing very less traction probably because it was not possible for people to browse the website for menus while they are waiting in queue. The next step was to make the website more accessible. Then, Deepinder took the decision to come up with a Smartphone based application and Zomato application was developed and launched for Google’s Android operating system.

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 Funding and Acquisition Spree : Now, there was a need of money in order to expand the business. One of the major sources of income is to raise funds from Angel Investors. 

In August 2010 in its first round of funding, Zomato raised US$1 million from Info Edge (India).

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In September 2011 in its second round of funding, Zomato raised of US$3.5million from the same investor.

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In year 2012 in its third round of funding, Zomato raised another US$2.5 million.

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In early 2013 through its fourth round of funding, Zomato raised worth US$10 million from Info Edge. With this, Info Edge was holding a stake of 57.9% in Zomato.

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In November 2013 in yet another round of funding, Zomato raised US$37 million from Sequoia Capital and Info Edge.

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In November 2014, Zomato received a fresh round of funding of US$60 million jointly led by Info Edge (India) Limited and Vy Capital and Sequoia Capital.

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In April 2015, Zomato raised yet another round of funding worth $50 million from Info Edge and Vy Capital.

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In September 2015, Zomato was able to raise funds again Temasek Holdings worth $60 million.

By now, Zomato has raised a total funding worth US$224 million. Simultaneously, company was focusing on expansion plans. It was running successfully in Delhi NCR, Mumbai, Bangalore and Pune. Zomato launched coverage in other three major cities of India Chennai, Hyderabad and Ahmedabad by 2011. Also, Zomato launched applications for iOS, Windows Phone and BlackBerry devices. Zomato went international in September 2012 when it launched its services in Dubai, UAE. This triggered a series of expansions into Sri Lanka, Qatar, United Kingdom, Philippines, South Africa, New Zealand, and Turkey.

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Subsequently, Zomato made its first acquisition by buying New Zealand’s ‘Menu-mania’ in July 2014. Succeeding, the company started growing its base in Europe and acquired online restaurant firms ‘Lunchtime.cz’ from the Czech Republic and ‘Obedovat.sk’ from Slovakia for a combined $3.25 million. More recently, Zomato acquired Seattle-based food portal ‘Urbanspoon’ in January 2015. On January 29, 2015, Zomato acquired Turkey’s popular eatery search service Mekanist. Zomato acquired NexTable, a U.S.-based restaurant reservations and tablemanagement platform. Within 7 year of Zomato’s envision, company has marked its presence in 22 countries and covers more than 1 million restaurants spread across 10,000 cities. Undoubtedly, Zomato has evolved itself to be India’s first global application and yet does not wish to sit back and relax. Apart from being an online restaurant search and discovery platform, Zomato has expanded its services to provide cashless payment, online ordering, white-label apps, table reservation, and point-of-sale systems.

FOOD TECH HAS PROBLEMS, BUT DON'T CALL IT A BUBBLE! After a few months of effusively praising every single piece of funding to take place in the socalled food-tech space, the conversation has taken a quick 180-degree turn as people are going out of their way to declare a bubble, and state that e-commerce in general is going to burst soon. Which is, frankly, alarmist and tends to miss the point about the ups and downs that are taking place in front of us. The most talked about issue right now is of course, the trouble with TinyOwl.The food ordering platform was recently in the news when mass layoffs were followed by a dharna by former employees, who held the firm's co-founder hostage.The company didn't help matters by issuing a tone deaf statement that talks in the vaguest of terms about difficult steps towards a big dream. It's a good dream for the founders, certainly, as the company gets funded for a large sum of money, but for the hundreds of people laid off, it's not a difficult step but a life changing nightmare. What the TinyOwl story proves, more than anything else, is that the model adopted by delivery companies - which is what the bulk of the food "tech" startups are - is not necessarily sustainable. Margins are thin, total order value is fairly low, and customer acquisition is expensive. In other words, these companies make money if customers keep coming back and placing orders - without discounts. Unfortunately, few - if any - of the companies in this space were actually delivering anything beyond VC funded discounts, and so customers just keep moving from platform to platform, chasing the best deals. 6

