Quick commerce leader Zepto has successfully raised $340 million in a follow-on funding round, boosting its valuation to an impressive $5 billion as the company prepares for an initial public offering (IPO). This marks Zepto’s third substantial fundraising effort within a year, bringing its total capital raised to over $1 billion in the past 12 months.
Insiders reveal that while Zepto initially aimed to raise $400 million, the company chose to cap the round at $340 million to maintain optimal equity distribution among existing investors.
The latest investment comes at a time when the quick commerce sector in India is becoming increasingly competitive. E-commerce giant Flipkart has announced plans to enter the 10-minute delivery market, and BigBasket, India’s largest online grocer, recently declared that 10-minute deliveries will become standard on its platform. Additionally, reports suggest that Amazon is also considering venturing into this rapidly growing segment.
The current funding round was led by General Catalyst, with participation from new investors Dragon Fund and Epiq Capital. Existing backers such as StepStone, Lightspeed, DST, and Contrary also increased their investments in this round.
Commenting on the strategic rationale behind the follow-on financing, Zepto co-founder and CEO Aadit Palicha stated, “First, the opportunity to take 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.”
This infusion of capital aligns with positive developments in the quick commerce industry, where business models are proving their viability. For instance, Zomato’s quick commerce arm, Blinkit, surpassed its core food delivery business in both adjusted revenue and gross order value (GOV) growth during the first quarter of FY25. Blinkit’s GOV and revenue experienced over 22% quarter-on-quarter growth, compared to over 10% growth in Zomato’s food delivery segment.
Zepto’s funding milestones have been noteworthy. In June, the company raised $665 million in Series F funding, doubling its valuation from $1.4 billion to $3.6 billion. This round saw contributions from Lightspeed Venture Partners and Avra, alongside existing investors including StepStone Group, Nexus Venture Partners, Glade Brook Capital, Goodwater, and Lachy Groom. Prior to that, Zepto achieved unicorn status in August last year by securing $235 million in Series E funding at a $1.4 billion valuation. The company had also raised $60 million in October 2021 and another $100 million at a $900 million valuation in December of the same year.
Expressing confidence in Zepto’s potential, Neeraj Arora, Managing Director of General Catalyst, said, “This is one of our first investments in India following the merger of Venture Highway and General Catalyst. We are thrilled to partner with Zepto, and believe their quick commerce model is setting the standard for the future of e-commerce in India and beyond.”
The newly acquired funds are slated to strengthen Zepto’s financial position ahead of its anticipated IPO within the next 12 months, with the company aiming to achieve profitability before going public. Zepto’s gross merchandise value has surged to over $1 billion annually, and as of May 2024, approximately 75% of its stores have reached full EBITDA (earnings before interest, taxes, depreciation, and amortization) positivity.
Currently operating around 350 dark stores across India’s top 10 cities, Zepto has ambitious expansion plans. The company intends to enter an additional 10 cities, increasing its store count to 700, thereby solidifying its presence and meeting growing consumer demand in the quick commerce sector.
