NEW DELHI: On the morning of 29 October, 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-yearold 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 Rs 1,006 crore ($161 million).



The founders’ equity — the stake held by him, his co-founder and some employees — was now worth Rs 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 Rs 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 Ltd, put in $1 million in seed funding early on, in August 2010. Thecompany funded Zomato through four subsequent rounds, cumulatively investing $25.4 million. It now owns a 50.1% stake in Zomato.Startup 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 Rs 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 other tech companies such as Flipkart.But there is no sure way of valuing a startup and big bets on companies with little revenue have paid off on occasion. Zomato clocked revenue of Rs 11.5 crore for the fiscal ended March 2013, up from Rs 2 crore the previous year. According to Goyal, this year, it is expected to clock Rs 30-40 crore in sales.

If you take Rs 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 Rs 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 the 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, Brazil 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 the 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 for the company, proving that the product was ready for overseas markets.



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.”