Making matters worse is the rampant fraud - that is an unfortunate characteristic of doing business in India, as most e-commerce firms here discover. Things were particularly bad in the case of Foodpanda, a company which has seen recurrent leadership changes, and was allegedly being mismanaged, according to a report by Mint. But these issues are around individual companies, and must be recognised as such. Food delivery is definitely a space that needs to be better organised, and there's still a lot of scope for growth and improvement. But when the bubble talk starts up, people immediately start making connections that are perhaps not entirely justified. So, when Zomato laid off a number of employees (mostly in the US), followed by the announcement that it's closing its Zomato Cashless payments system, people started saying that it's preparing to self-destruct. Things weren't helped when a letter by Goyal to the employees, talking about how the sales goals have not been reached by the company - for the first time in five years - was leaked, fuelling speculation about the health of the company and whether or not it's going to close up soon. That there are some issues with Zomato is no secret. It's work culture isn't one that most people can fit into - the company is apparently incredibly demanding, and doesn't seem to have a concept of work-life balance, according to former employees who have spoken to us off the record on this matter. That's certainly something that Zomato should attempt to address, but it doesn't exactly mean that the company is closing down. There have also been a number of high profile exits from the company in recent times, but our sources place the blame not on Zomato's business, but on the personality of the people in charge. Again, if true, then this is certainly something Zomato needs to introspect about, and should attempt to address. But it is also not an indicator by itself of a company in trouble. What about Goyal's letter? If you go beyond the hype, and read the actual letter - published by Business Insider, you don't see evidence of a bubble, but rather an attempt to bring about efficiency, instead of raking in big bucks and then spending wildly, as you would expect from companies in the midst of a tech-bubble.If you want to raise questions about Zomato, we should be asking them about the apparent flip-flops the company has made in recent times. Goyal in particularly had frequently talked about why entering the food delivery business in India is a bad idea - and the difficulties being borne by companies like Foodpanda and TinyOwl seem to attest to this. Yet, Zomato also entered the same business with Zomato Order.

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He also frequently talked about not wanting to enter the US market, as Zomato didn't have a true differentiator for the market there. Yet, with the Urbanspoon expansion, Zomato became a huge player in the market. Zomato co-founder Pankaj Chaddah called the acquisition unplanned, saying the decision was tactical, once the opportunity came up. Zomato also frequently stressed the importance of cashless payments, until it was shut down just last month, although this is something that the company doesn't seem to have fully given up on, as it wants to bring this back along with point of sale and table booking systems. Even with these missteps, Zomato's overall arc looks positive so far. It becomes clear that there are a variety of different problems that food tech companies are facing, and will have to solve, or they will die. This is true for all the companies in this space, whether you're talking about TinyOwl, Foodpanda, or Zomato. But that's not the same as a funding bubble that's bringing bad ideas up, and will lead to a market-wide correction, that sees thousands of people losing their jobs as a host of companies goes bankrupt. Even TinyOwl - the one with the most troubled story on this list - isn't going out of business just yet as it raises even more funds; it's new "operational efficiency" will no doubt help it in looking even more appealing to investors. So don't call it a bubble, because that's missing the point, and more importantly, letting some people off the hook for gross mismanagement.

TINYOWL AND ZOMATO ARE PROOF THAT SOMETHING IS ROTTEN IN INDIA’S FOOD TECH STARTUPS

At the beginning of 2015, many investors had predicted that food technology startups would be the new stars of the Indian ecosystem. The prophecy stood true for most part of the year, but now the world seems to be falling apart for two of the biggest food startups in the country. Gaurav Choudhary, co-founder of food-ordering startup TinyOwl, spent two days held hostage inside the company’s Pune office by employees who were laid off earlier this week. And Deepinder Goyal, founder of restaurant search portal Zomato, shot off an angry email to his sales staff about the company missing its sales targets, which got leaked to the media and made headlines. This comes less than a month after Zomato laid off roughly 10% of its workforce— around 300 employees—in order to focus on areas that are more profitable. “It’s hard for us to comment on what is happening at other startups within this space or otherwise. Our restructuring was a business call,” the Zomato spokesperson said. But it is unlikely that they have missed the writing on the wall.

