Zepto, a fast-growing startup specializing in quick-commerce, successfully raised a substantial $200 million in Series E funding, resulting in a significant valuation of $1.4 billion.
This impressive achievement puts an end to India’s 11-month unicorn drought. Headed by the reputable StepStone Group, a renowned asset management firm based in the United States, the funding round also attracted participation from Goodwater Capital and several existing investors. Zepto’s valuation experienced a remarkable surge, ascending from $900 million back in May 2022.
The funding holds significant importance as Zepto becomes the first Indian startup to achieve unicorn status this year, with a valuation exceeding $1 billion. Previously, in September 2022, Molbio Diagnostics had attained unicorn status.
During the peak of the funding boom in 2021, the nation witnessed the addition of a new unicorn nearly every week. Within that year, a staggering 44 startups joined the esteemed unicorn club, with an additional 23 joining the ranks the previous year. However, as time progressed, investors became more cautious and discerning in their choices, carefully selecting the startups they decided to support, showcasing their prudent approach.
Of the $200 million raised by Zepto, $105 million was contributed by the StepStone Group ($75 million) and Goodwater Capital ($30 million), both of which are new investors in the Mumbai-based company. This denotes StepStone’s initial direct investment in the country, while Goodwater Capital has also invested in audio-streaming startup Pocket FM and edtech firms Teachmint and Yellowclass.
Zepto secured an additional $95 million from its existing investors Nexus Venture Partners, Glade Brook Capital, and Lachy Groom. While Zepto has not actively pursued funding from India-centric VCs, co-founder Aadit Palicha mentioned in an interview with Moneycontrol that this may change in the future.
‘The investors we got onboard are high-quality, detail-oriented ones who have seen multiple cycles. Most investors have not seen a through and through cycle like this in India when it comes to technology investing and as a result they are a lot more conservative,’ Co-founder of Zepto Aadit Palicha said.
‘They are a lot less willing to invest in a bear market versus some larger institutional investors, like StepStone, which have been investing for decades. They’ve got the capability to take high-quality contrarian bets in this (bear) market.’
StepStone, which manages $140 billion of assets, is a limited partner in Lachy Groom, Nexus VP, Goodwater Capital and other funds who are already investors in Zepto.
‘Both StepStone and Goodwater Capital have invested in operationally intensive retail businesses before… we didnt find people that specialise in this category in India. That being said, we are very excited to go deeper with India-centric investors. Going forward, Zepto is going to see a lot more India-centric investors,’ he added.
Zepto competes with Zomato-owned Blinkit, Swiggy Instamart, Reliance-funded Dunzo and Tata’s BigBasket (BB Now). While Blinkit and Instamart keep swapping places as the top two players, Zepto was the third-largest in terms of order volumes, as per reports.
The startup also disclosed that its monthly cash burn had decreased to Rs 55 crore in April, down from Rs 90 crore in September 2022. Although Palicha refrained from disclosing specific figures, he mentioned that the cash expenditure was following a downward trajectory.
With its EBITDA margin narrowing to a negative 15-16 percent in April from a negative 278.6 percent in January 2022, Zepto aims to turn EBITDA-positive in 12 months and is eyeing an initial public offering during the first half of 2025.
Zepto raised money this year even as Palicha said most of the capital from the previous round, also $200 million, still sits in its bank accounts.
‘In 12 months, when we get to EBITDA-positive, we will not need to spend a significant amount of this money. After EBITDA-positive, we’ll do a pre-IPO round. This was our last growth equity round and was done just to build our balance sheet,’ Palicha said.
