Kiranakart Technologies Pvt Ltd, which runs Zepto, a 10-minute grocery delivery app, has raised $200 million in a Series D funding round led by American technology startup accelerator Y Combinator’s Continuity Fund, valuing the company at $900 million.
The round saw participation from new investor Kaiser Permanente with existing investors Nexus Venture Partners, Glade Brook Capital, and Lachy Groom.
"Rather than optimising for a 10-15% higher valuation, we wanted to optimise for the right long-term partner, like Y Combinator. More importantly, we wanted to have enough cash in the bank where we are not affected by market sentiment cycles,” said co-founder and chief executive officerof Zepto, Aadit Palicha.
"We didn’t look at the number to turn unicorn or not, but the fact that we built a $900 million business in nine months is in itself a good outcome. Had the market been aggressive, the valuation could have been at 10-15% higher valuation. We wanted to build a cash position where we are not affected by market sentiment,” said co-founder and chief executive officerof Zepto, Aadit Palicha.
Zepto claims to have posted 800% revenue growth quarter-on-quarter with burn rate narrowing 5 times on a per-order basis. “We maintained a phenomenal 88-point NPS (net promoter score) and 60% Month-1 buyer retention at scale,” Palicha added.
According to him, it was not a tough round given Zepto’s focus on solid execution and reaching a high level of scale sustainably.
The fresh funds will be deployed towards growing ‘sustainably’ across India. The company is looking to add more talent in functions like engineering, analytics, operations, marketing, finance and human resources.
Zepto has over 50,000 delivery partners and around 1,000 employees. It plans to double the employee base in the next one year.
Co-founder and chief technology officer, Kaivalya Vohra added, “Our rigorous focus on unit economics is the main reason why we’ve had such an amazing trajectory as a company. We’ve turned micro-markets profitable and brought down burn significantly while growing to a scale of hundreds of thousands of orders per day.”
Palicha added, "by the end of the quarter, we look to turn at least a dozen micro-markets profitable. We are already operating profitable in a few mature micro markets and our burn per order has reduced significantly. We have also focused on Unit Economics driven growth and we’re now at a high-level of scale compared to other players in Qcommerce.”
Palicha said by the end of this quarter, we are looking to turn at least a dozen regions profitable.
Frankly speaking, this space is lot less competitive than it seems in the media, Palicha further added.
“We have also focused on execution, we exclusively source from the major FMCG brands and only one of the companies in our space can be called a competitor,” he added without naming the firm.
“We are profitable on an operating basis and our burn rate is much lower...We have also focused on execution, we exclusively source from the major FMCG brands and we have at the highest scale and are only one of the companies in our space can be called a competitor,” he added without naming the firm.
In December 2021, Zepto raised $100 million (around Rs 758 crore) in a Series C funding round led by Continuity Fund valuing the firm at $570 million (around Rs 4,275 crore).
The Series C round came in just 45 days after the company announced its $60 million fund-raising in November. To date the company has raised $360 million.
The next fund raising could likely be in a year's time and we’d rather than focus on valuation, Palicha explained adding that, Zepto wants to continue its focus on a “high degree of efficiency”.
Zepto is also piloting a service to deliver coffee, chai (tea), and other café items in 10 minutes across select areas in Mumbai, the new category which is termed ‘Zepto Café’. It says the early customers have received the service positively. Zepto plans to scale this service across India if the pilot goes well, it said in a statement.
Zepto was founded by Aadit Palicha and Kaivalya Vohra, the 18-year-old dropouts of computer science degree course at Stanford University. The company operates with its network of ‘cloud stores’ or micro-warehouses to deliver groceries in under 10 minutes. The company has set up offices in all major Indian cities, with its corporate headquarters in Mumbai and engineering/product office in Bengaluru. Its leadership team includes senior executives and operators from Flipkart, Uber, Dream11, Pharmeasy, PepperFry and Amazon.
In April, BigBasket joined the quick commerce bandwagon by expanding its two services offering 10-20 minute and sub-60-minute deliveries. Quick commerce services have proliferated India’s e-commerce ecosystem with promises of instant and rapid delivery of groceries and other items for daily use. Companies typically set up dark stores or partner with local grocery stores to service orders in under 15 minutes.