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“Food technology is a perfect example of how bubbles had started coming up in the Indian startup ecosystem, but they are now getting self-corrected,” Pankaj Jain, partner at venture capital firm 500 Startups. “In the first half of the year, every day there were food delivery or grocery delivery companies that were getting funded, and in many cases they were raising very large amounts of money. I think everyone has now come to realise that those are fundamentally flawed businesses,” he added. Jain recollects a “mad rush” to invest in the food technology space earlier this year. “It was like ‘hey, they invested in a food tech company; we don’t have one in our portfolio, we must get one in our portfolio, too.'” Since January 2015, food technology startups in India have raised a total of $172.9 million (Rs1,138.4 crore), according to research firm Tracxn. This includes Rs. 100 crore raised by TinyOwl in February, and $60 million (Rs395 crore) raised by Zomato in September. Bengalurubased Swiggy also raised $16.5 million in a series B round in June—just five months after it had snapped up $2 million in series A funding.

The table below shows a monthly breakup of funds raised by food technology startups during 2015, according to Tracxn: Month

Funding ($ million)

January

0.26

February

17.9

March

0.5

April

53

May

1.5

June

19.9

9

Month

Funding ($ million)

July

0.77

August

4.3

September

63.2

October

11

November*

0.35

* As of Nov. 5. Besides overfunding, another reason that is causing trouble in the food technology space in India is overcrowding, Anand Sanwal, CEO of New York-based research firm CB Insights. “It is one of those sexy spaces where people think ‘everybody needs to eat and so this must be a trillion-dollar market’. But they don’t realise how difficult it is to crack the code here,” Sanwal said. “You and I could put up a website; somebody will order and we can run around and make the first deliveries ourselves if need be. In the beginning, it can be a technology-light business but eventually it needs to be pretty rigorous and significant.”

o More bad news : Developments at larger companies—Zomato and TinyOwl—are making headlines now. But in early October, a small food technology firm, Dazo, had announced its plans to wind up operations less than a year after its inception. “We were scaling up and were looking to get into more cities, but were short on capital. At some point we felt we were lagging behind other players and decided to quit,” Shashaank Singhal, former CEO of Dazo, reportedly said. And there will be more casualties. “There is going to be a lot of pain in this space, both in the US and in India,” Sanwal of CB Insights said. “Most of the companies are going to fail.” While the media celebrated a lot of these startups, most of them had no real business models, and investors will begin to take action soon. “There is going to be consolidation, there are going to be shutdowns, and there are going to be layoffs,” 500 Startups’ Jain said. “The sector got overfunded and now it’s all getting pulled back.”

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The saving grace, however, could be that the downfall of the food technology startups is unlikely to spoil the party for the ecosystem at large, Jain said.

Zomato shuts operations in 4 cities - January 12, 2016, Tuesday Exits Lucknow, Kochi, Indore and Coimbatore markets Barely a week after hyperlocal grocery delivery app Grofers had shut operations in nine cities, Gurgaon-based restaurant discovery and food ordering app Zomato said on Monday it was closing down its online ordering service in Lucknow, Kochi, Indore, and Coimbatore. Pankaj Chaddah, co-founder of Zomato, who is leading the online ordering business for Zomato, said: “The size of the market in these cities is small right now and is growing with time. We will re-launch when the time is right.’’

ZOMATO BATTLES REVENUE CRUNCH & BLAMES IT ALL ON SALES TEAM ; MIGHT FALL SHORT OF ITS PROMISES TO INVESTORS Deepinder Tries To Ease The Concerns Of The Agitated Sales Team And Urges The Whole Team To Do A “Bloody Good Job” The chaos in the food-tech sector seems to have breached the front gates of the mighty Zomato empire. After firing some 300 employees – 10% of its team – Zomato seems to fighting a revenue crunch, as well. In a mail that Deepinder Goyal, cofounder and CEO of Zomato, sent to all his employees, it was mentioned that the company’s revenue hasn’t kept up with the growth of its sales team. He mentioned that the company’s sales team has been constantly underperforming and not meeting its target. He is also deeply worried that the company, for the first time in five years, 11

might not be able to live up to its investors’ expectations and may fall short of its promises. In this mail, he asked all his employees to pull up their sleeves and do a “bloody good job from now onwards”. “Sales is the #1 priority for the entire organisation right now,” averred Deepinder. Here are the snapshots of the mail:

