Big Billion Day: Zepto about to close fresh $340 million round led by General Catalyst, surpassing $1 billion funding in two months

Zepto co-founders Aadit Palicha (L), and Kaivalya Vohra (R).

Quick commerce startup Zepto has reached a deal to raise $340 million in a new funding round that will now value the three-year-old startup at $5 billion, sources said, as investors continue to pour money in the fast-growing space.

While Zepto was initially preparing to raise as much as $400 million in the current round, the rapid delivery startup decided to cap the round’s size at $340 million. Of this, $250 million is coming from General Catalyst and Mars Growth is pumping in around $50 million, one of the people cited above said. The remaining will come from existing backers.

Quick commerce apps that deliver everything from electronics to vegetables in 10-20 minutes are seeing heightened interest in India, even as the concept did not take off in mature markets. Zepto, founded by a couple of 23-year olds (Aadit Palicha and Kaivalya Vohra), particularly stands out for its execution chops and ability to compete against more established rivals such as Blinkit, Swiggy Instamart and others.

Zepto's new round comes weeks after Moneycontrol first reported on July 2 that the company has received interest for a $250 million cheque from General Catalyst as part of a larger $400 million round. This came days after it closed a $665 million round, the biggest for a startup so far this year.

The new round will consist of primary capital and will be all equity. Primary capital is when the money is pumped into a company in exchange for equity, whereas secondary refers to a transaction where shares only change hands between two investors.

Zepto was offered a valuation of $5 billion, higher than $4.6 billion that it was being valued at during initial stages of the discussions, sources said.

Including the fresh funds, Zepto’s total funding has surpassed $1.6 billion of which $1 billion has come just in the past 50-60 days. With successive fundraises, Zepto’s valuation has also skyrocketed from $1.4 billion in August 2023 to $5 billion in August 2024.

“The company is raising money because capital is available right now. The market turns very quickly sometimes so the company is raising while it can,” an investor said when asked what explains back-to-back fundraises at Zepto.

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Zepto and Mars Growth did not respond to Moneycontrol’s queries.

For Mars Growth, this will be yet another bet in the Indian startup ecosystem, the third-largest in the world. It already backs large companies like Zetwerk and Meesho in India. For General Catalyst, on the other hand, the bet on Zepto will be its first since deepening its India presence by merging with Venture Highway in India.

The investment comes at a time when Silicon Valley-based General Catalyst is closing in on a $6 billion fund. The investor had also revealed plans to invest between $500 million and $1 billion in India over the coming years.

For a company like Zepto, which has clocked $1.2 billion in gross merchandise value (GMV), building a cash chest is understandable as it is up against Zomato, Swiggy, Walmart, Reliance and the Tatas.

The competitive intensity is only increasing as Flipkart also enters the turf with Flipkart Minutes to ward off competition and retain its market share in e-commerce. Quick commerce, as a sector, has gone from good to have to an indispensable one which has already made it a $5 billion market.

While companies have asserted that they are eating into the share of e-commerce and modern retail, investors in the space said the growth is coming at the cost of mom-and-pop (kirana) stores. Players like Blinkit, Swiggy Instamart and Zepto however will not admit that because they do not want to upset kirana owners, who can ensure regulatory intervention as they’re a large vote bank for the government, the investor said.

Reflecting on the company's journey, Palicha drew parallels with Amazon's early days at Moneycontrol Startup Conclave in Bengaluru on August 9.

"We are where Amazon was in the late 90s, early 2000s. We are sitting on the right macro and the right business model to create something that is very large. And if we execute well, we are sitting on a $50-80 billion outcome," Palicha said.

"If you want to build a $50-80 billion company you have to take the bull by the horn...It is largely just execution so it is not guaranteed. There were also companies in the past who could have done that but couldn't execute it," he concluded.