Fast-growing firm Zepto received $200 million in Series E fundraising on Friday at a valuation of $1.4 billion from both new and current investors, making it the first company in the nation to reach unicorn status in 2023. With Zepto, StepStone Group, a private markets investment company with headquarters in New York, has made its first direct investment in India. Along with other current investors Nexus Venture Partners, Glade Brook Capital, and Lachy Groom, venture capital firm Goodwater Capital of California also joined the round as a new investor. The cash will be used by Zepto, which is run by Aadit Palicha and Kaivalya Vohra, to expand its footprint in the top seven cities, including Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune, and some of Kolkata. The deal had just one advisor, and that was Avendus Capital.
According to Palicha, co-founder and CEO of Zepto, the top cities present “much larger opportunities” than ever anticipated, necessitating a focus on expanding upon current markets and increasing density to accelerate profitability and growth. Palicha continued, “Instead of aggressively expanding across geographies, we will adopt a measured and disciplined approach.” By maintaining a laser-sharp focus on attaining both growth and profitability at the same time, the grocery delivery company now plans to reach EBITDA-level profitability in the following 12 to 15 months, the co-founder noted.
The company claims that its sales have increased by 300% year over year and that it will soon reach $1 billion in annualized revenues. We want to maintain our discipline, avoid becoming comfortable, and work extremely hard to hit EBITDA positivity even with this capital. According to Vohra, co-founder and chief technology officer of Zepto, “along that journey, technology and product are the primary drivers of P&L improvement for us. The Y Combinator-backed grocery delivery service is pushing for sustainable growth since it wants to go public by the beginning of 2025. Zepto’s Palicha stated that the most recent fundraising is a pre-IPO round as part of a “capital-building exercise,” but she would not say how much money the company hopes to raise through the public listing. The idea behind the $200 million capital raise is to invest in stores within the next three months. The investment will produce income and support our transition to profitability over the following nine to twelve months, he continued.
With the most recent round of fundraising, Zepto has now raised $560 million in total. It most recently secured $200 million from Y Combinator Continuity at a valuation of $900 million. Zepto was established in 2021 and quickly rose to become one of the most well-funded rapid commerce firms in the nation, fiercely challenging Swiggy Instamart and Zomato-owned Blinkit. Despite a high capital burn and complex unit economics, Zepto’s fundraising suggests that competition in the rapid commerce area is rising. However, according to Palicha, the company’s cash burn—the amount of money it spends to complete an order—has decreased this year by 70% compared to early 2022, largely due to supply chain optimization, increased productivity at dark stores, and efficient sourcing. According to him, it generates sales of $50 to $60 million per month. Furthermore, the company claims that the bulk of Zepto’s 200 dark storefronts are already profitable. Ramesh Bafna, the former CFO of Peak XV-backed Zilingo and Flipkart-owned Myntra, joined the rapid commerce firm in April, according to a report from YourStory. He will oversee the finance department as CFO. Later in May, the company replaced the positions of Chief Growth Officer and Chief Operating Officer in its top management.