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According to Deepinder, the issue of the sales team revolves around motivation and training. Therefore, in order to offer them the “perspective and kick” required to do a good job, he tried to answer the some of the concerns raised by the sales team. These concerns, however, depicts insecurity and serious lack of motivation in the team – something that seems to be triggered by the recent layoffs. Here are some of the concerns raised by the team and Deepinder’s response to them: “I am just a number in a spreadsheet (i.e. “I don’t know how important my job is”).” I want to give you an analogy here. That of a picture and a pixel. The picture we are talking about is Zomato. And the pixel we are talking about is you. Each one of us is a pixel, and all these pixels together, make up the picture. When someone fails to perform their role up to expectations, that pixel stops shining brightly, and as a result, the picture starts looking faded. We owe it to each one of us to perform at our best, and look at it from the point of view that we are all contributing to the picture. Some of us may think that since we have grown so much, an individual pixel doesn’t matter. That couldn’t be further from the truth. Every dimly lit pixel hurts us, questions our existence, and makes the viability of our business weaker. Also, your job is as important as you want it to be. If you try hard, there is so much opportunity at Zomato. If you don’t, you will indeed be one of the hundreds of pixels. You will still be important, but the viewer only looks at the brightest of the pixels. Everything else becomes the background. The background is important too, but well, it is the background nonetheless. “Some of my buddies here at Zomato were fired for no reason at all. I am insecure and feel temporary, and am therefore not invested enough to give my best to Zomato.” Some of you already know this, but most of you don’t – that there is always another side to the story. A lot of friends tell you that they were never given any feedback before they were asked to 13

go. That is never true. The fact is that a lot of people don’t take feedback seriously, and they keep under-performing consistently. A lot of people are let go on ethical grounds – we never make the reality about such people public, because if we did, it would ruin their careers. If you have any questions about any of your buddies being asked to go unfairly, ask someone for a clarification. These questions are always fair, and you deserve answers to this. But do not hold a grudge against your team members for something, because it’s not worth it. Also, look around you and think about this – some of your buddies feel very secure and permanent at Zomato, and they give it all that they have. What makes them different? “I am constantly worried about being fired for performance. It creates so much pressure for me during sales meetings that it leads to a lot of demotivation and depression.” When you are worried about an outcome, it never happens. Here, we are talking about success as an outcome. Do not worry about success (or failure). Just give it your best, stay natural, and good things will happen. Worrying never helped anybody build anything. “In the past, we have been promised some rewards which weren’t eventually given to us. I feel un-appreciated, and don’t fully trust what my managers say anymore. I just don’t feel like giving it my best anymore.” As much as I know about Zomato, if any promised reward hasn’t been given to you or your team, I don’t think it is intentional. It must be purely a communication issue. In such cases, it doesn’t hurt to tell your manager that in a nice way. Something along the lines of “Hey dude, there was this thing that the team was promised, and I don’t think what was eventually given out met the team’s expectations. Could you please look into this? Leaving this unattended could hit the morale of the team significantly.” I am sure that this will be looked into right away. If it still doesn’t, talk to someone else. Email Pankaj about this. Or email me. Promises should always be kept, and communication should not come in the way. “I have some feedback for my manager. Whom should I talk to?” First, show some flair and talk to your manager directly and tell her/ him what you think. In general, managers should be open to any kind of feedback from the people they work with. They should be able to take any kind of constructive feedback from you positively. If they react to your feedback in a personally negative way, you should tell someone else. Tell your manager’s manager, or even email me in such cases. It is important for us to be real and candid with everyone around us. Zomans who cannot process feedback in the right spirit need intervention. “I have an important question. I don’t know whom to ask.” I agree that we don’t have a structured way to be able to ask questions. But in general, that shouldn’t hold you from asking questions. Start with asking someone. Anyone. Ask your city 14

