Valued at $900 million, Zepto adds $200 million to basket

Nine months after launching, hyperlocal delivery startup Zepto announced its $200 million Series D fundraising round, valuing the company at around $900 million. The Y Combinator Continuity fund doubled down and led the round, with new investor Kaiser Permanente also joining to back the company.

All major existing investors, including Nexus Venture Partners, Glade Brook Capital and Lachy Groom, have also increased their investments in the current round, a company statement said Monday.

The Mumbai-based startup, which originally started in “stealth mode” early last year, had previously raised funds from prominent angels such as Lachy Groom, Neeraj Arora and Manik Gupta. The startup was last valued at $225 million in a funding round in November 2021. To date, Zepto has raised approximately $260 million in equity funding, including the current round.

“We saw 800% revenue growth QoQ, while consumption decreased 5x per order. Our team achieved this while continuing to delight our customers – we maintained a phenomenal NPS of 88 points and 60% buyer retention in month 1 at scale. This incredible execution over the past few months has made it clear to investors that Zepto will be one of the winners in Indian q-commerce,” Zepto co-founder and CEO Aadit Palicha said in a statement.

Zepto offers a 10-minute grocery delivery service primarily focused in metropolitan and Tier 1 cities currently using a network of dark stores. Dark Stores are delivery-only stores that allow startups to source their own inventory through supply links with wholesalers and brands. Zepto currently stocks and delivers over 3,000 products using its 10-minute delivery model.

The delivery startup competes with existing hyperfunded companies like Dunzo and unicorns like BigBasket, Swiggy and Blinkit, all of which have mopped up millions of dollars in venture and institutional capital over the past few years.

Founded by 19-year-old Stanford high school dropouts Aadit Palicha and Kaivalya Vohra, Zepto (formerly known as Kiranacart) has offices in Bangalore and Mumbai. Its leadership includes senior executives from some of the country’s biggest start-ups, including Flipkart, Uber, Dream11, PharmEasy and Pepperfry.

The 10-minute delivery service, also known as fast commerce, is a new trend among hyperlocal delivery startups nationwide that operate on an inventory model. Although startups like BigBasket, Swiggy, and Dunzo started out as pure marketplace businesses in the grocery delivery space, they all eventually pivoted to an inventory model using their own dark stores.

The black store model allows delivery start-ups to have better control over inventory and overall operations, allowing them to provide a superior customer experience compared to the market model where inventory management has proven to be a difficult operation. The concept was first tested in India by BigBasket, which currently operates hundreds of such stores across the country.

With new capital now in the bank, Zepto plans to continue its sustainable growth across India. The company also built a large team of over 1,000 people within months and plans to continue hiring across all functions, including engineering, analytics, operations, marketing, finance and HR.

“Our rigorous focus on unit economics is the main reason we’ve had such an amazing trajectory as a company. We’ve made micro-markets profitable and dramatically reduced burnout while achieving scale of hundreds of thousands of orders per day,” added Zepto co-founder and CTO Vohra.

The 10-minute delivery model is the latest disruptive model in the Indian online food retail market. Quick commerce products such as Zepto, Dunzo, Blinkit, Swiggy Instamart and BBNow are beginning to gain traction among Tier 2 metro and city users. Estimates from management consulting firm RedSeer indicate that the market for q -commerce is currently valued at approximately $715 million, or just 13% of the current online grocery market. That figure, however, is expected to reach $5.5 billion by 2025, the consultancy said in a recent report in March.

A user survey conducted by RedSeer in September 2021 showed that 70% of metro and Tier 1 users preferred to make unplanned purchases of small amounts throughout the week, rather than large monthly purchases. This points to a fundamental shift in online consumer behavior patterns that could benefit the q-commerce revolution.