Zepto gets $665-mn war chest to challenge Blinkit, Swiggy

Quick-commerce unicorn Zepto has completed a mega funding round of $665 million at a post-money valuation of $3.6 billion. The deal was co-led by existing investors Nexus Venture Partners , StepStone Group and Glade Brook Capital Partners LLC .?

Along with the funding announcement, the company said it was approaching EBITDA positivity and planned to undertake an IPO “relatively soon”.

Zepto’s valuation has surged by 158% in just 10 months. In August 2023, it was valued at $1.4 billion. The latest capital raise has also pushed the four-year-old company’s total funding to $1.26 billion.?

New investors in this round include US-based growth fund Avenir , Lightspeed , and avra , a new fund started by former Y Combinator executives. Existing backers Y Combinator, Goodwater and Lachy Groom , also chipped in. Goodwater and Lachy Groom are known for financing startups like Notion and Figma.

The massive investment in Zepto comes at a time when growth-stage startups in India have struggled to secure fresh cash infusions. It is the largest round in the past two years after payments major PhonePe raised $850 million in 2023 and food-delivery player Swiggy picked up $700 million in early 2022.?

Also read: Aadit Palicha 's interview: We want to build a $50-bn company that’s profitable, public: Zepto’s CEO

Indian startups raised a total of $1.3 billion in May 2024, and Zepto’s $665 million accounts for half of it. In the first five months of 2024, Indian startups attracted $5.2 billion.

Zepto aims to double its number of dark stores from 350 to 700 by March 2025. The latest round gives it a war chest to take on Zomato -owned Blinkit and Swiggy Instamart, besides new entrants like Flipkart . For context, Blinkit is trying to expand its dark-store network to 1,000 by March 2025.?

Zomato has cash reserves of nearly $1.5 billion and Swiggy ~$800-900 million. Swiggy plans to raise $450 million in fresh capital through an IPO.?

Zepto’s gross merchandise value has grown significantly year-on-year, exceeding $1 billion. About 75% of its existing dark stores were EBITDA positive as of May 2024. Moreover, these stores now take only six months to reach profitability instead of 23 months earlier.

“This dynamic of stores turning profitable faster and faster has enabled Zepto to grow rapidly while simultaneously achieving near-EBITDA positivity at a company level,” said co-founder and CEO. “We plan to continue operating with fiscal discipline as we scale from 350 stores to 700 stores by reinvesting the capital generated from mature stores back into the business.”?

The company was incorporated in Singapore and is moving its registered entity to India. The shift will pave the way for an IPO. “I believe we will be ready to go public relatively soon,” Palicha said.

Palicha co-founded the company with Kaivalya V. The two were students of Stanford and dropped out of its computer science course to start up in India during the Covid-19 pandemic.

View Zepto's company page: https://thearcweb.com/company/zepto