head. Ask your business head. Ask Surobhi. Ask Pankaj. Ask me. Anyone. And get your questions answered. No point hanging around with unanswered questions – you deserve satisfactory answers to all your questions. “I have a lot of questions, but I am afraid to ask them because I might be judged by my managers/ peers.” Let’s say you ask your questions. There are three ways it can go: Everybody appreciates the questions = you win. The reaction is neutral = you get your answers (or not) and nobody cares. The reaction is negative. In case it is, it will either be for the wrong reasons, or the right reasons. If it is for the wrong reasons, you don’t have to worry about it – you can easily find help to manage that somewhere in the organisation (read: ‘I have some feedback for my manager. Whom do I talk to?’). If it is for the right reasons, it becomes tricky. It indicates a fundamental lack of culture fit of that person in the organisation. In that case, you found the wrong organisation, and no matter if you ask your questions now or later, the lack of cultural fit will eventually make you go on your own. So in the interest of your own time, and life, ask your questions and have nothing to fear. “I joined a startup expecting fast growth, but I was given a five-year career path. This isn’t motivating enough for me to put in my best.” Okay. Let me tell you something. The 5-year career path was created so that the people who ask this question do not speak to their managers every 7 days about when they are going to get promoted. Because apparently, at a startup, you should naturally expect to see some personal growth after every 7 days. Startups are a marathon, not a sprint. There’s only one thing that you should focus on – giving it the best you have, and not worrying about the short-term outcomes. The moment you stop worrying about the outcome, the outcomes have a way of happening anyway. Nobody ever got anything by worrying or obsessing over it. But you can get everything you want if you work hard for it. The best people at Zomato do not worry about titles, compensation, responsibilities, or the type of work that will do. All they care about is adding value. Zomato adds a lot of value back to such people – including supercharged growth. Also, take an objective look at our organisation. We are so short of good people at the ASM levels (or even more senior than that). If we had people within our team who could perform the role, we would have moved them irrespective of where in the 5-year career path they are right now. That leads to the next big complaint I have heard…

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“Why are we hiring ASMs laterally? Why can’t you give me a shot at performing the role?” To give this role to someone who hasn’t already demonstrated the ability to perform in this role puts a lot at risk. The business can’t afford to do that. Also, if we believed you have the maturity and skills required to do the ASM’s job, you would be doing that job. Don’t fall into the trap of thinking that you can only learn the ASM’s job once you have it. You will have to learn how to become a great ASM while you are still an SM/ KAM. So that we know that once you start performing that role, you will be good at it from Day 1. If we don’t think we have anyone at Zomato who can do the ASM role well, we do the next best thing. Get good people from outside the organisation. These are the people we think will be able to do the role. We are not always right, but we think it poses less of a risk to the organisation. Yet to be proven wrong or right. “I have not been trained to do my job.” Then train yourself. The people who first started selling at Zomato didn’t even have clarity on what they were selling. Nobody trained them. But they kicked ass. They used to train themselves, sit for mock pitches with each other for hours to hone their skills over the weekends. And they grew incredibly fast – as individuals, and at Zomato. Stop reciting problems. Think of how you can get to the answers you want for yourself. And do everything in your power to get those answers, including training yourself on everything that you need to. “I am not learning. Isn’t that the organisation’s problem?” To train you, the organisation can do two things – Classroom coaching – we have plenty of these. I don’t understand why, though. Nobody listens during the classroom coaching sessions anyway. Have great people around you from whom you can learn – we have plenty of great people at Zomato, and at a higher density than pretty much any other organisation around us. You might be thinking that if the organisation is doing everything it is doing, what is eventually going wrong? Why do you feel that you are not learning? Let me give you my thoughts on that. There are two types of people in this world: Rocks and Sponges. Rocks are the people who just don’t absorb anything at all. No matter what is thrown at them, they reject everything. Sponges, on the other hand, absorb almost everything around them.

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People in our Sales teams meet business owners every day – successful, and struggling. There is a wealth of knowledge out there with your clients which you can learn from. Be a sponge, not a rock. And you know what? Honestly, I would kill for your job – I don’t think anyone at Zomato has more opportunity to learn than our sales people. Personally, some of the most important learnings of my life have come through listening into conversations I wasn’t even a part of. For example, “the best way to get things done is to give it to a busy person” was a part of a conversation between my dad and my brother when I was 12. There is always so much to learn and so much to do – it all just comes down to you. Nobody will gift you your growth and learning. You have to put in an effort to do that. “My team lead does not go to meetings with me. Whom should I learn from?” First, I would like to reiterate my answer to the question above. Having said that, we very recently realised that ASMs and City/ Country Heads do not go for many sales meetings anymore. We have been communicating to the group to actively accompany their team to sales meetings, and also take an active role in the meetings for closure/ retention so that everybody learns to do their job faster. “Why are we hiring people at ASM levels without prior field sales experience? We never get the right answers from them. How are we supposed to do our job well?” Hiring anyone is a risk. You never know when someone works out or not. Most of the people in our sales team are doing sales for the first time in their life. They still kick ass. We hire these ASMs with the hope that they will learn quickly, and be able to contribute significantly to Zomato. However, it’s been a hard journey for some of our ASMs hired directly into those roles. The team working with them is generally so uncooperative, that only the really strong-hearted are able to make it work. This needs to change. All of us are responsible to make sure that we help them as much as we can to get up to speed as soon as possible. Remember the pixel vs. picture. While every pixel needs to work hard on its own to shine, some light from the pixels around it when it’s just learning its way around really helps a lot. “Our office is not nice and cosy. Zomato doesn’t treat us well. Why should I give my best back?” Some offices deserve to be nice and cosy. These offices are the ones who pay their own bills. i.e. they make enough money to cover all the local cost easily. Such offices have the privilege to spend on luxuries like nice offices. Offices which are not yet profitable should not be nice and cosy. In spite of that, some of our new offices are super nice – even though they shouldn’t be. Back in 2011, the Pune team used to work out of a cafe, and we had set a goal of $5000 monthly revenue for them to be able to get an office 17

