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Zomato Almost Went Bankrupt in 2020. Here's How It Survived.
Before becoming one of India's most recognised consumer internet companies, Zomato faced one of the most dangerous periods in its history.
When COVID-19 hit India in 2020, restaurants were forced to shut down, customers stopped ordering food and Zomato's core food-delivery business was severely disrupted.
According to Deepinder Goyal, Zomato had only around 45 days of cash runway during the crisis.
The company also struggled to raise external capital because investors themselves were dealing with the uncertainty created by the pandemic.
Instead of waiting for another funding round, Zomato moved into survival mode.
The company cut costs, reduced salaries, offered employees additional ESOPs and focused aggressively on preserving cash.
What followed became one of the most important chapters in Zomato's startup journey.
Key Highlights
COVID-19 severely disrupted Zomato's food-delivery business in 2020.
Deepinder Goyal has described the company as having only around 45 days of runway during the crisis.
Zomato struggled to raise fresh capital during the initial phase of the pandemic.
Around 13% of Zomato's workforce was laid off in May 2020.
The company announced temporary salary reductions of up to 50% for remaining employees.
Employees who voluntarily accepted salary cuts received additional ESOP benefits.
Zomato focused heavily on reducing its monthly cash burn.
The company later restored salaries as business conditions improved.
Zomato's economics improved significantly during the recovery.
Zomato raised $250 million in August 2020 from investors including Kora Management, Tiger Global and Temasek.
The company went public in 2021.
Zomato later expanded beyond food delivery through its investment in and acquisition of Blinkit.
The crisis demonstrated the importance of cash management, adaptability and employee alignment.
Deepinder Goyal's leadership philosophy also focuses on giving employees significant autonomy rather than managing every individual through rigid targets.
What Happened to Zomato in 2020?
Zomato entered 2020 as a major food-delivery and restaurant-discovery company.
The business was already operating at significant scale.
But COVID-19 fundamentally changed consumer behaviour almost overnight.
Restaurants closed.
Dining-out activity disappeared.
Food-delivery demand fell sharply.
Restaurant partners faced existential challenges.
For Zomato, this created a direct threat to its primary source of business activity.
The company suddenly had to answer one critical question
How long can we survive if revenue does not recover?
The answer was extremely uncomfortable.
Zomato had approximately 45 days of runway, according to Deepinder Goyal's later account of the crisis.
What Is Cash Runway?
Cash runway refers to the amount of time a company can continue operating before it runs out of cash, assuming its spending and cash inflows remain broadly unchanged.
For example
If a startup has ₹10 crore in cash and spends ₹1 crore per month, its runway is approximately 10 months.
If the same company has only 45 days of runway, it has very little room for error.
This makes fundraising, cost reduction and revenue recovery extremely urgent.
For Zomato, the situation was even more difficult because the pandemic had affected the entire ecosystem.
Restaurants were struggling.
Customers were staying home.
Investors were uncertain.
The global economy was under severe pressure.
Zomato's 45-Day Crisis
The 45-day runway became one of the defining moments of Zomato's journey.
The company attempted to raise capital, but according to Deepinder Goyal, raising external funding during the initial crisis was extremely difficult.
Investors were dealing with their own portfolio companies and were becoming significantly more cautious.
This created a dangerous situation.
Zomato could not simply depend on another funding round to survive.
It needed to reduce its cash burn immediately.
The company therefore moved into survival mode.
Zomato's First Major Decision: Cut Costs
The first priority was cash preservation.
Zomato reduced its workforce and implemented salary reductions.
In May 2020, Zomato announced that approximately 13% of its workforce would be laid off.
At the time, the company had around 4,000 employees.
The remaining employees faced temporary salary reductions, with cuts reaching up to 50% for higher-paid employees.
The objective was not simply to reduce expenses.
The objective was to extend the company's runway.
Every month of additional runway gave Zomato more time for
Revenue recovery
Fundraising
Cost restructuring
Business model changes
Market recovery
Employee Salary Cuts
One of the most unusual parts of Zomato's survival strategy was employee participation.
Before the company imposed broader salary reductions, employees were given the opportunity to voluntarily take salary cuts.
Some employees even volunteered to give up their entire salary for a period of time.
