Zomato last week announced the launch of Zomato Wings, a platform to connect its restaurant partners with investors. The company hopes to get 100 restaurants funded through this new platform over the next three years.
In making the announcement, Zomato Founder and CEO Deepinder Goyal said:
“By curating a set of restaurants and cloud-kitchens that could become rocketships if fuelled with equity capital, we hope to build the go-to platform for venture capital firms, angel investors, family offices, etc. that are looking to make private investments in restaurants and cloud kitchens.”
Why is Zomato launching this platform?
In a blog post, Zomato reasoned that it is launching this platform because:
- Funding of restaurants has been scarce: It is currently “not easy for restaurants in India to raise funding through growth-focused equity investors.” The company cited a Tracxn report that reveals only about 25 restaurants and cloud kitchens saw Series A or larger equity funding rounds in the last three years.
- Restaurants might not have the expertise to fundraise: Additionally, there are many restaurants that “may not have the expertise or focus to fundraise at the right time from the right investors,” the company noted.
- Indirect benefit for Zomato: The company also acknowledges the indirect benefit for Zomato through this platform: “As we partner with more investors by connecting them with enterprising restaurants, more budding restaurants would use this platform for fundraising, and the platform’s flywheel would create a win-win for restaurants and investors, and by extension, for Zomato!”
Will Zomato invest in deals?
Notably, Zomato itself will not invest in any restaurants in order to avoid competition with other restaurants on the platform:
“We are mindful that by owning an equity stake in one brand, we may raise some concern among other brands. Again, we do not want to compete with restaurants, and want to remain a fair and neutral platform for all restaurants.” – Zomato
Zomato will therefore serve as a facilitator and will help restaurants “position their story and metrics in the right manner,” the company said.
By not participating in the deals, Zomato Wings avoids additional scrutiny by the Competition Commission of India (CCI), which has already received complaints from the National Restaurant Association of India (NRAI) alleging anti-competitive practices by Zomato and Swiggy including the launch of private labels that compete unfairly with the other restaurants listed on the two platforms.
How can restaurants participate?
Although Zomato has extensive data on the sales of its restaurant partners, which gives it the ability to gauge the growth potential of any restaurant, the company does not appear to be choosing potential restaurants to list on Zomato Wings on its own. Instead, it is asking restaurants that believe their business can grow to reach out to their account manager.
Investors who are looking to invest in the restaurant industry can reach out to firstname.lastname@example.org.
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