Mumbai-based startup Zepto has raised a massive $665 million in a new funding round, more than doubling its valuation from $1.4 billion to $3.6 billion in less than a year, as the company steps up its efforts to capture India's competitive quick commerce market.
Zepto sells and delivers everything from groceries to electronics to urban Indian consumers on short notice, a fast-delivery model that has thrived in India even as most startups in the space have failed in developed markets.
Glade Brook, Nexus and StepStone Group co-led the “significantly oversubscribed” Series F round, according to Zepto. Avenir, Lightspeed, Avra (former YC Continuity executive Anu Hariharan's new fund), and existing backers Goodwater, Lachie Groom and Contrary also invested in the round, the startup said.
DST Global, an early investor in Zepto rival Swiggy, also co-led the new round, according to two people familiar with the matter. Zepto did not disclose DST Global's participation in the round and declined to comment.
Zepto competes with BlinkIt (owned by Zomato) and Swiggy's Instamart in the quick commerce space.
These quick commerce companies have set up thousands of discreet warehouses, known as “dark stores,” across urban India. By strategically locating these facilities within miles of high-demand residential and commercial areas, they are able to fulfill orders within minutes of purchase.
“Dark stores require less space than traditional stores, allowing Zepto to build a larger store network across cities and reduce delivery times,” Contrary partner Will Robbins wrote in the paper.
Zepto aims to expand its network of dark stores to more than 700 by March 2025. The company says its revenue has grown 140% year over year, and it expects to exceed $1 billion in annual gross merchandise value (GMV). The company works with more than 50,000 delivery partners, and is adding more than 5,000 delivery partners every month.
About 75% of dark stores were EBITDA positive as of last month, according to the company. Improved efficiency and scale have allowed dark stores that previously took 23 months to become profitable to now reach that milestone in six months, Zepto said.
The growth of quick commerce companies in India's $4 trillion economy has surprised many investors and analysts, especially since many similar business models have collapsed in other markets.
“India has a culture of hyperlocal shopping that doesn't really exist in other parts of the world. Indian customers buy small value items hyperlocally multiple times a week, and quickcommerce serves that hyperlocal, high proximity, low value use case,” Aadit Paricha, co-founder and CEO of Zepto, told TechCrunch. “Other forms of grocery sales haven't been able to offer a similar service to consumers, even in the offline world.”
Indian quick-commerce startups are starting to expand beyond grocery delivery, with one company promising to deliver big-ticket items like smartphones and gaming consoles to customers within 10 minutes.
Paricha, who co-founded Zepto with Kaivalya Vora when they were both just 19, said that while Zepto offers electronic accessories such as chargers and cables, it is not looking to offer premium electronics on the platform.
“We are not really focusing on smartphones, high-end fashion or laptops. We are more interested in categories like electronics, lingerie, general merchandise, toys, beauty and cosmetics, home and kitchen items – which are lower risk purchases. That is where we are seeing a response,” Paricha said.
The startup is currently operating in major Indian cities and plans to expand to smaller cities in the coming months. Paricha said Zepto is encouraged by the initial response in cities like Jaipur, where local offline services are not adequate to meet customer demand.
“If we can achieve this while keeping our customers satisfied, we will be ready to go public relatively soon,” he said in a statement.
New York-based venture firm Avenir had been tracking Zepto for about three years before finally investing in this latest round. Ben Jubas, a partner at Avenir, said Zepto can disrupt traditional trade-offs in Indian retail.
“The depth of its value proposition and the rigor of its operations give it the opportunity to become a large-scale commerce business,” he told TechCrunch. “In our view, it's unique.”
Some industry analysts predict that quick commerce companies will significantly eat into the market share of e-commerce giants like Amazon and Flipkart. Mr. Jubas agrees, but says it's up to Zepto's management how it responds.
According to Goldman Sachs, the addressable market size for quick commerce players in the top 40-50 cities across grocery and non-food categories is around $150 billion.