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Inside Zepto: A Closer Look at India's First Unicorn of 2023

In 2021, India saw a significant upsurge in unicorn companies, with 48 new companies achieving this status. However, this number slacked off to 25 in 2022, and no new unicorns emerged in the first few months of 2023 until the arrival of Zepto.

Zepto, a grocery delivery startup, recently raised fresh funding of $200 million at a $1.4 billion valuation (as per reuters.com), making the company the first one to achieve unicorn status in 2023. Zepto, in a fiercely competitive market, is competing against some big names like BigBasket, Dunzo, and BlinkIt. These companies have a business model highly dependent on the concept of Dark Stores. These Dark Stores are micro warehouses storing a fixed range of products dispersed throughout strategic locations in the cities, each serving an area of 3-4 km.


What distinguishes them is the 76-second packaging time and thus the ability to maintain strong credibility by fulfilling the delivery of orders within 10 minutes. This, in return, has become their USP.


The origins of Zepto go back to the time of the Pandemic when all of us were facing issues in getting our daily groceries. To solve this very problem, Aadit Palicha and Kaivalya Vohra, two dropouts from Stanford, conceptualized Zepto. Zepto emerged in April 2021 to bridge this gap, promising "Groceries delivered in 10 minutes." While Zepto is now in the spotlight, Palicha and Vohra's earlier venture, KiranaKart, laid the foundation for this endeavour, offering grocery store delivery services with Kirana traders and aiming for deliveries within 45 minutes or less.


Now that we know the business model of Zepto and its key competitors, let's delve into Zepto's key financial metrics. The company's total funding stands at $566.5 Million, with investments from some notable investors such as StepStone Group, Glade Brook Capital, etc. However, In FY22 Zepto witnessed a loss of around Rs. 390 Crore, with an ROI of Rs. 1 for every Rs. 3.75 spent (as per Financial Express).


Zepto's rapid funding growth is noteworthy. Within five months of its inception, Zepto secured a $570 million valuation after raising $100 million in a Series C round led by Y Combinator's Continuity Fund. This represented a 2X increase from its previous $60 million valuation, just 45 days prior. Subsequent rounds, also led by Y Combinator, further raised Zepto's valuation to $900 million. In August 2023, Zepto reached unicorn status, securing $200 million in a Series E funding round, bringing its valuation to $1.4 billion, thus ending India's 11-month unicorn drought. Some notable investors of Zepto include StepStone Group, Glade Brook Capital, etc.

In May this year, Zepto in its pitch deck claimed to have reduced its cash burn from around Rs. 90 crore in September 2022 to around Rs. 55 crore in April 2023 and doubled down on annual sales from around Rs. 2,500 crore in August last year to around Rs. 5,000 Crore in March. Furthermore, it claimed to have increased its average order value by about 40% YoY.


Notably, The company has also managed to trim its dark store rent costs as a percentage of total sales from 2.5% in June 2022 to 1.5% in March this year.


With a presence established in major Indian metro cities, boasting over 200 Dark Stores, Zepto anticipates substantial revenue growth, with the current monthly average revenue run rate standing at approximately Rs. 400 crore, signalling promising prospects for FY24, as per Aadit Palicha, the co-founder and CEO of Zepto.


Looking Forward, The company aims to turn EBIDTA-positive and has sights on an IPO in the next 12 to 15 months.

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