The idea was simple
Employees sacrifice cash today in exchange for potential equity upside tomorrow.
This helped Zomato preserve cash during a period when raising money was extremely difficult.
Why Were ESOPs Important?
ESOP stands for Employee Stock Ownership Plan.
Instead of receiving all of their compensation in cash, employees could receive additional equity benefits.
For employees, this created a different risk-reward equation.
They were accepting lower short-term cash compensation while gaining greater potential ownership in the company.
For Zomato, the arrangement helped preserve cash.
This created alignment between the company and employees.
The logic was
Short-term sacrifice → Longer runway → Higher chance of survival → Potential long-term equity value
Zomato's Employee Participation
According to Deepinder Goyal's later account, more than 80% of the approximately 4,000-person team participated in the voluntary salary-cut programme.
This was significant.
Employees were not simply being asked to work through a crisis.
They were being asked to share some of the financial risk of keeping the company alive.
Zomato later rewarded employees who had voluntarily taken salary cuts with additional ESOPs.
When Zomato eventually became a publicly listed company, those equity holdings could potentially become significantly more valuable than the salary employees had sacrificed.
This became an important example of employee equity alignment in the Indian startup ecosystem.
Zomato's Official Cost-Cutting Measures
The salary programme was not the only cost-cutting measure.
Zomato also reduced its workforce.
In May 2020, the company announced that approximately 13% of employees would leave the organisation.
Employees affected by the layoffs received support including continued salary payments for a limited period, health insurance and outplacement assistance.
The company also continued vesting previously allocated ESOPs for affected employees during the support period.
The goal was to create a leaner organisation capable of surviving a prolonged downturn.
Zomato's Business Was Under Extreme Pressure
The pandemic did not simply reduce orders.
It affected almost every part of the company's operating ecosystem.
Restaurants faced closures.
Delivery operations were disrupted.
Consumers became cautious.
Regulations around movement and food delivery changed frequently.
Zomato had to work with restaurant partners and delivery workers while simultaneously protecting its own financial position.
Deepinder Goyal expected that a significant number of restaurants could permanently shut down during the crisis.
This meant Zomato had to prepare not only for a temporary disruption but potentially for a completely different restaurant ecosystem.
The Survival Strategy
Zomato's survival strategy can be understood through five major actions
1. Preserve Cash
The company aggressively reduced expenses.
2. Reduce Burn
Salary reductions and workforce restructuring reduced monthly cash requirements.
3. Protect the Core Business
Zomato continued working on food delivery while adapting to the new environment.
4. Find New Revenue Opportunities
The company explored adjacent businesses as consumer behaviour changed.
5. Raise Capital When Markets Reopened
As investor sentiment improved, Zomato successfully raised additional capital.
Zomato Raised $250 Million in 2020
The company's financial situation eventually improved.
In August 2020, Zomato raised approximately $250 million from investors including Kora Management, Tiger Global and Temasek.
This funding provided additional financial runway during the pandemic recovery.
It was a major turning point.
The company had moved from worrying about surviving for weeks to having significantly greater access to capital.
But funding alone was not the complete answer.
Zomato also needed to improve its economics.
Zomato Improved Unit Economics
As the food-delivery business began recovering, Zomato focused heavily on reducing losses per order.
In early 2020, the company had been losing money on individual food-delivery transactions.
By the June 2020 quarter, Zomato reported positive contribution economics per order.
The company also significantly reduced its monthly burn.
This was important because survival was not simply about raising money.
The company needed to make the underlying business more sustainable.
Salary Cuts Were Eventually Reversed
As the business recovered, Zomato reinstated employee salaries.
The company also decided to reward employees who had voluntarily accepted salary reductions.
Employees who had taken voluntary salary cuts received additional ESOPs linked to the amount they had sacrificed.
This demonstrated a key principle
If employees share the downside during a crisis, they should also share the upside when the company recovers.
The Zomato IPO
The next major milestone came in 2021.
Zomato went public through an IPO.
The IPO was significant because it demonstrated that public-market investors were willing to invest in a large technology company operating in the food-delivery sector despite its history of losses.
The IPO provided Zomato with additional capital and increased its visibility in India's public markets.
