Zomato IPO: When data brings confusion, not clarity

Note to readers: Hello world is a program developers run to check if a newly installed programming language is working alright. Startups and tech companies are continuously launching new software to run the real world. This column will attempt to be the "Hello World" for the real world.

A few days ago, food delivery startup Zomato said that it intends to go public. The company, which started as a restaurant review, listing and reservation platform back in 2008 has come a long way. As internet and venture capital supercharged India’s startup ecosystem, Foodiebay grew into Zomato. These days, it makes most of its money from food delivery. It charges a commission from the restaurant as well as a delivery fee from customers.

We don’t know how or when it will go public yet, but when it does, it will be a great day for India’s exit-starved startup ecosystem. It will have created history in startup land.

As an observer of the ecosystem, I set out to make this column an informative take on Zomato’s potential initial public offering (IPO). What it means for the ecosystem, what does it do for the company, its perseverant founders, employees and ultimately investors. Sure Zomato has been losing money but that’s pretty much how most internet companies are built.

A more diligent columnist would have come up with a better example so forgive me for this lazy example: think Amazon. The online retailer founded in 1994 turned a profit only nine years later in 2003 (Amazon went public in 1997). By now we know that losses are part of the game. So we won’t yet dwell too much on Zomato’s profits.

As I started researching, I came across several articles and a few very well made videos on Zomato’s IPO. All well presented. The articles were well written. And the videos were well produced.

But something didn’t add up. Before you assume this is Zomato’s fault, let me clarify. It is not. Zomato deserves every bit of credit and is sure to succeed in its mission.

My problem, however, is with my old enemy: noise. There is so much noise around everything around us that it has become hard to trust anything these days.

Let me illustrate with just one example: according to one top brokerage firm’s report in 2019, the food delivery market was projected to be at $30 billion by 2022. The same firm revised its estimate in 2021 and cut the projection to several fractions. Its current estimate is that food delivery will be a $11 billion market in 2025.

Note that the initial projection was not cut by a third. The projection was completely changed. And it doesn’t end there. Several credible media outlets have quoted these numbers without any explanation as to what transpired. The data has been hashed and rehashed a hundred times.

But what happened? Did half the population get wiped out because Thanos snapped his fingers? Did we suddenly lose our collective appetite to order in? Despite COVID, popular narrative will have you believe that people are ordering in and the food delivery is getting back on track. What gives? Can someone explain please? The shiny video makers, pretty please?

So you see dear reader, my column this week was a non-starter. What you end up with is some questions about the sheer disregard for data and accountability all around us. In short, a rant.

And I apologise for that and promise to make up for it in my next column. As I’ve written before, if you must, try and form your own world view and stop trusting the experts blindly. First principles thinking is your only way out of this noise.