Ending the startup unicorn drought in India, quick commerce company Zepto has become the first unicorn of 2023 by raising $200 million at a valuation of $1.4 billion in Series E funding in the primary tranche. The funding was led by StepStone Group, California-based Goodwater Capital, Nexus Venture Partners, Glade Brook Capital, and Lachy Groom amongst others. The company plans to utilise the money to achieve profitability in the next 12-15 months as well as for IPO in 2025.

"A good amount of capital will go into pre-IPO. In the short term i.e. one to three months, this will cost money, but in the next 9 to 12 months we are aiming to achieve profitability," says Aadit Palicha, co-founder and CEO, Zepto.

The Mumbai-based company is currently pitting against Tata Group-backed Big Basket, Reliance Industries-backed Dunzo, Zomato-backed Blinkit and Swiggy Instamart in the quick commerce space. While its peers like Duzo are already witnessing a cash crunch in the global dwindling macroeconomic space, Zepto aims to turn EBITDA (earnings before interest tax, depreciation and amortization) positive in the next 12 to 15 months.

"There is a narrative of see-saw between growth and profitability. But we have realized that there is no growth or profitability, it has to be both," says Palicha, adding that most of the company’s more than 150 dark stores are generating cash now.

According to the company, while the company's cash burn has reduced dramatically over the course of the past 12 months, Zepto's monthly revenue currently stands at $50-$60 million per month in total sales.

In order to achieve profitability, according to Palicha, the company has been working towards optimising the valuation and the longevity of the partners. The company claims to have grown 300% year-on-year in sales and will likely achieve $1 billion in annualized sales within the next few years.

The company which is present in the top 7 cities including Pune and Kolkata, aims for expansion into newer markets after 12 months.

"When we go deeper into the existing market, what we realized is that the market opportunities are way bigger than what we realized. When we go deeper into existing markets, we do not see growth taper off. So, with that in mind, as we venture deeper into our existing markets, we are seeing densification create a flywheel on profitability and growth," says Palicha.

"Our core objective is to expand aggressively on profitability and growth. We are going to do that in a measured and disciplined manner. We are going to launch new models for our stores, continue to grow the business organically by growing deeper into the existing markets and 12 months from now or sooner than that we will explore expanding into a few more cities," adds Palicha.

The company also plans to expand Zepto Cafe, which is only present in Mumbai to other six cities.

"Even with this capital, we want to maintain our discipline, avoid complacency, and push hard to hit EBITDA positivity. In that journey, the biggest drivers of P&L improvement for us are based on technology and product. We are building one of the best supply chain product stacks in the country today and we are investing heavily in customer-facing product as well," says Kaivalya Vohra, Co-founder & CTO of Zepto.

Startup Unicorn

Zepto becomes India's first unicorn of 2023; raises $200 mn at $1.4 bn valuation