In a significant milestone for the Indian startup ecosystem, Zepto, a quick commerce startup, has successfully secured $200 million in a Series E funding round, elevating its valuation to an impressive $1.4 billion. This funding marks Zepto’s entry into the unicorn club, making it the first startup in India to achieve this status in 2023. The funding round was spearheaded by StepStone Group, a prominent New York-based private markets investment firm, marking their debut direct investment in India through Zepto. Joining as a new investor is California-based venture capital firm Goodwater Capital, while existing backers including Nexus Venture Partners, Glade Brook Capital, and Lachy Groom also participated in the round. The funding effort was supported by Avendus Capital, serving as the exclusive advisor to the deal.
Zepto’s Vision and Expansion Plans
Founded by Aadit Palicha and Kaivalya Vohra, Zepto envisions utilizing the newly acquired funds to strengthen its presence across the top seven cities in India. These cities include Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune, and parts of Kolkata. According to Aadit Palicha, the Co-founder and CEO of Zepto, these top cities present expansive opportunities that demand a more focused approach. The strategy involves deepening the company’s foothold in existing markets to cultivate density and facilitate both profitability and growth.
A Holistic Approach to Growth and Profitability
Emphasizing their commitment to a balanced approach between growth and profitability, Zepto has set its sights on achieving EBITDA-level profitability within the next 12-15 months. With a remarkable 300% year-on-year increase in sales, the company is poised to achieve an annualized sales figure of $1 billion in the coming quarters. Kaivalya Vohra, Co-founder and CTO of Zepto, expressed that technology and product innovation will play a pivotal role in driving profitability and improving the company’s bottom line.
The Road to an IPO
Notably, Zepto harbors ambitions of going public and aims to launch an initial public offering (IPO) by early 2025. While specifics about the fundraising target for the IPO remain undisclosed, Aadit Palicha shared that the current funding round serves as a strategic step in the company’s “capital-building exercise.” The infusion of $200 million will be allocated towards investments in stores over the next 1-3 months, with a forecasted return on investment contributing to the company’s journey towards sustainable profitability.
Zepto’s Impressive Trajectory
With this latest funding round, Zepto’s total capital raised to date has reached an impressive sum of $560 million. This feat follows their previous funding round of $200 million at a valuation of $900 million, with Y Combinator Continuity leading the investment. Established in 2021, Zepto rapidly emerged as one of India’s highest-funded quick commerce startups, fiercely competing with Swiggy Instamart and Blinkit, a subsidiary of Zomato. The recent funding accomplishment underscores the intensifying competition within the quick commerce sector, despite the sector’s traditional challenges of high cash burn and intricate unit economics.
Path to Profitability and Operational Efficiency
Despite the competitive landscape, Zepto has demonstrated commendable progress in enhancing its financial sustainability. Aadit Palicha highlighted a 70% reduction in cash burn throughout the year, attributed to improved sourcing efficiency, productivity gains in dark stores, and optimized supply chain operations. Generating monthly sales of $50-60 million, Zepto boasts profitability in the majority of its 200 dark stores.
A Strategic Leadership Shift
To further fortify its growth trajectory, Zepto made strategic additions to its leadership team. Ramesh Bafna, former CFO of Peak XV-backed Zilingo and Flipkart-owned Myntra, joined as the CFO in April. Additionally, the company undertook top management restructuring in May, redefining roles including COO and Chief Growth Officer.
Zepto’s journey from Series E funding to unicorn status underscores its resilience, innovation, and strategic vision. As the company advances towards its IPO ambitions, the fusion of technology-driven solutions and a commitment to financial viability will undoubtedly remain at the core of Zepto’s journey.