It also changed the perception of the company.
Zomato was no longer simply a venture-backed startup.
It had become a publicly listed consumer technology company.
From Food Delivery to a Larger Consumer Ecosystem
Zomato's transformation did not stop with food delivery.
The company increasingly looked at adjacent categories where its customer base and delivery infrastructure could provide an advantage.
One of the most important moves was its entry into quick commerce.
Zomato invested in Blinkit and later proposed its acquisition.
The acquisition was completed in 2022.
This was strategically important because quick commerce offered a higher-frequency use case than restaurant ordering.
A customer might order food once or twice a day.
But groceries, household products and daily essentials can potentially create much more frequent interactions.
Why Did Zomato Invest in Blinkit?
Zomato's argument was that quick commerce was strategically complementary to food delivery.
The company already had
Large consumer reach
Delivery infrastructure
Logistics capabilities
Technology
Customer data
Brand recognition
Strong relationships with delivery partners
Quick commerce allowed Zomato to use these capabilities in another category.
The strategy was therefore not simply
Food → Groceries
It was
Delivery infrastructure → Multiple high-frequency consumer categories
Zomato's Business Transformation
Zomato's evolution can be broadly understood in stages.
2008 — Food Discovery
Zomato began as a restaurant discovery and information platform.
Food Delivery Expansion
The company expanded into online food ordering and delivery.
2020 — Survival Crisis
COVID severely disrupted its core business.
2020 — Capital Recovery
The company raised substantial funding as capital markets reopened.
2021 — IPO
Zomato became a publicly listed company.
2022 — Blinkit Acquisition
The company expanded aggressively into quick commerce.
Today — Consumer Internet Ecosystem
Zomato operates across food delivery and quick commerce through its broader ecosystem.
The Biggest Lesson From Zomato's Crisis
The most important lesson is not that Zomato raised more money.
It is that the company survived long enough to raise that money.
When funding disappeared, the company had to become more efficient.
When revenue collapsed, it had to preserve cash.
When employees were asked to sacrifice compensation, they received equity upside.
When the market recovered, Zomato was still alive.
This is the fundamental purpose of runway
Runway buys a startup time.
And during a crisis, time can be the difference between survival and failure.
Deepinder Goyal's Leadership Philosophy
The Zomato story is also interesting because of Deepinder Goyal's approach to management.
His leadership philosophy is different from the traditional corporate approach.
He has argued against excessive reliance on rigid quarterly or annual targets.
Instead, he believes leaders and employees should be trusted to do their best work.
The underlying idea is that people can sometimes optimise for the target rather than the actual objective.
For example
If a team is given a target of 100, it may focus on reaching 100.
But if the team is asked to achieve the best possible outcome, it may attempt to reach 120 or 150.
This philosophy puts greater emphasis on
Ownership
Autonomy
Judgement
Accountability
Long-term thinking
High-quality execution
Why Deepinder Avoids Excessive Target Setting
According to Goyal's philosophy, rigid targets can sometimes create minimum-effort behaviour.
If an employee believes success means reaching a predefined number, they may stop pushing once that number is achieved.
This can create a dangerous organisational pattern
Target → Achievement → Stop
Instead, Goyal prefers
Mission → Ownership → Best Possible Outcome
The approach is particularly relevant in startups where the environment changes rapidly and fixed targets can become outdated.
Zomato's Hiring Philosophy
Deepinder Goyal also places significant importance on how candidates behave during interviews.
One of the characteristics he looks for is genuine team orientation.
A candidate who takes complete credit for every achievement can be a warning sign.
For example
A candidate saying
"I built everything myself."
may raise questions about whether they work effectively with others.
A candidate saying
"Our team achieved this, and I contributed in these specific areas."
may demonstrate stronger collaboration.
For Goyal, this distinction can be important because startups depend heavily on teamwork.
The Hiring Lesson
The broader lesson is
Hire people who make the team stronger, not people who only make themselves look stronger.
A startup is a collection of interdependent functions.
Product depends on engineering.
Engineering depends on product clarity.
Marketing depends on product quality.
Sales depends on customer success.
Operations depend on technology.
Individual brilliance cannot compensate indefinitely for a weak team.
