Zepto has raised a whopping $665 million in a recent round of funding, greater than doubling its valuation to $3.6 billion from $1.4 billion in lower than a yr, as the Mumbai-based startup redoubles its efforts to aiming to capture the contested high-speed trade market in India.
Zepto sells and delivers every part from groceries to electronic gadgets to consumers in urban India at short notice. The fast delivery model is thriving in India though most space startups have failed in developed markets.
Glade Brook, Nexus and StepStone Group co-led the Series F round, which was heavily oversubscribed, Zepto said. Avenir, Lightspeed and Avra (former recent YC Continuity fund manager Anu Hariharan), in addition to current backers Goodwater, Lachy Groom and Contrary also invested in the round, the startup says.
DST Global, an early backer of Zepto rival Swiggy, also co-led the recent round of financing, in keeping with two people familiar with the matter. Zepto didn’t disclose DST Global’s participation in the recent round of financing and declined to comment.
Zepto competes with BlinkIt (owned by Zomato) and Instamart Swiggy in the fast commerce space.
These fast-trading firms have arrange quite a few discreet warehouses, referred to as “dark stores,” throughout urban India. By strategically locating these facilities inside several miles of high-demand residential and industrial areas, they’ll fulfill orders inside minutes of purchase.
“Because a dark store requires less space than normal storefronts, Zepto can create a wider network of stores throughout the city, allowing for short delivery times” – Will Robbins, partner at Contrary, he wrote in his master’s thesis.
Zepto goals to expand its network of dark stores to greater than 700 by March 2025. The startup said its revenue was up 140% from a yr earlier and its annual gross merchandise value (GMV) is expected to exceed $1 billion. It works with over 50,000 suppliers and adds over 5,000 suppliers every month.
The company said about 75% of its dark stores were EBITDA positive last month. Greater efficiency and scale mean that a dark store that previously took 23 months to attain now reaches that milestone in six months, Zepto said.
The rise of high-speed trading firms in India, which has a $4 trillion economy, has surprised many investors and analysts, especially as many similar business models have failed in other markets.
“There is a hyper-local buying culture in India. This doesn’t really exist in other parts of the world. Customers in India buy small-ticket products several times a week hyperlocally, and high-speed commerce provides them with hyperlocal use cases close to each other and at low cost,” Zepto co-founder and CEO Aadit Palicha told TechCrunch. “No other format in the grocery industry, even in the offline world, has been able to offer consumers similar offers.”
Fast retail startups in India are increasingly moving beyond grocery delivery. One company guarantees to deliver expensive products reminiscent of smartphones and game consoles to its customers inside 10 minutes.
Palicha, who co-founded Zepto with Kaivalya Vohra when they were each just 19, said Zepto does offer electronic accessories reminiscent of chargers and cables, but the company does not intend to supply high-end electronics on its platform.
“We don’t really deal in smartphones, fashion and laptops. We are more interested in categories where the risk is relatively lower, reminiscent of home appliances, underwear, general merchandise, toys, cosmetics and home and kitchen products. We see resonance there,” Palicha said.
The startup currently operates in top Indian cities and plans to expand to smaller cities in the coming months. Palicha said Zepto is encouraged by the initial adoption in cities like Jaipur, where local offline offerings cannot fully meet customer demands.
“If we can achieve this while continuing to delight customers, I believe we will be ready to go public relatively quickly,” he said in a statement.
Avenir, a New York-based enterprise capital firm, had been tracking Zepto for about three years before finally investing in the current round. Zepto has the ability to interrupt traditional retail trade-offs in India, said Ben Jubas, partner at Avenir.
“It has the opportunity to become a huge retail company because of the depth of its value proposition and operational rigor,” he told TechCrunch. “In our opinion, it is second to none.”
Some industry analysts predict that fast-trading firms will significantly reduce the market share of major e-commerce players reminiscent of Amazon and Flipkart. Jubas said that he subscribes to this thesis, but it is as much as Zepto’s management how he plans to make use of it.
According to Goldman Sachs, the total addressable market in grocery and non-grocery categories for fast-trading firms in the 40-50 largest cities is roughly $150 billion.