It's official! Zepto is India's newest unicorn; raises $200M at $1.4B valuation

Quick commerce startup Zepto secured a Series E funding of $200 million at a valuation of $1.4 billion from new and existing investors on Friday, making it the first startup in the country to attain unicorn status in 2023.

The funding round is led by StepStone Group—a New York-based private markets investment firm that has made its first direct investment in India with Zepto. California-based venture capital firm Goodwater Capital also joined as a new investor, while existing investors, including Nexus Venture Partners, Glade Brook Capital, and Lachy Groom, also participated in the round.

Led by Aadit Palicha and Kaivalya Vohra, Zepto aims to use the funds to deepen its presence in the top seven cities, including Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Pune, and parts of Kolkata. Avendus Capital was the sole advisor to the deal.

The top cities offer "much larger opportunities" than ever imagined, which makes it necessary to focus on going deeper into existing markets and create density to turn the flywheel on profitability and growth, Palicha, Co-founder and Chief Executive Officer of Zepto, told reporters in a media briefing on Friday.

"We're not going to expand aggressively across geographies, but will take a measured and disciplined approach instead," Palicha added.

The grocery delivery firm now aims to hit EBITDA-level profitability in the next 12-15 months by keeping a laser-sharp focus on achieving both growth and profitability at the same time, the co-founder added.

According to the company, its sales have grown 300% year-on-year, and it is on track to achieve $1 billion in annualised sales within the next few quarters.

"Even with this capital, we want to maintain our discipline, avoid complacency, and push hard to hit EBITDA positivity. In that journey, the biggest drivers of P&L improvement for us are based on technology and product," Vohra, Co-founder and Chief Technology Officer of Zepto, added.

The Y Combinator-backed grocery delivery firm aims to float an initial public offering (IPO) by early 2025, making its push for sustainable growth more important than ever.

Zepto's Palicha did not divulge details about how much money the firm is looking to raise through the public listing, but said that the latest fundraise is a pre-IPO round part of a "capital-building exercise".

"The thought process behind raising the capital ($200 million) is to make investments in stores in the next 1-3 months. In the next 9-12 months, the investment will generate money and fuel our journey to profitability," he added.

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With the latest funding round, Zepto has raised a total of $560 million to date. It last raised $200 million at a valuation of $900 million with Y Combinator Continuity as the lead investor.

Founded in 2021, Zepto became one of the highest-funded quick commerce startups in the country, giving intense competition to Swiggy Instamart and Zomato-owned Blinkit.

Zepto's fundraise signals intensifying competition in the quick commerce space despite high cash burn and tricky unit economics. Palicha, however, said that the firm's cash burn (money spent by the company to fulfil an order) has reduced by 70% this year compared to early 2022, mostly helped by sourcing efficiency, productivity at dark stores, and supply chain optimisation. It generates sales worth $50-60 million every month, he added.

Moreover, the majority of Zepto's 200 dark stores are already profitable, according to the company.

In April, YourStory reported that Ramesh Bafna—the former CFO at Peak XV-backed Zilingo and Flipkart-owned Myntra—joined the quick commerce startup to lead the finance division as CFO.

Later in May, the firm restructured its top management replacing its COO and Chief Growth Officer roles.

(The story was updated to mention Avendus Capital and Zepto's monthly sales figures)