Deepinder Goyal, founder and CEO of restaurant-based start-up Zomato, has defended his business after an analyst's report halved its valuation to $500 million.
The HSBC report, which is not in the public domain, said that the financing of Zomato's funding round in September valued it at $1 billion. However, HSBC identified a number of concerns which prompted the downgrade.
But Zomato has refuted the claims in a series of media interviews and in a blog post penned by Deepinder Goyal, its co-founder and CEO.
He said the " assumptions and statements in the HSBC report make it look like they’re coming from someone who doesn’t – and hasn’t bothered to – understand the space well."
One of HSBC's biggest concerns is over the investment needed to scale Zomato's food ordering and delivery business. Goyal responded by saying Zomato is "already profitable in the order business at a unit economics level" and that this part of the business will be in the black when it averages 40,000 orders a days.
"We should get there in the next 3-6 months," he said, pointing out that the day before the post was published the number of online orders came in at 33,000.
Goyal was also positive about the entire Zomato business, saying that "we are aiming to hit overall profitability (without compromising on growth) at an overall company level in the next 6-12 months."
It is looking at ramping up its mobile strategy within that timescale. Mobile accounts for 50% of Zomato's traffic across the 23 countries it operates in, although Goyal admitted that mobile has yet to be "monetized seriously". A new mobile product is due out at the end of May to start these monetization efforts.
He concludes his defence by saying:
"There’s something that we say often – “we are only 1% done”. We are truly 1% done, and if we continue to focus on execution, the noise will die down very soon."
It might be a bit simplistic to say "time will tell" but by going public and revealing some deadlines for profitability, that time is now etched in stone. If Zomato fails to deliver (no pun intended) the valuation could drop even lower. The pressure is on.
Related reading from Tnooz:
Zomato restructures, lays off more than 100 in the US (October 2015)
Zomato earmarks latest $60 million for new business lines (Sept 2015)
Zomato sows $50 million, buys restaurant POS company Maple (April 2015)