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Y Combinator-backed Zepto launches 10-minute food delivery service 'Cafe' in Mumbai

In its last round, Zepto raised $100 million in a round led by YC Continuity at a valuation of $570 million, within months of raising $60 million in its first institutional round.

April 18, 2022 / 04:56 PM IST

Zepto, the buzzy 10-minute grocery delivery app, has started food delivery in Mumbai on its own app through an offering called 'Cafe', intensifying the battle in the quick commerce space.

Zepto, which queered the pitch in the online grocery space last year with its promise of delivering essentials in 10 minutes or less, now wants to do something similar with 'break time essentials.' This comes at a time when larger rivals such as Zomato, Swiggy and Ola are all testing 10-min food delivery.

Zepto is currently providing a free delivery on an order value of Rs 99. A quick glance of the app shows that the Mumbai-headquartered startup has tied up with restaurants such as Blue Tokai Coffee, Chaayos, Gurukripa snacks and Sassy Teaspoon. Some of the items being delivered in 10 minutes include tea, croissants, samosa and coffee.

Speaking to Moneycontrol, Aadit Palicha, co-founder of Zepto, said, “We launched this pilot a few weeks ago, and we've already seen an incredible response from customers. We're going to continue tweaking the model for quite some time so we can perfect the customer experience and unit economics before scaling.”

“Let me be clear - we are not doing food delivery. This is a Café format, with ready-to-drink coffee, chai, and packaged snacks (like biscuits and sandwiches). We don't want to get distracted from our core business by building a complex supply chain for food delivery, where it's difficult to control quality."

He further added that the core of Zepto’s business will remain grocery delivery and will not move away from that.

Zomato earlier had said that it will be able to deliver biryani, momos, bread omelette, poha, coffee, tea, and even instant noodles in ten minutes. Ola too is offering items such as pizza and rolls in 10 minutes in Bengaluru through its quick commerce service, Ola Dash.

Increasingly, quick commerce companies see quick food delivery as a natural extension, as they can use their delivery infra to tie up with cloud kitchens and convenience stores that stock bakery items, coffees, snacks etc.

Zepto, which was founded in late 2020 and launched services from April 2021, was started by 19-year olds Aadit Palicha and Kaivalya Vohra, who dropped out of a computer science engineering program at Stanford University. Brought up in Dubai and from families that had a background in business, they dabbled with ventures early on. While in school they started up their first venture GoPool, a ride pooling app which was acquired by a Dubai-based firm.

Inspired by the stories of unicorns (startups valued at a billion dollars and above) coming from India, they came to Mumbai to try their luck with entrepreneurship for the second time. This was also around the time when pandemic-induced nationwide lockdowns made it hard to arrange for basic essentials.

They decided to start a venture that would solve this problem - initially by partnering with local offline shops or kiranas to deliver essentials. However, they soon realized that quick delivery is hard to execute without dedicated dark stores (mini-warehouses). So, they shut KiranaKart and set up Zepto.

As they saw a massive jump in customer experience metrics for 10-minute delivery, when compared to 30 or 45 minutes, they made it their sweet spot. Zepto's strong operating and execution chops attracted investors and steep valuation in a short span of time, amidst the funding boom in Indian startups.

In its last round, Zepto raised $100 million in a round led by YC Continuity at a valuation of $570 million, within months of raising $60 million in its first institutional round. Nilam Ganenthiran, the President of Instacart, and Ravi Inukonda, a senior executive at DoorDash, also participated in the round.

Everybody loves Qcommerce

While the jury is still out on whether people actually need essentials in 10 minutes and if this is a sustainable business model, Zepto's alacrity has made its rivals sit up and take notice. Moneycontrol reported earlier this year that it held talks for a potential acquisition by online food delivery platforms Zomato and Swiggy. While the talks did not fructify, the fact that these conversations happened underscores the competitive intensity in the quick commerce space in India and shines a light on how larger rivals view upstart Zepto.

Speedy delivery has attracted significant ire in recent months, as questions persist on the safety of riders and the pressure that the timeline puts on them. For instance, the Chennai traffic police fined app-based delivery services a sum of Rs 1,35,400 after registering 978 cases against their delivery partners. These companies include Zomato, Swiggy, Dunzo among others, according to data released by city traffic police. The police department said that food delivery services commit to deliver in a very short time, which is the primary reason why food delivery partners are forced to drive at a high speed.

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Sanghamitra Kar
Sanghamitra Kar
first published: Apr 18, 2022 04:45 pm