19-year-old entrepreneurs' startup Zepto raises $100 million at $570 million valuation

Online quick commerce firm Zepto has raised $100 million in its Series C round led by growth-stage investor YC Continuity for a valuation of $570 million.

The round also saw participation from new and existing investors, including Glade Brook, Nexus Venture Partners, Breyer Capital, Lachy Groom, Global Founders Capital, Contrary Capital, among others.

Senior executives of global quick commerce firms -- Nilam Ganenthiran, president of Instacart, and Ravi Inukonda, vice president of Doordash have also invested in the company.

This is the largest funding YC Continuity has made in an Indian startup so far. As the name suggests, the fund primarily focuses on supporting Y Combinator alumni companies like Zepto and has invested in companies like Doordash, Instacart and Stripe, among others.

The round happened barely within a couple of months after Zepto raised its first institutional round of $60 million.

Founded by two 19-year-old Stanford University dropouts – Aadit Palicha and Kaivalya Vohra – Zepto offers quick grocery delivery to customers through micro-warehouses.

The company will be using this fund to expand coverage across multiple cities in India and scale its team rapidly. It is currently hiring across all functions, including operations, supply chain, marketing, finance, product, engineering, and human resources.

It currently has operations across Mumbai Bangalore, Delhi, Gurgaon, Chennai, Hyderabad and Pune.

"We have got a 400 person team. We're planning to scale that up substantially. We will probably hire about 800 people in the next couple of months," Aadit Palicha, co-founder and chief executive officer of Zepto told Moneycontrol in an interaction.

So far the company has set up 100 mini-warehouses which have a capacity to do 2,500 orders per day. However, Zepto did not share the actual number of orders it is generating right now.

On being asked about competitors like Grofers and Swiggy's Instamart which claim to be doing 1 million weekly orders, Palicha said the company would cross this number in 3-4 months.

"This model is an incredibly intense, detail-oriented business. You need extremely strong operating and technical discipline to pull off a 10-minute delivery done consistently," Palicha said, adding that Zepto has a month-on-month buyer retention of 65 percent with an 88 point Net Promoter Score (NPS).

"They are exceptional founders who bring relentless focus and "Doordash-like" execution to the quick commerce model. They originally launched with a different model, swiftly pivoted to quick commerce in August 2021 and are now adding 100,000 new customers every week, 60 percent of them women. Their attention to detail on the logistics experience is unparalleled and this has enabled them to scale to most major metros in just five months," said Anu Hariharan from Y Combinator.

Besides Swiggy's Instamart and Grofers, Zepto is likely to lock horns with young rivals like Fraazo which is also in advanced talks to raise $125-130 million. This was reported by Moneycontrol on December 20.

On the other hand, Grofers is in talks to raise $500 million from existing investor Zomato while Swiggy recently said it will invest $700 million in Instamart as it plans to double down on a category that has grown at a scorching pace since its launch in the middle of the coronavirus pandemic in 2020.