Zepto raises $1 billion in two months; closes $340 million funding round led by General Catalyst

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

Quick commerce startup Zepto has raised $340 million in a fresh round led by General Catalyst and participation from Dragon Fund (Mars Growth Capital) and Epiq Capital, all new investors. Existing backers like StepStone, Lightspeed, DST and Contrary also increased their stakes in the company by infusing more capital.

The company is now valued at $5 billion, up sharply from $1.4 billion in August 2023, thanks to successive funding rounds and growth in scale.

With the latest round, Zepto has raised a whopping one billion dollars in two months, as investors continue to bet big on the burgeoning quick commerce in India. Three year old Zepto, which competes with Zomato owned Blinkit, Swiggy Instamart, Flipkart Minutes and Tata’s Big Basket, has emerged as a challenger on the back of its execution chops and rapid expansion.

Moneycontrol was first to report about General Catalyst joining Zepto’s cap table on July 2 and also exclusively wrote about the rapid delivery startup is set to close a fresh $340 million round on August 14.

Including the latest round, Zepto has raised $1.05 billion in a span of two months and across two tranches. The first $665 million round closed on June 21 and the remaining $340 million on August 29. Since being founded in 2021, Zepto has raised around $1.5 billion in total.

Speaking on the rationale behind raising such a large amount of money in quick succession, Aadit Palicha, co-founder and CEO of Zepto said the reason is twofold.

“First, the opportunity to bring onboard a lead investor of  Neeraj Arora’s calibre from General Catalyst was one we couldn't pass on,” Palicha said.

Arora is the co-founder of Venture Highway, an early-stage investor in India which merged with General Catalyst as the latter looks to deepen its presence in India. He is also the former Chief Business Officer (CBO) of Whatsapp. He also served on Paytm's board between June 2015 and February 2018, after about four years at Google.

“Second, strengthening our balance sheet is a strategic move, particularly as the company continues to deliver robust growth and operating leverage. While (the) recent financing reflects strong confidence in Zepto’s performance to date, we recognise there is still a lot of execution ahead of us to fulfil our ambition of building a world-class internet company out of India,” Palicha said while shedding more light on the reason to raise capital. The comments come ahead of a planned public market debut in 12-18 months.

Palicha has previously drawn parallels with Amazon and said Zepto can be a $50-80 billion outcome if the management executes well. 

“I’ve known Aadit and Kaivalya for several years, and they are truly exceptional founders who turned their bold mission to modernise India’s grocery sector into a category-defining company...having personally witnessed their bold vision and unmatched execution with Zepto since their inception in 2020,” said Neeraj Arora, Managing Director, General Catalyst.

“The young founders possess a rare combination of 'out of the box' systems thinking and a mission that has attracted the best industry talent. Their long-term vision to reimagine and build an enduring supply-chain company front-ends as a quick commerce play today," he added.

General Catalyst had previously said it will invest anywhere between $500 million and $1 billion in India over the coming years. It is also closing in on a new $6 billion fund for tech startups across the globe.

Mars Growth Capital, a joint venture established in 2021 between Mitsubishi UFJ Financial Group (MUFG) and Liquidity Group, had earlier made its foray into the equity space with the launch of Dragon Fund I, through which it has invested in Zepto in the current round. It already backs companies like Meesho in India. 

“Quick commerce addresses the convenience, variety and value needs of urban India which is a massive opportunity,” said Aakash Tulsani, Managing Director at Dragon Fund. “We have been impressed by Zepto's execution, data driven approach and ambition to build an enduring company.”

The massive funding into Zepto, a key player in the Indian rapid delivery space along with Zomato’s Blinkit and Swiggy Instamart, comes at a time when quick commerce has come on the Indian government’s radar for potentially disrupting the livelihood of millions of small retailers who own mom-and-pop (kirana) stores.

In the $5 billion market, Zepto also competes with Tata’s BB Now, Walmart’s Flipkart Minutes – both run by conglomerates which have deep pockets.

In FY23, the latest available financials, Zepto clocked a revenue of Rs 2,024 crore up from Rs 141 crore in FY22. That is a 1,335 percent jump year-on-year (YoY) albeit from a lower base. At the same time the company incurred a net loss of Rs 1,272 crore in FY23 up around 3X from Rs 390  crore in FY22.

Palicha had earlier said the company clocked a revenue of Rs 10,000 crore in FY24 but is yet to officially file its financials.