worth $1000 per month. The Pune team kicked ass, got a nice office for themselves and stayed there for three years. Most of the team which made that happen is still with us at Zomato, and they proudly tell this story to someone new almost every other week. While you are here, have a very clear sense of your privileges and entitlements. Privileges are earned, and entitlements are poisonous. There is no end to entitlements, and they almost always lead to whining. And whining is like a drugs – it makes you ineffective. Build something, and you will get to live in it day in and day out. “I don’t get paid enough. Our incentives suck. Zomato doesn’t treat us well. Why should I give my best back?” We have done a whole lot of salary benchmarking in various countries recently. The fact is that you get paid very well. However, if you are comparing yourself to that one friend of yours who makes more money than you, well, suck it up. No matter how much money you make, there will always be that one friend who makes way more money than you. You should stop using money to measure your success in life. Because if you do, you will always fall short of your own expectations. “I don’t have stock in the company. Why should I feel ownership towards my job or Zomato?” 17% of the people at Zomato have stock at Zomato. That’s a very large number compared to a lot of startups I know of. The reason you don’t have stock in Zomato yet, is probably because you haven’t consistently made a point that Zomato needs you badly for the next 4 years. For us, stock is not a part of compensation and perk-based motivation. For us, stock is a gesture that we want these folks to be at Zomato for a long time to come. And you will have to prove the point that Zomato needs you for the long haul, and you will be a strong growth driver for our organisation in the years to come. “We get our targets from Delhi, while the local reality is very different. We just can’t achieve what we set out to achieve. Why should we even try hard?” Let me tell you the reality. You can achieve whatever is thrown at you. You just don’t know it yet. Whenever we hit a team with very high targets there is a percentage of the sales people who meet those targets. What’s stopping the rest of them? In general, targets are what we need to do as a team. An organisation needs to pay its people, and make money to be able to pay those people and spend on other things which are necessary. Our sales people are the ones who are responsible for making money. The revenue you bring in is not an arbitrary number in an excel sheet – the revenue is used to pay you and me and everyone at Zomato. If we don’t get our act together on revenue, we will all fail.

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Whenever the Delhi teams sends you your targets, rather than saying “this is not possible”, you should say “okay cool, let’s try our best, and let’s do it for the sake of Zomato”. After all, trying our best is the best we can do. “Our clients don’t get ROI. How am I supposed to believe in what I am selling? It directly affects my performance.” Not all clients will get ROI. Zomato cannot sell a bad product (people will not click on a bad banner). In general, on an average, it is safe to assume 8x incremental ROI for our clients. Some cities generate a lot more, some cities a little less. Our pricing models are based on the ROI clients get on an average. Here, it is important to understand what average means. When we say 8x incremental ROI is the average, it means that around half of our clients get less than 8x. The other half get more than 8x. Some clients will get less than 1x, some will get more than 20x. That’s how averages work. I understand that you get a hammering at the hands of our clients who do not get enough ROI. The fact of the matter is that it is not our fault. If you replaced that client with a product (client) which can sell, it will get ROI. We should stop being defensive about this and think about ways in which we can drive ROI for our clients. Understand their target audience for them, and help them create targeted banners for that audience. Hopefully, that should work. If it doesn’t, try something else. These concerns clearly illustrate that Zomato’s sales team is visibly shaken and is not happy with their jobs. The recent layoff episode has affected the employees deeply and they seem to be operating under the fear of losing their jobs; something that does not breed results. Under such situations, the company needs to calm them down and make them feel safe and wanted. One can only wonder how this mail from Deepinder will get the job done; especially because the news of the company battling revenue crunch, and the sales team being blamed for it, might only intensify their fears and insecurities. The recent layoff was mostly focused on the US and the content team – the employees who collect data from restaurants listed on the Zomato platform and the core of the company’s original “feet on the street” approach.

