Aadit Palicha, Co-Founder and CEO of Zepto
Zepto, the largest fast-track commerce company, has raised $340 million in a follow-on funding round at a valuation of $5 billion as it prepares for an initial public offering (IPO).
This is Zepto’s third major fundraising in a year, bringing the company’s total to over $1 billion in 12 months.
According to people familiar with the matter, Zepto had planned to raise $400 million but has limited it to $340 million to avoid diluting existing investors.
Zepto’s fundraising comes at a time when fast commerce is booming in India. Flipkart announced its intention to foray into the 10-minute delivery segment. India’s largest e-grocer BigBasket recently announced that 10 minutes was the default on its platform. And media reports have suggested that Amazon is also planning its foray into the segment.
The current round was led by General Catalyst, with Dragon Fund and Epiq Capital joining as new investors.
Existing investors including StepStone, Lightspeed, DST and Contrary increased their stakes.
According to Aadit Palicha, co-founder and CEO of Zepto, the reason behind the follow-up funding was twofold.
“First, we could not pass up the opportunity to bring in a leading investor of the calibre of Neeraj Arora from General Catalyst. Second, strengthening our balance sheet is a strategic move, particularly as the company continues to show strong growth and operating leverage,” he said.
The funding also comes at a time when fast-commerce players are also reporting the viability of the business model. According to Zomato, its fast-commerce business, Blinkit, outperformed its core food delivery business in terms of both adjusted revenue and market value (GOV) growth in Q1FY25. The GOV and revenue of the fast-commerce vertical grew over 22 per cent quarter-on-quarter (QoQ) versus food delivery, which grew over 10 per cent in both metrics.
By June, the company had raised $665 million in Series F funding, doubling the company’s valuation to $3.6 billion from $1.4 billion.
In this round, Lightspeed Venture Partners and Avra joined Zepto’s cap table, alongside existing investors StepStone Group, Nexus Venture Partners, Glade Brook Capital, Goodwater and Lachy Groom.
In August last year, Zepto raised $235 million in Series E funding at a $1.4 billion valuation to become a unicorn.
Prior to that, the firm had raised $60 million in October 2021. In December of that year, the Y Combinator-backed startup raised another $100 million at a valuation of $900 million.
“This is one of our first investments in India following the merger of Venture Highway and General Catalyst. We are delighted to partner with Zepto and believe their fast commerce model is setting the tone for the future of e-commerce in India and beyond,” said Neeraj Arora, CEO of General Catalyst.
The funds will help Zepto strengthen its balance sheet ahead of its planned IPO in about 12 months, as it looks to turn a profit ahead of its public listing.
Zepto’s gross merchandise value has grown year-over-year to a base of over $1 billion, and about 75 percent of the company’s stores are fully EBITDA positive (earnings before interest, taxes, depreciation and amortization) as of May 2024. The company operates approximately 350 dark stores across India’s top 10 cities. It plans to expand to 10 more cities, with the aim of increasing its store count to 700.
First published: August 30, 2024 | 00:10 IS
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