Ending India’s 11-month unicorn drought, Zepto, which is a quick-commerce startup has raised $200 million at a valuation of $1.4 billion.
The StepStone Group led the Series E round which had some existing investors and Goodwater Capital.
The funding is particularly important because Zepto is the first start-up valued at more than $1 billion to be minted this year in India. In September 2022, Molbio Diagnostics was the last to achieve unicorn status.
Of the $200 million raised by Zepto, $105 million came from the StepStone Group ($75 million) and Goodwater Capital ($30 million), both new investors in the Mumbai-based company. While this is StepStone’s first direct investment in the country, Goodwater Capital has invested in Audio streaming start-up Pocket FM and educational technology firms Teachmint and Yellowclass.
Existing investors Nexus Venture Partners, Glade Brook Capital and Lachy Groom also contributed to Zepto’s remaining $95 million. According to co-founder Aadit Palicha, apart from Nexus, Zepto hasn’t actively raised funding from Indian-centric VCs, but that could change over time.
He said that the investors they got onboard were high-quality, detail-oriented ones who had seen multiple cycles. Most investors had not seen a through and through cycle like that in India when it comes to technology investing and as a result they were a lot more conservative and that they were a lot less willing to invest in a bear market versus larger institutional investors like StepStone that had been investing for decades and they got the capability to take high-quality contrarian bets in that market.
He also added saying,“Both StepStone and Goodwater Capital have invested in operationally intensive retail businesses before… we didn’t find people that specialise in this category in India. That being said, we are very excited to go deeper with India-centric investors. Going forward, Zepto is going to see a lot more India-centric investors,”.
Zepto has been competing with Zomato-owned Blinkit, Swiggy Instamart, Reliance-backed Dunzo and Tata’s BigBasket (BB Now). Although Blinkit and Instamart are constantly changing places as the top two players, Zepto was the third largest in order volume.
In September 2022, its monthly cash burn had fallen from Rs 90 crore to Rs 55 crore, the startup revealed. While exact numbers were not revealed by Palicha, the cash burn was on a downward trend.
Zepto’s EBITDA margin shrank to 15-16% in April from a negative 278.6% in January 2022. Zepto aims to turn EBITDA positive in 12 months and is eyeing an initial public offering during the first half of 2025.