Will Zomato's new diversification strategy deliver more unicorns?

 Soon after its strong public market debut, Zomato said it is investing in companies that can become market leaders in their category. Find out the rationale behind its 'buy instead of build' model

Inspired by Chinese internet behemoths Alibaba and Tencent, recently listed food-tech startup Zomato has chalked out an ambitious plan to invest $1 billion over the next two years in other startups. There are reports that the company may invest $500 dollar in Grofers, as it sees opportunity in quick commerce
Zomato is well-positioned from a capital perspective too after raising $1.2 billion in its IPO in July this year. This, it hopes, will help the company emerge as a major force in the hyperlocal e-commerce ecosystem.
Over the past six months, Zomato has committed $275 million across four startups. In August, it invested $100 million in the online grocery store Grofers. A month later, it shut down its own pilot grocery delivery service. The company cited gaps in order fulfillment, leading to poor customer experience. Zomato believes that its investment in Grofers will deliver better outcomes to its shareholders than its in-house efforts.
It is also investing $75 million in logistics firm Shiprocket, $50 million in savings, and neighborhood discovery app Magicpin.
Zomato is also divesting its recently-acquired sports platform Fitso to Curefit Healthcare for $50 million and also investing an additional $50 million in the fitness and well-being startup. In the process, Grofers and Curefit have turned unicorns with Zomato’s funding.

Each one of these deals is being seen as strategic by Zomato. It has made its intentions clear, Zomato is not looking to be a financial investor who sits on the sidelines.
The company is ready to infuse additional capital into these businesses as they scale and consolidate its stake, leading to a potential merger in the future.
In the worst-case scenario of acquisition not panning out, Zomato is still expecting windfall gains from its investments. Laying out its strategy, Zomato said it is only investing in companies that have the ability to become market leaders in their category. This way, it is looking to add multiple large core businesses to its mainstay of food delivery.