Is Zepto’s Aggressive Growth Strategy The Right Way To Become A Unicorn?

Two college dropouts who found their way in an already saturated market ruled by tech giants - sounds like I am talking about Facebook , 亚马逊 , or Flipkart , right?

Zepto came to the market with a promise of delivering groceries in just 10 minutes. With a disruptive idea and just one dark store in July 2021, the Startup grew as fast as it promised deliveries. Tech giants in the quick delivery space have been shook by the steep growth to $200 million in just a year. What they thought was their tight hold on the market size kept slipping easily to the last brand entering it with ambitions of becoming the biggest and a unique land-grabbing strategy.

Aadit Palicha and Kaivalya V. , two college dropout entrepreneurs, were analyzing the bloated bottom line of their fast-growing Startup in 2022 when one of their American investors called up and told them, “I am serious. The party is over. You need a complete flip in your mindset. It can’t be growth at all cost now.” This piece of advice may have helped Zepto save itself from being chewed by the hypergrowth-led downfall.

What is hypergrowth-led downfall?

When a company grows too fast, too soon, and without a sustainable plan to earn back the money spent without needing more investments. In this situation, the market demand requires more burn than a company's revenue and can successfully lead to a hypergrowth-led downfall.?

Building A Lightning-Fast USP

Before starting Zepto, Adit and Kaivalya started a similar grocery delivery venture during the COVID-19 lockdown. As the local shops and online deliveries were disrupted, the two young entrepreneurs began taking grocery delivery orders via WhatsApp. Kiranakart worked on a hyperlocal market and delivered groceries in 45 minutes. The delivery giants crushed the market with their faster deliveries and better discounts, leading to the failure of Kiranakart. This was the ROI of Kiranakart, whose lack of market fitness gave birth to Zepto’s true USP - delivering groceries in 10 minutes.

Quick Realizations Save Organizations

Adit Palicha was smart enough to conduct aggressive funding rounds, which accumulated over $300 million in funding from multiple rounds over a period of one year. However, the good times were ending, and the CEO had to find a sustainable way to grow the company without suffering the chills of the upcoming funding winter.

Zepto reported an operating loss of $390 in FY’22, which led to the wake-up call. However, a sudden call by one of his investors in March 2023, who informed Palicha about the bank run in Silicon Valley, changed his entire outlook on the business. With nearly $30 million frozen in the Silicon Valley Bank, Zepto’s runway dropped from 18 months to 9.?

Panic spread throughout the board of investors across the Startup ecosystem, and almost closed funding deals with giants like Y?Combinator were called off. Somehow, the founder got the money wired after an American investor was able to extract it from the Silicon Valley Bank ank. But the funding winter was almost at the doorstep, and something had to be done about it before the money cut came through.

Relying On Numbers Is Always A Lifesaver

American investors were already spooked by Indian startups' shoddy governance and non-disclosure practices. Adit Palicha knew about his company’s impressive numbers and went back to the drawing board with them. Backing it with an optimized business plan that ensured a sustainable yet slower growth rate was key to gaining the confidence of existing investors. While the revenues grew from INR 142.36 Crore in FY’22 to INR 2,024 Crore in FY’23, the bottom line also increased to INR 1,272 Crore. It was high time to restructure the company’s growth plan, and Adit’s slow-cooked strategy began generating cash in over 100 stores.

The First Unicorn Of 2023

As a result, Palicha received a commitment of 60% funding from existing investors. Later in August, Zepto cracked $200 million in funding at a valuation of $1.4 billion, giving it a Unicorn status and the first one of 2023. More funding came in, but Zepto now found its slower version to sustainable growth. The company has grown to 300 stores and has made annualized sales of $700 million. Healthy underlying customer stats and economic control are bringing the company’s revenue closer to profit generation, which may soon begin. The young company recently launched Zepto Pass and gained 1 Million subscribers within 1 week of its launch.

It is now time for Zepto to prove that aggressive growth strategies followed by a slower-optimized movement can be a great move to grow in a highly competitive market such as delivery. As the CEO of Appinventiv , I am thrilled to share the inspiring success story of Zepto, a rising star in the tech industry. Zepto's journey is a testament to the power of innovation, determination, and strategic decision-making, and there are several valuable insights that young entrepreneurs can glean from their remarkable achievements.

What would you call Zepto’s success story to Unicorn in two words? I would call it aggressively remarkable.