Zepto Secures $340M at $5B Valuation Amid Intensifying Quick Commerce Rivalry

• ByStartupStory     |    August 30, 2024

Quick commerce unicorn Zepto has successfully raised $340 million in follow-on financing at a valuation of $5 billion, amid increasing competition and strong consumer demand in the quick commerce sector. The latest funding round was led by General Catalyst Dragon Fund, with participation from Epiq Capital, which joined Zepto’s cap table. Existing investors StepStone, Lightspeed, DST, and Contrary also increased their stakes in the company.

This fundraise follows just two months after Zepto secured $665 million at a $3.6 billion valuation from investors including Avenir, Lightspeed, and Avra. Prior to that, in August 2023, Zepto raised $200 million at a $1.4 billion valuation. The company’s rapid growth has been marked by increasing investments and a significant rise in its valuation over the past year.

Co-founder and CEO Aadit Palicha elaborated on the company’s decision to pursue follow-on financing: “First, the opportunity to bring on board a lead investor of Neeraj Arora’s calibre from General Catalyst was one we couldn’t pass on. Second, strengthening our balance sheet is a strategic move, particularly as the company continues to deliver robust growth and operating leverage.”

Neeraj Arora, Managing Director of General Catalyst, shared his thoughts on the investment: “This is one of our first investments in India following the merger of Venture Highway and General Catalyst.” General Catalyst has previously backed successful global companies such as Airbnb, Hubspot, and Snap.

Zepto has been aggressively expanding its dark store operations and bolstering its presence in metro cities across India. The company is targeting to double its store count to 700 by the end of this financial year. To support this growth, Zepto recently relocated its base from Mumbai to Bengaluru, aiming to consolidate and expand its talent pool and operational capabilities.

In terms of performance, Zepto had previously announced that its gross merchandise value (GMV) has multiplied year-on-year, reaching a base of more than $1 billion. Additionally, nearly three-fourths of Zepto’s stores were fully EBITDA-positive as of May 2024, showcasing the company’s financial stability.

The quick commerce space is becoming increasingly competitive, driven by new market entrants, evolving consumer preferences for grocery shopping, and the convenience of 15-minute deliveries. Quick commerce apps are gaining popularity, particularly among millennials and Gen Z, with a growing range of products, including electronics, available for rapid delivery. According to Redseer Consulting, the quick commerce market is expected to grow at a 40-45% GMV CAGR over the next three years.

Zepto’s competitors are also making strategic moves in response to the sector’s growth. Swiggy, which operates Swiggy Instamart, recently appointed Flipkart executive Amitesh Jha as the CEO of its quick commerce unit. This move follows the appointment of Sairam Krishnamurthy as Senior VP and the first Chief Operating Officer (COO) of Instamart just a week earlier. Meanwhile, Zepto’s listed peer Zomato has reported that its quick commerce arm Blinkit’s revenue more than doubled to ₹942 crore during Q1 FY25, up from ₹384 crore in the same period last year. The segment contributed 22% to Zomato’s total revenues and has been adjusted EBITDA-positive since March 2024.

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