In an exhilarating breakthrough, Zepto, a swift-commerce startup, has secured $200 million in its Series E funding round, propelling its valuation to a staggering $1.4 billion. This feat not only ends India's 11-month unicorn dry spell but also ushers Zepto into the realm of billion-dollar startups. The funding round was spearheaded by the StepStone Group, an esteemed US asset management firm, along with participation from Goodwater Capital and existing investors. The startup's valuation skyrockets from $900 million in May 2022, marking a significant achievement.
India's Newest Unicorn Emerges
Zepto's latest funding round is a beacon of significance, marking India's inaugural unicorn of the year. This achievement breaks the silence since Molbio Diagnostics attained unicorn status in September 2022. A stark contrast to the vigorous pace of 2021, where a new unicorn almost graced India every week, the investment landscape has evolved. Investors are now meticulously evaluating startups before committing funds, a testament to their prudent approach.
Stepping Stones and Capital Streams
StepStone Group and Goodwater Capital emerged as crucial players, contributing a substantial portion of the $200 million funding. The StepStone Group provided $75 million, marking its debut direct investment in India. Goodwater Capital, with prior investments in Pocket FM, Teachmint, and Yellowclass, channelled $30 million into Zepto. Moreover, existing investors Nexus Venture Partners, Glade Brook Capital, and Lachy Groom collectively infused $95 million into the Mumbai-based startup.
Future Prospects
Zepto's co-founder Aadit Palicha anticipates a potential shift in fundraising strategies, potentially engaging India-centric venture capitalists over time. The startup recognizes the value of aligning with investors seasoned in navigating diverse market cycles, like StepStone, known for its contrarian market moves.
Zepto's Landscape and Growth
Zepto contends with notable rivals, including Zomato-owned Blinkit, Swiggy Instamart, Reliance-funded Dunzo, and Tata's BigBasket (BB Now). Among these players, Zepto clinched the third-largest spot in terms of order volumes, an impressive feat. Moreover, the startup showcased a downward trajectory in its monthly cash burn, minimizing it to Rs 55 crore in April from Rs 90 crore in September 2022. This fiscal discipline is a precursor to Zepto's ambitious goal of achieving positive EBITDA margins within a year, setting the stage for an IPO in the first half of 2025.
Journey to IPO
Zepto's financial journey unfolds strategically, with a pre-IPO round in the pipeline once positive EBITDA status is attained. With prudent financial management and a focus on bolstering its balance sheet, the startup's path to IPO seems promising. Founded in 2020 during the pandemic, Zepto has rapidly surged ahead, securing around $560 million in funding within two years.
Zepto's Resilience Amid Funding Challenges
In the midst of a challenging funding environment, Zepto's remarkable $200 million funding achievement stands out. The Indian startup ecosystem witnessed a 77 percent plunge in funding during the initial seven months of 2023 compared to the previous year. Zepto's accomplishment shines in the midst of adversity, highlighting that select startups like FreshToHome, PhonePe, and Lenskart have also secured substantial funding rounds in recent times.
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