Zepto: What a giant leap forward

Zepto, a Mumbai-based startup, has successfully raised an impressive $665 million in its latest funding round. This significant investment has more than doubled the company's valuation from $1.4 billion to $3.6 billion in less than a year. The startup aims to dominate the competitive quick commerce market in India, where it sells and delivers a wide range of products, from groceries to electronic gadgets, to urban consumers within a short timeframe.

Despite the challenges faced by many startups in this sector in developed markets, the rapid-delivery model has thrived in India. Zepto's success can be attributed to its ability to cater to the demands of urban Indian cities efficiently.

How Zepto did it

The Series F round was co-led by Glade Brook, Nexus, and StepStone Group, and was described as "highly oversubscribed" by Zepto. Other notable investors in this round include Avenir, Lightspeed, Avra, Goodwater, Lachy Groom, and Contrary. Interestingly, DST Global, an early backer of the firm's rival Swiggy, also participated in the funding round, although Zepto did not disclose the extent of DST Global's involvement.

In the quick commerce space, Zepto faces competition from BlinkIt (owned by Zomato) and Swiggy's Instamart. These companies have established discreet warehouses, known as "dark stores," strategically located near high-demand areas. This allows them to fulfil orders within minutes of purchase, thanks to the reduced space requirements of dark stores compared to traditional storefronts.

Zepto has ambitious plans to expand its network of dark stores to over 700 by March 2025. The startup has experienced a remarkable 140% increase in revenue compared to the previous year, and its annualized gross merchandise value (GMV) is projected to surpass $1 billion. With a growing team of over 50,000 delivery partners, the company is adding more than 5,000 delivery partners each month to support its expanding operations.

The firm reported that approximately 75% of its dark stores were EBITDA positive by the end of last month. Enhanced efficiency and increased scale have resulted in a significant reduction in the time taken for a dark store to become profitable, with the milestone now being reached in just six months, according to Zepto.