Two 19-year-old entrepreneurs, who have already collaborated on a number of projects, including a shuttle app for schoolchildren and who left Stanford last year to start a new startup, said on Sunday they had raised $ 60 million for disrupt India’s crowded and highly competitive grocery delivery market.
Glade Brook Capital led Zepto’s first round of institutional funding, startup founder and CEO Aadit Palicha told TechCrunch. Nexus and Y Combinator along with angel investors Lachy Groom, Neeraj Arora and Manik Gupta also participated in the round, which values Zepto at $ 225 million.
Zepto, which has operated largely in stealth mode until today and launched its app six months ago, has been around the world for several months. The startup, whose name playfully uses a mathematical term to describe the business, offers a 10-minute grocery delivery service, beating many heavily backed rivals in speed.
To achieve this feat, Zepto has set up dark stores in the cities where it operates (Mumbai, Bangalore and as of this week Delhi.) Palicha said that these dark stores, which the startup has set up and owns, are designed and optimized. for fast deliveries. (Zepto’s approach, for which Palicha said he has looked at other markets and spoken with the operators who run those companies, is different from that of many Indian startups that rely on regular grocery stores for inventory.)
“The way we are developing now, and the current penetration and frequency of use that we are seeing, the opportunity is just huge,” he said. The startup plans to expand to Hyderabad, Pune and Kolkata soon and bring the number of dark stores to over 100 by the start of next year, up from 11 currently, he said.
The idea to create Zepto came, Palicha said, when he and Kaivalya Vohra (the other founder) were locked in their homes in Mumbai last year due to the pandemic. “We had just had a very in-depth exposure to the world of entrepreneurship and tech startups. Now we were in Mumbai and the biggest problem for both of us singles was getting groceries and basic necessities, ”he said.
Maharashtra – like every other Indian state – had imposed the lockdown to contain the spread of the virus, which, among other things, meant that deliveries took two to three days to reach their customers. “We were extremely frustrated,” he said.
“We felt that the Indian grocery delivery space’s online game, which is one of the largest in the world, was struggling with serious execution errors,” he added, without naming any company.
Zepto, which has assembled a team comprising former executives from Flipkart, Uber, Dream11, Pharmeasy, and Pepperfry, competes with a number of heavily-backed startups, including Swiggy and Grofers, backed by SoftBank, and Dunzo, backed by Google. , many of which have expanded to the fast grocery delivery category in recent quarters.
“We’ve been ignoring the noise for a long time and working headlong to perfect this model, and our efforts are paying off. Today, we are experiencing steady growth of 200% every month with an unstoppable team, robust product infrastructure and deep access to institutional capital, ”said Palicha.
At stake is an opportunity estimated at $ 21 billion by 2025, according to a recent memo prepared by analysts at Sanford C. Bernstein. “Online grocery penetration is expected to reach around 3-5% by 2025, compared to less than 1% today. Long-term structural drivers remain strong: increased income and wealth, lower level consumption, e-commerce penetration (~ 30% CAGR) and young population (~ 50% under 25). Grocery expenses as a proportion of income remain high at ~ 30%, ”they wrote in the note.
“There is significant leeway to increase penetration in existing high traffic cities, increase conversion and retention. The adoption of online grocery shopping has increased with the acceleration in engagement levels and order volumes. DAU (Daily Active Users) has seen strong growth for many online grocery apps during lockdowns. Downloads have increased recently. Online grocery shopping has advantages on the demand side of 24/7 shopping, wide ranges of referrals, same day / next.