Zepto Secures $665 Million Funding Pre-IPO, Valuation Doubles

The company said it will use the capital raised in the latest funding round to expand its dark stores and fuel new initiatives such as Zepto Pass

The funding and valuation achieved by the Kaivalya Vohra and Aadit Palicha-founded startup signals the comeback of optimism in the quick commerce space, which was once being dismissed as a cash-guzzling business.

Just nine months after turning unicorn, quick commerce startup Zepto has secured a whopping $665 million from a mix of new and existing investors at a valuation of $3.6 billion, as the company gears up for a public-market listing next year.

Among the new investors are New York-based growth equity investment firm Avenir, global venture capital firm Lightspeed and growth-stage investor Avra Capital, while existing investors such as Nexus Venture Partners, Glade Brook, and StepStone Group also participated in the round.

The deal also marks the formal launch and first investment of Avra Capital, an investment firm headed by Anu Hariharan, the co-founder and former managing director of Y Combinator’s growth fund. Incidentally, Y Combinator was also among Zepto’s earliest investors.

Meanwhile, the latest round of funding has doubled the firm’s valuation to $3.6 billion, from its previous valuation of $1.4 billion achieved in August 2023. This shows the growing interest among investors who want a piece of the action at the fast-growing four-year-old startup.

Value Proposition
Zepto’s funding spree also indicates the comeback of optimism in the quick commerce space, which was once being dismissed by the venture capital and private equity ecosystem owing to its cash-guzzling proposition.

Over the last few months, quick commerce firms including Zepto and Zomato-owned Blinkit have managed to fuel customer demand as well as show better unit economics, making the space highly competitive.

According to a report by HSBC Global Research released in April, Zepto has steadily increased its quick commerce market share to 28% at the cost of Swiggy Instamart over the past two years, while market leader Blinkit has grown its share to 40%.

Further, the current funding round is expected to help Zepto rapidly expand its dark stores network, or warehouses where grocery and e-commerce items are stored, with the aim of doubling the store count to 700 by March 2025.

Currently, nearly 75% of its existing 350 stores are already EBITDA positive, while the time taken for each store to achieve profitability has also reduced to six months from 23 months earlier, on the back of operational efficiency and an optimised supply chain, according to Aadit Palicha, co-founder and CEO of Zepto.

The company also claims to be nearing companywide EBITDA profitability with its gross merchandise value (GMV) multiplying multi-fold on a year-on-year basis.

GMV is a key metric in e-commerce, which tracks the total value of all the goods sold on a platform, not including discounts and other expenses.

“This dynamic of stores turning profitable faster and faster has enabled Zepto to grow rapidly while simultaneously achieving near EBITDA positivity at a company level,” Palicha said in a statement on Friday.

Smart commerce
Zepto is also playing smart by adhering to fiscal discipline and reinvesting the proceeds from its profitable stores back into the business, the chief executive noted.

Earlier this week, Mint had reported that the grocery delivery company is looking to set up larger dark stores to stock a larger assortment of grocery and e-commerce products like cosmetics and gifting items.

“If we are able to achieve this while continuing to delight customers, I believe we will be ready to go public relatively soon,” he added.

Founded by Aadit Palicha and Kaivalya Vohra in 2021, Zepto shot to fame after it secured upwards of $150 million in funding from marquee investors such as Y Combinator and Nexus Venture Partners within months of inception.

It attained unicorn status last year after bagging $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 is now planning an initial public offering sometime next year, aiming for a multi-billion dollar listing on the back of a healthy balance sheet, Palicha said.

Over the last few months, Zepto has introduced several new initiatives to diversify its revenue streams and improve its margins.

For instance, Zepto Pass, its loyalty programme with monthly prices starting at ₹19, saw more than a million customers sign up to it within a week of launch in February, according to the company. Now, the programme has more than 4.5 million subscribers, Palicha told Mint.

“The most exciting part about this next phase of Zepto’s journey are the major new projects that will [provide a] 10X customer experience, from launching new categories to expanding initiatives like Zepto Pass. To build out this roadmap, we plan to hire top talent across engineering, product, growth, finance, operations, and category management,” said Kaivalya Vohra, co-founder and chief technology officer, on Friday.

The company is also looking to scale up Zepto Cafe, its quick snack and meal delivery option.