Backed By Sequoia, Zomato Closes $37M Series D To Expand Its Restaurant Discovery Service Internationally


Zomato wants to eat Yelp’s lunch. The Indian restaurant discovery service has been chipping away at the space since 2008, mostly in its home market. Today it’s closed a $37 million funding round from Sequoia Capital and existing local investor Info Edge to supersize its international expansion plans. It’s raised a total of around $55 million to date.

The new round works out as Zomato’s fifth, but founder and CEO Deepinder Goyal describes it as a Series D. “We have a list of 22 countries that we’re going to do over the next two years,” he tells TechCrunch.

Currently Zomato is operating in eight markets, including the U.K., with around two-thirds of its traffic (15 million monthly users across the web and its apps) coming from its home market of India, vs. 100 percent one year ago before it kicked off its international expansion. It’s currently profitable in India and the UAE, according to Goyal.

Today it’s adding three markets to its growing footprint: Brazil, Turkey and Indonesia. (Albeit, it only targets specific cities in each market.)

How is Zomato different to the likes of Yelp? It uses a “feet on the street ” approach to give its local eatery information an edge. The startup began as a menu card scanning service in India — sending people out to collect menus from restaurants and then scanning them in so users can view specific dishes and photos.

It’s still doing this primary data collection, using techniques like OCR to turn the paper data into digital info, but has added more features to flesh out a fully formed restaurant discovery offering. The result is a service that lets users find a place serving a specific dish — if they fancy beans on toast for lunch (say). It also serves up very granular info like opening hours and food services offered (take-away, dine-in, home delivery, etc.) — with the data checked in person by Zomato’s team every three months to ensure it’s relatively fresh.

The local team also takes photos of the eateries and the food on offer and gives an idea of the cost of eating there for two people. Zomato leaves reviews and ratings up to users (so ratings are thin on the ground in certain local U.K. areas where usage of the service hasn’t taken off yet). Users can also filter the data to show nearby places to eat, and slice that by ‘open now’, rating, cost, cuisine type and so on.

“We are in the business of search. We are in the business of Google for food. Everything else — the last mile [restaurant bookings, etc.] — is taken care of by our partners,” says Goyal.

There’s no doubt Zomato’s approach requires a lot of people to power it. It already employs some 650 people for its current market footprint. That’s clearly going to rise as it scales up to new markets. But Goyal says the new funding round is enough for it to expand out to those 22 new markets.

“This round is going to fund these 22 countries. The approach we are following for international expansion is that we budget for a particular country and we keep that money on the side,” he says. “We don’t touch that money. So every country has a separate budget and each team has to break even on a separate budget.”

The US is on its list but it plans to tweak its feature set so it can offer something attractive enough to crack the market so isn’t going to tackle that market immediately. “It will take us another six to 12 months to enter the U.S.,” he says. “There are a lot of product changes that we need to do to make sure we are ready to enter the U.S.”

“Right now our product when compared to Yelp only stands out due to the strength of the content,” says Goyal. “People like the UX, people like the UI, it’s easier to find restaurants but the real differentiator right now is really the menu cards and the pictures. I think that’s not enough for the U.S.. Because data is really a commodity in the U.S.; you can buy it from anywhere.

“So our approach so far won’t really work. We’ll have to find good answers to how to create a viral product, how to make the product market itself and how to retain these customers over the longer term, how to retain them better. We have some ideas an we’ll be testing them out over the next couple of months. And in six months we’ll have a good polished version of what needs to go out.”

Having feet on the street powers Zomato’s monetization model — as well as restaurant info gathering. Its business model is currently heavily skewed towards advertising — and since it’s actually visiting the restaurants that advertise on its service, that’s helpful to generating sales leads. Affiliate restaurant bookings via partnering with the likes of Toptable (in the UK) make up a fraction (sub-2%) of its revenue, according to Goyal.

That may change in future, though. He says it plans to use some of the funding to expand the feature set of its product — with a view to creating new types of businesses, such as restaurant bookings or online ordering, down the line.

For now, though, it’s fully focused on the core of scaling out its restaurant discovery service.

“An online ordering or a table reservation thing is a separate business. We think it’s actually easier for us to go into a new market than open a new business. What we have to do is customise our product to launch in a new market — that’s very much more easy for us to do in order to scale and grow the business than launch a new business. That’s what we’re trying to do now; dominate as many countries as possible,” he says.

“Once we are done with this, in terms of growth, then we will start thinking about other things. By that time we’ll have those products ready for shipping as well.”

Commenting on the funding round in a statement, Mohit Bhatnagar, Managing Director, Sequoia Capital India Advisors, said: “With quiet determination, Zomato, India’s leading restaurant search company, has begun dominating its category globally. We are glad that the Zomato team picked Sequoia Capital as their venture partner to help them succeed internationally. Sequoia Capital completed this investment in record time because of our conviction in the founders, their world class product and ambitious global vision.”

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