Zepto, an instant grocery delivery business, announced on Friday that it has secured $200 million in a new investment round at a valuation of $1.4 billion.
In contrast, most other companies in the same industry have either failed or are having difficulty. Zepto is the first Indian business to achieve unicorn status this year, thanks to the funding.
StepStone Group, a significant LP in various venture funds, including Nexus Venture Partners, headed Zepto’s Series E funding. This is the American company’s first direct investment in India. Participants in the round included Goodwater Capital and previous supporters Nexus, Glade Brook Capital, and Lachy Groom.
An investment round that Zepto announced in May of last year valued the company at $900 million. According to Zepto co-founder and CEO Aadit Palicha, the business, which has raised around $560 million to date, has yet to receive secondary transactions in the fresh round.
The money comes at a time when the great majority of quick delivery businesses worldwide—including Gopuff, Jokr, Getir, Gorillas, Instacart, and others—have drastically scaled back operations and seen their private valuations drop or shut down entirely. These startups collectively received over $10 billion.
Closer to home, Zepto’s rival BlinkIt, was sold after operating for almost ten years for less money than it had raised. Dunzo, which Reliance Retail sponsors, has delayed employee paychecks and reduced employment after aggressively investing over $150 million to grow its dark stores. This risk hasn’t paid off at all.
What, then, has Zepto found effective?
Most people are unaware of this, but organizations that rely heavily on operations and the supply chain are primarily about execution, according to Palicha, who spoke with TechCrunch.
“The high-level factors that people keep bringing up, such as the existence of competitors with vast pockets and who is on the cap table, are irrelevant. What counts is the level of discipline and execution you are using to manage every inch of your supply chain.
When they were 19 years old, Palicha and Kaivalya Vohra co-founded Zepto. The two put Zepto out of stealth mode in late November 2021. They had previously collaborated on projects, including a ride-hailing commute app for schoolchildren.
The business fulfills more than 300,000 orders daily across seven Indian cities, selling and delivering anything from groceries to technological devices.
Zepto, like many other businesses in this sector, depends on thousands of so-called “dark stores” spread throughout crowded areas of cities. According to Palicha, most of these stores have an entirely positive EBITDA.
He claimed that Zepto has drastically decreased its “burn” and aims to be IPO-ready in 12 to 15 months with a company-wide EBIDTA positive statistic. The firm has raised its sales by 300% year over year.
It aims for $1 billion in yearly sales within the next several months, according to Palicha, whose annualized revenue sales presently surpass $700 million.
“Even with this capital, we want to maintain our discipline, avoid complacency, and push hard to hit EBITDA positivity,” Zepto co-founder and CTO Kaivalya Vohra said. “In that journey, technology and product are our primary drivers of P&L improvement.
We are now developing one of the best product stacks for supply chains in the nation, and we are also making significant investments in products that directly serve customers. We are bred for technological perfection, and I look forward to the next stage of construction.
According to the company, Zepto is “a profitable, growing technology company that customers love,” it intends to go public by 2025.
With the cash, Zepto becomes this year’s first unicorn from India amid an extended economic recession that has severely reduced investor interest.
According to market intelligence company Tracxn, Indian startups raised just $5.46 billion in the first half of 2023, a sharp reduction of 68% from the $17.1 billion raised in the same period of 2022 and a drop from $13.4 billion in H1 2021.
In 2021 and 2022, 65 Indian firms achieved or surpassed a valuation of $1 billion, becoming unicorns. Because Zepto sets the standard so high for comparisons, Will Robbins, GP at Contrary and an early backer of Zepto said he feels like he has been investing less this year.