Zepto has raised a whopping $665 million in a new round of funding, more than doubling its valuation to $3.6 billion from $1.4 billion in less than a year, as the Mumbai-based startup doubles down on its efforts to take on the disputed quick trade market in India.
Zepto sells and delivers everything from groceries to electronic gadgets to consumers in urban cities of India within a short period of time. The rapid delivery model is thriving in India, even as most startups in the space have cratered in developed markets.
Glade Brook, Nexus and StepStone Group co-led the “highly oversubscribed” Series F round, Zepto said. Avenir, Lightspeed and Avra (former YC Continuity executive Anu Hariharan), as well as existing backers Goodwater, Lachy Groom and Contrary also invested in the round, the startup said.
DST Global, an early backer of Zepto competitor Swiggy, also co-led the new funding round, according to two people familiar with the matter. Zepto did not disclose DST Global’s participation in the new funding round and declined to comment.
Zepto competes with BlinkIt (owned by Zomato) and Swiggy’s Instamart in the quick commerce space.
These fast-paced trading companies have set up numerous discreet warehouses, known as ‘dark shops’, across urban India. By strategically locating these facilities within a few miles of high-demand residential and commercial areas, they can fulfill orders within minutes of purchase.
“Because it takes less space to stand a dark store than normal storefronts, Zepto can create a wider network of stores in a city allowing for short delivery times,” said Will Robbins, partner at Contrary. He wrote in his thesis.
Zepto aims to expand its network of dark stores to more than 700 by March 2025. The startup said its revenue is up 140% from a year earlier and its annual gross merchandise value (GMV) is on track to surpass $1 billion. It works with over 50,000 delivery partners and adds over 5,000 delivery partners every month.
The company said about 75% of its dark stores were EBITDA positive as of last month. Improved efficiency and scale mean a dark store that previously took 23 months to achieve profitability now reaches that milestone in six months, Zepto said.
The growth of e-commerce companies in India, a $4 trillion economy, has surprised many investors and analysts, especially as many similar business models have collapsed in other markets.
“In India, there is a culture of hyperlocal shopping. This doesn’t really exist in other parts of the world. Customers in India buy small-ticket items multiple times a week hyperlocally, and fast commerce provides them hyperlocal, high-proximity, low-ticket use cases,” Zepto co-founder and CEO Aadit Palicha told TechCrunch. “No other format in grocery, even in the offline world, has been able to make similar offers to consumers.”
Fast food startups in India are increasingly beginning to expand beyond grocery delivery. A company promises to deliver high-value items such as smartphones and game consoles to customers in 10 minutes.
Palicha, who founded Zepto with Kaivalya Vohra when both were just 19, said Zepto offers electronic accessories such as chargers and cables, but the company does not want to offer high-tech electronics on its platform.
“We’re not really into smartphones, ticket fashion and laptops. We’re more interested in categories that are relatively lower-stakes purchases, such as home appliances, underwear, general merchandise, toys, beauty and cosmetics, and home and kitchen products. We see resonance there,” Palicha said.
The startup is currently active in leading cities in India and plans to expand to select smaller cities in the coming months. Palicha said Zepto is encouraged by the initial reception from cities like Jaipur, where local offline offerings are unable to fully meet customer demands.
“If we are able to achieve this while continuing to please customers, I believe we will be ready to go public relatively soon,” he said in a statement.
Avenir, a New York-based venture firm, had been watching Zepto for about three years before finally investing in the current round. Zepto is in a position to disrupt traditional retail exchanges in India, said Ben Jubas, partner at Avenir.
“It has the opportunity to become a huge commercial enterprise because of the depth of its value proposition and its operational rigor,” he told TechCrunch. “In our view, it’s second to none.”
Some industry analysts predict that e-commerce companies will significantly erode the market share of major e-commerce players such as Amazon and Flipkart. Jubas said he subscribes to that thesis, but it’s up to Zepto management on how it plans to play with it.
According to Goldman Sachs, the total addressable market in the grocery and non-grocery categories for fast-casual companies in the top 40-50 cities is about $150 billion.
