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Quick commerce major Zepto has raised $340 million in a follow-on financing round at a valuation of $5 billion as it gears up for an initial public offering (IPO).
This is Zepto’s third big-ticket fundraise within a year. With this, the company has raised more than $1 billion in 12 months.
According to people in the know, Zepto was planning to raise $400 million but restricted it to $340 million so that equity dilution for existing investors was not disturbed.
Zepto’s fundraise happens at a time quick commerce is hotting up in India. Flipkart announced its intention to foray into the 10-minute delivery segment. India’s largest e-grocer, BigBasket, recently announced that 10 minutes was default on its platform. And news reports have suggested Amazon too is planning its foray into the segment.
The current round was led by General Catalyst, with Dragon Fund and Epiq Capital joining as new investors.
Existing investors such as StepStone, Lightspeed, DST, and Contrary increased their stakes.
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According to Zepto co-founder and Chief Executive Officer Aadit Palicha, the rationale behind the follow-on financing was twofold.
“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,” he said.
The funding is also happening at a time when players in the quick commerce space are also reporting the feasibility of the business model. According to Zomato, its quick commerce business, Blinkit outpaced its core food delivery business both in terms of adjusted revenue as well as GOV growth in the first quarter of Q1 FY25. The quick commerce vertical’s GOV and revenue grew at over 22 per cent quarter-on-quarter (QoQ) versus food delivery, which grew at over 10 per cent across both metrics.
In June the company had raised $665 million in Series F funding, doubling the firm’s valuation to $3.6 billion from $1.4 billion.
The round saw Lightspeed Venture Partners and Avra join Zepto’s cap table, beside 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 funding at a $1.4 billion valuation to become a unicorn.
Before that, the firm had raised $60 million in October 2021. In December that same year, the Y Combinator-backed startup raised another $100 million at a $900 million valuation.
“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,” said Neeraj Arora, managing director of General Catalyst.
The funds will aid Zepto in bolstering its balance sheet ahead of its planned IPO in roughly 12 months, and is looking to turn profitable before its public listing.
Zepto’s gross merchandise value has multiplied year-on-year to reach a base of over $1 billion, and around 75 per cent of the company’s stores are fully Ebitda (earnings before interest, tax, depreciation, and amortisation) positive as of May 2024. The company operates roughly 350 dark stores across India’s top 10 cities. It plans to expand into an additional 10 cities, aiming to increase its store count to 700.
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