Friday, May 20

Grocery Delivery Startup Raises $200M, Burns Less Cash than Rivals

Grocery Delivery Startup Raises $200M, Burns Less Cash than Rivals

Zepto, an Indian grocery delivery startup, has just raised $200M at a valuation of $900M. As per this latest fundraising in the grocery delivery sector, it is now seen as an Investor hotspot where every business is vying to deliver groceries to a customer in flat 10 minutes.

Indian delivery startup, Zepto, is spearheaded by two Stanford dropouts aged 19. Founded in 2021 during the prime of the pandemic, this new fundraising is led by Silicon Valley-based Startup incubator- Y Combinator! The investment round also includes US-based Kaiser Permanente and its previous investors, Nexus Venture Partners.

As per market speculation, Zepto food delivery startup competes with Blinkit, erstwhile Grofers, backed by SoftBank. In the wake of 10-minute delivery, these Indian grocery delivery startups are diving headlong with hyperlocal delivery services provider Dunzo backed by Indian billionaire Mukesh Ambani’s Reliance and soon-to-be acquirer, Swiggy.

Given the statistics of the quick commerce industry growing 10-15 times to $5B by 2025 and the Indian grocery retailing industry predicted growth of $600B, ex-Stanford students of computer science, Aadit Palicha and Kaivalya Vohra, decided to join the lucrative market. Zepto operates in 11 cities in a year with plans to cover 24 more in the next quarter with this new round of funding. The strategy is to partner with dark stores in new cities and hire more resources. A portion of the investment will also be allocated to bolster a network of ‘cloud stores’ or micro-warehouses to fulfill orders within the time frame.

According to Aadit Palicha, the food delivery industry took too long to improve its delivery speed when Zepto resolved it within months. It is interesting to note that when Reuters interviewed delivery personnel from Zepto and Blinkit, the responses, collectively, didn’t sound like a positive experience. Blinkit and Zepto drivers told Reuters how they have to perform under pressure to ensure on-time delivery for customers regardless of traffic and avoid being called out by store managers. Here, Palicha clarified that at Zepto, drivers travel only short distances of an average of 1.8 km (1.12 miles) to deliver orders and so there is no rush.

How fast is too fast? While fast delivery aids lifestyle, anything operating too fast burns out too fast without room for improvement. If in 2022, every grocery delivery startup is speeding up to 10-minute delivery, where are they expected to be in 2023 and in years to come? What works on the smooth roads of the US and Europe is not compatible in India, which ranks 1st in deaths from road accidents among 199 countries as per World Road Statistics, 2018.

As far as the Great Indian Dream of a $5T economy is concerned, young Indian college dropouts qualify to bag major investments from foreign investors in the tech space enabled by digital payments, the internet, and smartphones. In this context, Zepto records an average monthly revenue of $12M while spending $8M on marketing and promotional activities. Inspired by the fast delivery model in Turkey and Russia, Palicha said, “we burn less (cash) than our rivals.” 

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