Zepto Secures $665M Funding, Doubling Valuation to $3.6 Billion

Zepto, an instant grocery delivery startup based in India, has raised $665 million in a new funding round, boosting its valuation to $3.6 billion. This round saw participation from both new investors like Avra Capital, Lightspeed, and Avenir, and existing ones such as Glade Brook, Nexus, and StepStone. Just nine months ago, Zepto raised $235 million at a valuation of $1.4 billion.

As of May 2024, Zepto reported a gross merchandise value (GMV) of over $1 billion, with nearly 75% of its stores being EBITDA profitable. Previously, it took 23 months for stores to achieve profitability; now, they reach that milestone in just six months.

Zepto plans to expand its network from 350 to 700 stores by March 2025, adding new categories and expanding Zepto Pass, the firm's subscription service.

In April, The Economic Times reported that Zepto failed to strike a deal with Flipkart over a sale, as the parties could not agree on Flipkart's request for controlling interest. Despite this, Zepto became India’s first unicorn of 2023 after securing the first part of its Series E round in August.

Zepto competes with BlinkIt (owned by Zomato) and Swiggy’s Instamart in the quick commerce space. These companies have established numerous discreet warehouses, known as “dark stores,” throughout urban India. By strategically locating these facilities close to high-demand areas, they can fulfill orders within minutes.

“Because less space is needed to stand up a dark store than normal storefronts, Zepto can create a wider network of stores across a city allowing for short delivery times,” said Will Robbins, a partner at Contrary wrote in his thesis.

Zepto's revenue has risen 140% from a year earlier, and its annualized GMV is on track to exceed $1 billion. The company works with over 50,000 delivery partners, adding more than 5,000 each month. Improved efficiency means that a dark store now achieves profitability in six months.

Some industry analysts predict that quick commerce companies will significantly erode the market share of major e-commerce players like Amazon and Flipkart. According to Goldman Sachs, the total addressable market in the grocery and non-grocery categories for quick commerce companies in the top 40-50 cities is about $150 billion.

By expanding its dark store network and nearing EBITDA profitability, Zepto is well-positioned to enhance its service offerings and consumer loyalty, despite industry challenges.