Zomato's Crisis Management Framework
Zomato's 2020 experience provides a useful framework for founders.
Step 1: Calculate Your Runway
Know exactly how many months or weeks your startup can survive.
Step 2: Identify Your Largest Costs
Separate essential expenses from expenses that can be delayed.
Step 3: Protect Core Operations
Do not cut costs so aggressively that the company loses its ability to recover.
Step 4: Communicate With Employees
During a crisis, uncertainty can be more damaging than bad news.
Step 5: Align Employees With the Upside
Equity can help align employees with long-term company value when appropriate.
Step 6: Improve Unit Economics
Do not depend permanently on external capital to cover losses.
Step 7: Look for Adjacent Opportunities
Once the core business stabilises, expand into categories where existing capabilities create an advantage.
Zomato's Biggest Strengths During the Crisis
Strong Brand
Zomato already had significant consumer awareness before COVID.
Large Restaurant Network
The company had built relationships with restaurants across multiple markets.
Technology Infrastructure
Its platform could quickly adapt to changing customer and restaurant requirements.
Delivery Network
The company had an existing delivery ecosystem that could be repurposed and scaled.
Employee Alignment
The voluntary salary-cut programme demonstrated significant employee participation.
Ability to Raise Capital
Once capital markets reopened, Zomato was able to attract major institutional investors.
Zomato's Biggest Challenges in 2020
Revenue Shock
Food delivery demand was severely disrupted.
Restaurant Closures
Many restaurant partners faced financial distress.
High Cash Burn
The company had significant operating expenses.
Funding Uncertainty
Investors were extremely cautious during the early pandemic period.
Workforce Restructuring
The company had to reduce its employee base.
Changing Consumer Behaviour
Nobody knew how long the pandemic would last or how quickly restaurant demand would return.
What Would Have Happened If Zomato Had Not Cut Costs?
If Zomato had continued spending at its pre-pandemic rate while revenue remained severely depressed, its runway could have disappeared rapidly.
That could have forced the company into a distressed fundraising situation.
In such a scenario, investors could demand
Lower valuation
Greater dilution
Stronger investor control
Aggressive restructuring
Emergency asset sales
By cutting burn early, Zomato bought itself additional time.
That time became valuable when the market started recovering.
Why the 2020 Crisis Changed Zomato
The pandemic forced Zomato to become more disciplined.
Before COVID, growth and market expansion were major priorities.
During COVID, survival became the priority.
That change forced management to examine
Cash flow
Unit economics
Employee costs
Restaurant relationships
Delivery efficiency
Business diversification
The crisis therefore became an organisational reset.
Zomato's journey after 2020 shows that a crisis can sometimes accelerate changes that would otherwise take years.
Zomato's Story Is Not Just About Survival
It is tempting to describe the story simply as
"Zomato almost went bankrupt and survived."
But the deeper story is more interesting.
Zomato went through several transformations
Restaurant Discovery → Food Delivery → Crisis Management → Public Company → Consumer Ecosystem
Each stage required a different strategy.
The company that survived COVID was not exactly the same company that entered the pandemic.
The crisis forced Zomato to become more financially disciplined and operationally focused.
The Bigger Startup Lesson
Startups often operate under the assumption that the next funding round will solve their problems.
That can be dangerous.
Funding is not guaranteed.
Markets change.
Investors change priorities.
Economic crises can happen unexpectedly.
A strong startup therefore needs to understand
Revenue + Costs + Burn + Runway + Unit Economics
before thinking only about valuation.
Zomato's 2020 crisis demonstrates why runway matters.
A startup with 24 months of runway has options.
A startup with 45 days of runway has very few.
Summary Takeaway
💡 **Key Takeaway:** Zomato survived its 2020 crisis not simply because it raised more funding, but because it bought itself enough time to reach the recovery. Cost control, employee participation, ESOPs, improving unit economics and disciplined cash management helped the company navigate an extraordinary disruption.
The company later raised significant capital, went public in 2021 and expanded into quick commerce through Blinkit.
But the most important lesson for founders is simple
When funding disappears, your runway becomes your most valuable asset.
Protect cash. Build employee trust. Improve unit economics. And give your business enough time to recover.
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