To be fair, there are things where Zomato has excelled. Its marketing and communication has always been incredible. Many companies try to imitate them, but stop short when things get a bit uncomfortable. Not Zomato. It has strong principles, and it hasn’t been afraid to stand by them and do the right thing, even at considerable political risk. (View Highlight)
First, there’s Zomato Gold, its flagship loyalty programme which it launched in 2017. By 2022, it had been scaled back, rebranded, then scaled back again, and finally shuttered. Zomato also expanded internationally into multiple countries in the middle-east, Europe and Africa. All of those businesses are dead now. When the pandemic struck, it got into grocery delivery. Also dead now. It also created a nutrition supplement business. Dead. It’s losing co-founders rapidly. And then, there’s the Blinkit acquisition, which has raised many questions. Since it went public, Zomato’s stock price is down by more than 50%. (View Highlight)
But there’s one thing Zomato does really well that makes up for all of their deficiencies, and I believe this is going to play a big part in their success this year—at its core, Zomato is a consumer-centric product company. (View Highlight)
Companies that build consumer products do not necessarily build consumer-first . And this is fine. There’s no rule that says that product companies that create and iterate starting with the user are going to be more successful than product companies that try to optimise something else. Apple is a consumer product company, but I don’t think they build and iterate by starting with the user’s needs. Hotstar is a content-first product company. Their strategic product decisions are driven by their content. I’m not saying that users aren’t a key consideration, but it’s rarely user-first. That’s not what they optimise for. Fintech consumer companies are trying to optimise for revenue-generation products (usually lending or post-paid), not the user. (View Highlight)
Talk to people who work at Zomato, and they’ll tell you similar stories. They’ll tell you how even today, their CEO Deepinder Goyal is deeply involved with everything on the consumer side, i.e., the mobile apps and the website. Mostly, this is because Zomato started as a consumer app company, which listed menus by restaurants. The logistics came much later, and it didn’t even build these capabilities in-house—it had to acquire a company to do so. As a consequence, Zomato is able to launch products that make you go wow as a user. Zomato Gold is one of these and is a classic consumer-first product. Same with Zomato’s intercity delivery, which lets you order food from another city and get it delivered the next day. Zomato starts by building products that it knows its users would love, and then figures everything else from there. (View Highlight)
On the other hand, Swiggy is a logistics company through and through. They make decisions on what to build next by optimising their core capability, i.e., logistics. Swiggy says, okay, so we have a massive fleet to deliver food, and we have excess capacity. What else can we do? Let’s deliver groceries. After they optimise that, they move on to something more complicated—like fresh meat delivery. Then they move on to small stores and build Swiggy Minis. And then a daily subscription product. That’s their approach. It’s more boring, but it’s effective. Think of the last time Swiggy launched something that made you wonder how on earth they were doing it. Never happens. It’s a deliberate, slow, iterative way to build product after product on top of their logistics. (View Highlight)
Zomato builds products. Swiggy builds on top of its platform. This is what makes them different. (View Highlight)
A stereotype about private tech investing is that companies are not supposed to do down rounds. If you are a tech startup, and you raise some money from venture capitalists at a 250millionvaluation,andthenayearlateryouwanttoraisemoremoney,youhadbetterhavea500 million valuation. If the market is tough, 250million,Iguess.Butifyougoouttoraisemoneyata150 million valuation, after previously raising at a $250 million valuation, that is very bad. Venture investors want growth, they want positive momentum, they do not want a discount. If your valuation has gone down, that’s a bad sign for your future.
This is mostly just a set of social conventions. Public companies don’t work this way: If they want to raise money, they sell stock at whatever their stock price is. It would be somewhat silly for a public company to say “we can’t raise money by selling stock because our stock price is lower than it was six months ago,” or for a mutual fund to say “we can’t buy your stock because the price has gone down.” But in private markets it’s a thing.
Private Markets Don’t Like to Go Down, Matt Levine, Bloomberg (View Highlight)
