Aadit Palicha, co-founder and CEO, Zepto
Trading giant Zepto has raised $340 million in a follow-on funding round, at a $5 billion valuation, in preparation for an initial public offering (IPO).
This is Zepto’s third major fundraise in a year, taking the company to over $1 billion in 12 months.
According to insiders, Zepto had sought to raise $400 million, but limited the investment to $340 million to avoid diluting existing investors’ shares.
Zepto’s fundraising comes at a time when high-speed commerce is gaining traction in India. Flipkart announced that it plans to enter the 10-minute delivery segment. India’s largest e-grocer, BigBasket, recently announced that 10 minutes is standard on its platform. And news reports suggest that Amazon is also planning to enter the segment.
The current round was led by General Catalyst, with Dragon Fund and Epiq Capital as new investors.
Existing investors such as StepStone, Lightspeed, DST and Contrary increased their stake.
According to Aadit Palicha, co-founder and CEO of Zepto, the reason behind the follow-on funding was two-fold.
“First, the opportunity to bring on board a lead investor of the caliber of Neeraj Arora from General Catalyst was one we could not pass up. Second, strengthening our balance sheet is a strategic move, especially as the company continues to deliver robust growth and operating leverage,” he said.
The funding also comes at a time when players in the quick commerce space are also reporting the viability of the business model. According to Zomato, its quick commerce business, Blinkit outperformed its core food delivery business both in terms of adjusted revenue and GOV growth in the first quarter of Q1 FY25. The quick commerce vertical’s GOV and revenue grew by over 22 percent quarter-on-quarter (QoQ) versus food delivery, which grew by over 10 percent in both metrics.
In June, the company raised $665 million in Series F funding, doubling the company’s valuation from $1.4 billion to $3.6 billion.
This investment round adds Lightspeed Venture Partners and Avra to Zepto’s capital table, joining existing investors StepStone Group, Nexus Venture Partners, Glade Brook Capital, Goodwater and Lachy Groom.
In August last year, Zepto raised $235 million in a Series E financing at a valuation of $1.4 billion, making it a unicorn.
Prior to that, the company had already raised $60 million in October 2021. In December of the same 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 after the merger of Venture Highway and General Catalyst. We are excited to partner with Zepto and believe their high-velocity commerce model sets the standard for the future of e-commerce in India and beyond,” said Neeraj Arora, Managing Director, General Catalyst.
The funds will help Zepto strengthen its balance sheet in preparation for its planned IPO in about 12 months. The company hopes to become profitable before the IPO.
Zepto’s gross merchandise value has multiplied year-on-year to a base of over $1 billion, and about 75 percent of the company’s stores are fully Ebitda (earnings before interest, tax, depreciation and amortization) positive as of May 2024. The company operates about 350 dark stores across India’s top 10 cities. It plans to expand to 10 more cities, with a target of taking the store count to 700.
First publication: Aug 30, 2024 | 12:10 AM IST