Just nine months after becoming a unicorn, quick commerce startup Zepto has secured $665 million from new and existing investors, raising its valuation to $3.6 billion. This comes as the company prepares for a public-market listing next year.

New investors in this round include New York-based Avenir, global venture capital firm Lightspeed, and growth-stage investor Avra Capital. Existing investors like Nexus Venture Partners, Glade Brook, and StepStone Group also participated.

This investment marks Avra Capital’s first investment. Avra Capital is headed by Anu Hariharan, the co-founder and former managing director of Y Combinator’s growth fund. Interestingly, Y Combinator was also one of Zepto’s earliest investors.

The latest funding round has doubled Zepto's valuation from $1.4 billion in August 2023 to $3.6 billion, reflecting growing investor interest in the fast-growing four-year-old startup.

Zepto’s Appeal

Zepto’s funding success signals renewed optimism in the quick commerce sector, which had previously been dismissed by venture capital and private equity firms due to its high cash consumption.

In recent months, quick commerce firms like Zepto and Zomato-owned Blinkit have managed to increase customer demand while showing better unit economics, making the market highly competitive.

According to an HSBC Global Research report from April, Zepto has steadily increased its market share in the quick commerce sector to 28%, overtaking Swiggy Instamart, while market leader Blinkit has grown its share to 40%.

The new funding will help Zepto expand its network of dark stores, which are warehouses for grocery and e-commerce items. The company aims to double its store count to 700 by March 2025. Currently, nearly 75% of its 350 existing stores are already EBITDA positive, meaning they are profitable before interest, taxes, depreciation, and amortization. The time it takes for each store to become profitable has also decreased from 23 months to just six months, thanks to operational efficiency and an optimized supply chain, says Aadit Palicha, co-founder and CEO of Zepto.

Zepto is also nearing profitability at the company level, with its gross merchandise value (GMV) increasing significantly year-on-year. GMV is a key metric in e-commerce that tracks the total value of goods sold on a platform, excluding discounts and expenses.

“This trend of stores becoming profitable faster has allowed Zepto to grow quickly while nearly achieving companywide EBITDA positivity," Palicha said.

Smart Commerce Strategies

Zepto is maintaining fiscal discipline and reinvesting the profits from its successful stores back into the business, according to Palicha.

Earlier this week, Mint reported that Zepto is looking to set up larger dark stores to stock a wider range of grocery and e-commerce products, including cosmetics and gifts.

“If we can achieve this while continuing to delight customers, I believe we will be ready to go public relatively soon," Palicha added.

Founded by Aadit Palicha and Kaivalya Vohra in 2021, Zepto gained attention after securing over $150 million in funding from major investors like Y Combinator and Nexus Venture Partners within months of starting. It achieved unicorn status last year after raising $200 million in Series E funding led by US private equity firm StepStone Group, along with Goodwater Capital, Nexus Venture Partners, and Glade Brook Capital.

The startup plans to launch an initial public offering (IPO) next year, aiming for a multi-billion dollar listing based on a healthy balance sheet, according to Palicha.

In recent months, Zepto has launched several initiatives to diversify its revenue streams and improve margins. For example, Zepto Pass, its loyalty program with monthly prices starting at ₹19, attracted over a million customers within a week of its launch in February, according to the company.

Investor Optimism and Market Position

Zepto’s recent funding success indicates a strong belief in its business model and growth potential among investors. The quick commerce space, though previously viewed with skepticism due to high operating costs, has shown signs of being a viable and profitable sector.

By expanding its network of dark stores and improving its operational efficiency, Zepto is positioning itself as a major player in the quick commerce market. Its ability to quickly turn stores profitable and manage its resources effectively has given it a competitive edge.

Furthermore, the company's strategic focus on customer satisfaction and loyalty programs has helped it build a strong customer base. This customer-centric approach, combined with smart financial management, sets Zepto up for sustained growth and profitability.

Looking Ahead

With plans to double its store count and an upcoming IPO, Zepto is poised for significant growth. The company's leadership is confident in its ability to continue delighting customers while achieving financial milestones.

Zepto's story is a testament to the potential of quick commerce and the opportunities it presents for investors and customers alike. As the company moves towards its public listing, it aims to continue its growth trajectory and solidify its position in the market.

In summary, Zepto's journey from a startup to a multi-billion-dollar company in a few short years underscores the rapid evolution of the quick commerce sector and the exciting possibilities that lie ahead. The company's commitment to innovation, efficiency, and customer satisfaction will likely drive its future success and set new benchmarks in the industry.

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