Zepto has now become the first unicorn of India in 2023 with a fresh funding of $200 million
On Friday, Zepto, a startup that offers instant grocery delivery, announced that it has secured $200 million in a new funding round at a valuation of $1.4 billion. This is a remarkable achievement, especially considering that most other companies in this sector have either gone out of business or are struggling to survive. This funding round has made Zepto the first Indian startup to achieve unicorn status this year.
Zepto, a company backed by Nexus Venture Partners, among other venture funds, has announced the completion of its Series E funding round. StepStone Group, an influential LP in many venture funds, including Nexus Venture Partners, made its first direct investment in India by leading this funding round. Along with StepStone Group, existing backers such as Glade Brook Capital, Lachy Groom, and Goodwater Capital they participated in the round.
According to Zepto co-founder and CEO Aadit Palicha in a recent interview, the startup was last valued at $900 million during a funding round announced in May of last year. Although the startup has raised approximately $560 million thus far, there were no secondary transactions in the latest funding round.
Currently, most instant delivery startups worldwide, including Gopuff, Jokr, Getir, Gorillas, Instacart, and others, have significantly reduced their operations, experienced a significant drop in their private valuations, or completely closed down. Despite this, funding has been secured at this time.
BlinkIt, a rival of Zepto, was sold for less than its raised funds after almost a decade of operation. Dunzo, which Reliance Retail backs, has deferred payments to employees and cut its workforce after aggressively spending over $150 million to expand its dark stores. Unfortunately, this gamble did not pay off. So, what worked for Zepto? According to Palicha, people overlook that businesses driven by supply chains and operations are primarily about execution. The existence of well-funded competition and who is on the cap table are less important than the attention to detail and discipline applied to every aspect of the supply chain.
Zepto was co-founded by Palicha and Kaivalya Vohra when they were just 19 years old. Before this, the duo had worked on several projects, including a ride-hailing app for school children, and had dropped out of Stanford two years ago. In November 2021, Zepto emerged from stealth mode. The startup is involved in selling and delivering a wide range of products, from groceries to electronic gadgets, and currently processes over 300,000 daily orders in seven Indian cities. Zepto, like many other companies operating in this space, relies on numerous “dark stores” in popular neighborhoods across cities. Palicha explained that the vast majority of these stores are entirely profitable.
Zepto aims to hit $1B in annual sales within a few quarters. The company has surpassed $700M in annualized revenue sales, with an impressive YoY growth rate of 300%. Zepto is expected to become IPO-ready in 12-15 months and has reduced expenses, resulting in a positive EBIDTA metric company-wide.
“We’ve secured this capital, but we’re determined to remain focused, avoid complacency, and work hard to achieve EBITDA positivity,” commented Kaivalya Vohra, Zepto’s co-founder and CTO, in a statement. “Our advancements in technology and product are the major drivers of our P&L growth. We’re currently developing one of the best supply chain product stacks in the country, and we’re also investing heavily in customer-facing products. Technical excellence is at the core of our DNA, and I’m thrilled about the next phase of our development.”
Zepto has announced plans to become a profitable and growing technology company that customers love, with the intentions to go public by 2025. Despite a downturn in India’s economy, which has dampened investor interest, Zepto has secured funding to become India’s first unicorn this year. According to Tracxn, Indian startups raised just $5.46 billion in H1 2023, down from $17.1 billion in the same period in 2022 and $13.4 billion in H1 2021. However, Zepto’s success has set a high standard for other startups, with early backer Will Robbins from Contrary admitting that he has made fewer investments this year.