Exclusive: Zepto in talks to raise $100 Mn at $500 Mn valuation

On-demand grocery delivery segment has turned hot in India and global investors are displaying a strong appetite to back this model that has seen a resurgence. And Zepto’s new round is a testament to that. The six-month-old startup is in talks to raise $100-125 million at a valuation of around $550 million, according to two people familiar with the matter.

“Zepto has been witnessing notable interest from several growth-stage investors based out of the US,” said one of the sources requesting anonymity. “These investors including new and existing ones are in late-stage talks to put in $100-125 million in Zepto.”

This comes just a week after Zepto announced its $60 million maiden round led by  Glade Brook Capital Nexus, Y Combinator, Global Founders Capital and several top-tier angels.

The prominence of Zepto has come at a time when the on-demand grocery delivery play is gaining momentum. Zomato-backed Grofers pivoted to a 10 minute delivery model and Dunzo followed suit. Swiggy also scaled its on-demand grocery delivery service Instamart to six major cities including the national capital region (NCR).

Currently, Zepto operates in a few areas of Mumbai, Bengaluru and Gurugram. “With the new fundraise, the company wants to cover over a dozen cities with its dark stores,” said another source who also wished not to be named as talks are private. 

Queries sent to Zepto’s co-founder Aadit Palicha over email and WhatsApp didn’t elicit any immediate response. We will update the story as and when he responds.

Caveat: the terms of the deal may change at the last moment.

The new euphoria in the quick delivery space is reminiscent of the 2014-16 period when many startups sprung to crack on-demand grocery and essentials such as fresh farm produce (vegetables and fruits). However, the space saw bloodbath and even hyper-funded companies like Peppertap had to wind up operations because of poor unit economics.

Nevertheless, the 10 minutes delivery model seems to be working well as Grofers’ pivot attracted a $100 million investment from Zomato and it increased the interest of strategic investors in Dunzo. 

Dunzo is reportedly in conversations with Reliance for investment but its talks with BigBasket, Swiggy and Zomato failed in the past over valuation and other unknown reasons.

Meanwhile, Swiggy is set to raise a new round at a $10 billion valuation.

The scale of the 10-minute grocery delivery startups has picked up pace in the West in the post-pandemic era. Several companies in Europe too had raked in large rounds at lofty valuations. Turkey-based Getir had raised over $1.1 billion in 2021 while its German peer Gorila valuation soared to $6 billion. In the US, Instacart, a grocery delivery startup that picks up items from the neighbourhood stores and delivers to the customer, saw massive growth during the pandemic.