Zepto's valuation surges to $5 billion ahead of IPO
What's the story
Zepto, a leading player in the quick commerce sector, has successfully raised $340 million in a follow-on funding round.
This latest financial boost has elevated the company's valuation to an impressive $5 billion.
The fundraising comes as Zepto prepares for its initial public offering (IPO), marking its third major capital infusion within a year and bringing its total funds raised to over $1 billion in 12 months.
Investor participation
A look at the funding round
The funding round was spearheaded by General Catalyst, with Dragon Fund and Epiq Capital making their debut as investors.
Existing shareholders including StepStone, Lightspeed, DST, and Contrary also increased their investments.
Zepto had initially planned to raise $400 million but decided to limit it at $340 million, to avoid equity dilution for current investors.
Market dynamics
Strategic move amid quick commerce competition
The fundraising coincides with a period of intense competition in India's quick commerce sector.
Major e-commerce platforms like Flipkart and BigBasket have ventured into the 10-minute delivery segment. Reports also suggest that Amazon is considering a similar move.
Zepto co-founder and CEO Aadit Palicha, explained the reasoning behind their latest financing round, citing the opportunity to collaborate with lead investor Neeraj Arora from General Catalyst, and the strategic importance of strengthening their balance sheet amid robust growth.
Sector performance
Quick commerce sector shows promising growth
The quick commerce sector is demonstrating the viability of its business model.
Zomato reported that its quick commerce venture, Blinkit, has surpassed its core food delivery service in terms of adjusted revenue and gross order value (GOV) growth in Q1 FY25.
The GOV and revenue for the quick commerce vertical grew by over 22% quarter-on-quarter (QoQ), outpacing food delivery's growth rate of over 10% across both metrics.
Growth trajectory
Zepto's previous funding rounds
In June, Zepto secured $665 million in Series F funding, which doubled its valuation from $1.4 billion to $3.6 billion.
Prior to that, it raised $235 million in a Series E round at a valuation of $1.4 billion, achieving unicorn status.
The newly acquired funds will be used to improve Zepto's balance sheet ahead of its planned IPO in approximately 12 months, with the aim of becoming profitable before going public.
Business performance
Zepto's operational success and expansion plans
Zepto's gross merchandise value has seen a significant year-on-year increase, reaching over $1 billion.
As of May 2024, approximately 75% of the company's stores were fully EBITDA positive.
Currently operating around 350 dark stores across India's top 10 cities, Zepto wants to expand into an additional 10 cities and aims to double its store count to 700.