Always ‘Grocery-first’
Zepto which promises 10-minute delivery of groceries was founded in 2021 by two 19-year-old Standford dropouts, Aadit Palicha and Kaivalya Vohra. Aadit Palicha, Co-founder and CEO, Zepto believes, “Quick commerce is going to be the fastest growing consumer internet category in the country”.
Funding Logbook
Within three years Zepto has attained the status of a unicorn after raising $200 million at a $1.4 billion valuation. The latest development was remarkable as Zepto became the first to join the billion-dollar club in India this year.
The latest Series E round brought in new investors, the round was led by the StepStone Group, a US asset management firm. Additionally, California-based VC firm Goodwater Capital joined the group as a new investor.
Notably, existing investors such as Nexus Venture Partners, Glade Brook Capital, Lachy Groom and more impacted Zepto with meaningful follow-on investments.
Amongst all stakeholders, the founder duo, Aadit Palicha and Kaivalya Vohra disclosed that they hold a 25-30 per cent stake in the company, as of now.
Before this round, the quick commerce startup secured $200 million at a $900 million valuation in May 2022.
Profitability and IPO
Palicha highlighted that most of the capital raised in earlier rounds sits in their bank accounts as the quick commerce unicorn nears profitability. The latest round is mainly to maintain a strong balance sheet ahead of the IPO launch, he stated.
“Even with this capital, we want to maintain our discipline, avoid complacency and push hard to hit EBITDA positivity,” Kaivalya Vohra, Co-founder and CTO of Zepto said about the latest funding round. “We are building one of the best supply chain product stacks in the country today,” he added.
In line with its IPO goal, the company aims to hit the EBITDA positive mark in the next 12-15 months. Amidst the intensified competition in the segment, the company has managed to demonstrate substantial growth with a 300 per cent year-on-year increase in sales. The founders intend to reach $1 billion in annualised sales in the upcoming quarters.
Zepto plans to use the funds to expand to newer cities as well as to go deeper into the seven Indian metro cities where it has a presence. The founders claim that most of the dark stores are generating cash, are EBITDA positive and the rest are set to reach the mark in the next 12-15 months.
"In the last 24 months, operating in a bear market has forced us to be more mindful of every penny and to take high-quality decisions which we will be executing with high rigour. There is no growth or profit, it has to be both,” Palicha emphasised while sharing his experience.
Zepto has been through a journey from a monthly cash burn of Rs 90 crore in September 2022 to now, clocking consistent monthly revenue of around $50-60 million. With a sharp 70 per cent decline, the founders revealed that the monthly cash burn as well as customer acquisition cost, are on a downward trajectory, not too far from zero.
The Mavericks
Zepto disrupted the quick-commerce market in India about two years ago. Its massive scale and growth have outshined most of the peer players such as Swiggy and Dunzo, which have been around for nearly a decade.
Getting groceries delivered the same day, forget on time, was not a norm earlier. During the pandemic, Palicha and Vohra were confined to their houses in Mumbai because of lockdown restrictions. The teenage duo, in 2020, realised that there was an opportunity to build a business by doing rapid home-delivery of groceries.
The 19-year-old Standford dropouts founded Zepto in April 2021, a 10-minute grocery delivery startup backed by Y Combinator, as their second venture.
Palicha and Vohra have thrived inspite of the challenges posed by the high cash burn segment business. Following a huge spike in demand, the platform recorded massive growth.
Zepto’s Co-founder and CTO, 19-year-old Kaivalya Vohra also got listed as the youngest richest Indian in the IIFL Wealth Hurun India Rich List 2022.
Tapping India’s FMCG Market
While the founding duo foresee its foray into other categories, they have no immediate plans in place as such. “Grocery is the mother of all categories and that is our DNA,” Palicha stated.
Zomato’s Blinkit, Reliance-backed Dunzo, Tata’s BigBasket and SoftBank-funded Swiggy directly compete with Zepto. Even among them, Zepto's Co-founder and CEO Aadit Palicha said the company has the quickest average delivery time of 13 minutes.
Grocery can be considered as the largest consumer opportunity that exists in the market today. “We have successfully cracked the delivery of groceries, fresh produce and other everyday essentials in the on-demand commerce space,”Palicha candidly commented.
The Long-term Vision
Vohra shared that the Zepto team plans to be heads-down executing for the next year with the aim of building a better business every day.
Palicha said that Zepto’s culture of frugality and worshipping customers has stood them in good stead. According to him, their customer obsession, operational excellence, fiscal discipline and high-quality talent have been the bedrock of their growth since the start. The future looks incredibly promising as Zepto continues to redefine this landscape.