ZOMATO BLACKLISTED FROM IIT PLACEMENTS AFTER DEEPINDER GOYAL’S OUTBURST

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Zomato CEO Deepinder Goyal can’t seem to get his foot out of his mouth. Last year he’d done a Reddit AMA, hoping to receive some fawning praise and promote Zomato’s food delivery business. Earlier, a bitter email that he wrote to his sales team went viral, and was his approach was roundly criticized for being immature. And now a series of tweets from May is back to haunt him. Goyal was referring to Zomato being denied a day one slot as a recruiter as its salary offers (with ESOPs) amounting to a total of Rs 26 lakh was too low. Day One slots at IIT are highly coveted, with the best companies turning up with lucrative offers. Now it was revealed that Zomato has been blacklisted from conducting placements at all IITs this year. “No company should take the IIT system for granted,” said the placements head at one of the top IITs. At least six IITs Delhi, Bombay, Kharagpur, Madras, Guwahati and Kanpur confirmed the blacklisting. Goyal’s outburst has played a large part in the ban, sources told Economic Times. Complaints of Zomato’s highhandedness at other IITs and alleged ego issues also added to the problem. Zomato has an infamously rigourous work culture that the company proudly promotes. This includes long working hours, a hire-fast-fire-fast policy, and countdown clocks in the bays. Though it is valued at over $1 billion. Zomato’s facing a hard working environment of late, having fired 10% of its staff last month.

ZOMATO-BACKED PICKINGO SEEMS TO BE IN TROUBLE, HALTS HYPERLOCAL DELIVERY

After Localbanya and Townrush, hyperlocal B2B logistics startup Pickingo appears to be in trouble. The Gurgaon-based company has halted hyperlocal logistics services for retailers and restaurants. We spoke incognito to Pickingo executive inquiring possible partnership for restaurant delivery, however, the executive said the startup had stopped hyperlocal deliveries.

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According to the executive, the company continues to ensure deliveries for e-commerce players. Zomato had invested a small amount in Pickingo in September last year. According to sources, Zomato infused some cash against five percent equity in the company. Pickingo raised $1.3 million led by Rehan Yar Khan of Orios Venture Partners along with participation from Zishaan Hayath in August last year. Sources tried reaching Rahul Gill, Cofounder, Pickingo, over the phone but his number is out of service. Launched in December 2014 by IIT-IIM graduates, Pickingo started with reverse-pickups for ecommerce players such as Jabong, Snapdeal, Shopclues, and Paytm among other across six cities. The company entered the on-demand hyperlocal delivery segment and claimed to power delivery of 300 restaurants, groceries, and pharmacies. The company was handling deliveries for Grofers as well. Grofers confirmed that it had stopped working with Pickingo almost three months ago. The 11 month-old-startup is possibly pulling out from hyperlocal space in the wake of high burn rate and to improve its bottom line. Prior to Pickingo, Townrush and Localbanya shut their operations after they failed to raise follow-on rounds. The unprecedented appetite for foodtech and hyperlocal startups from investors seems to have passed its crest on the pretext of scale and projected growth.

CONCLUSION

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Startups who compromised on fundamentals to focus on scale, growth, future projections, and over-hiring are feeling the heat even as a cold front (winter) appears to be setting in. Experts say figuring out unit economics in hyperlocal logistics is very tough. Customers in India typically don’t pay an additional amount for delivery and at those price-points, offering a delivery service for restaurants/retailers doesn’t translate into viable unit economics for foodtech and hyperlocal startups. With Pickingo pulling out of hyperlocal delivery, Zomato can look into writing off its investment in the company. Zomato had invested in Pickingo and Mumbai-based Grab to streamline its home delivery part. On the lines of foodtech, hyperlocal is on its way towards consolidation and it would be interesting to track how overall hyperlocal evolves in the times to come.

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