Zepto leads charge as Indian start-up funding surges 5,151% in a week

The Indian start-up ecosystem has witnessed a remarkable resurgence in funding activities this week, marking a stark departure from its recent slump. From August 21 to 26, start-ups in the country collectively secured a staggering $231 million across 16 deals. This represents an astonishing 5,151% increase compared to the previous week when only $4.4 million was raised over seven deals.

This week also saw the end of an 11-month drought in India's unicorn club as Zepto, a rising star in the quick-commerce sector, secured an impressive $200 million in a Series E funding round. This achievement makes Zepto the first start-up of 2023 to attain a billion-dollar valuation, a feat eagerly anticipated after the company showed strong growth potential last month.

In the week under review, the consumer services sector emerged as the most funded, securing an impressive $200 million in funding through two noteworthy deals. On the other hand, e-commerce took the lead in deal count, with a remarkable five transactions, amassing a total of $13.1 million in funding.

Additionally, other start-ups also reaped the benefits of this funding surge. GradRight, an ed-tech start-up, successfully secured funding. Alia Bhatt-backed Navashya Consumer Products Pvt Ltd, known for its reusable diaper brand SuperBottoms, raised a substantial $5 million (equivalent to Rs 41.4 crore) in a Series A1 funding round, co-led by Lok Capital and Sharrp Ventures. Furthermore, the artificial intelligence-based start-up Portkey.ai secured $3 million (approximately Rs 24.8 crore) in a seed funding round.

Zepto's meteoric rise however has to be the standout story from this week. Founded just two years ago in July 2021 by Aadit Palicha and Kaivalya Vohora, Zepto quickly capitalized on the surging demand for quick-commerce delivery following the outbreak of the COVID-19 pandemic. It garnered attention by securing $60 million in funding in November 2021 from Glade Brook Capital, Nexus Venture Partners, and Y Combinator, among others.

Zepto's recent Series E funding round not only cements its unicorn status but also positions it as a formidable player in the quick-commerce space. The company, which boasts over 220 'dark stores' or neighbourhood warehouses in cities like Mumbai, Bangalore, and New Delhi, plans for aggressive expansion in the coming years. Some of its early backers include Nexus Venture Partners and Lachy Groom.

While Zepto has remained tight-lipped about how it intends to utilise the fresh funds, it has revealed its ambitious plan to go public by 2025. Including this latest funding round, Zepto has raised approximately $560 million across multiple rounds to date.

In the competitive landscape of quick-commerce, Zepto finds itself contending with the likes of Swiggy's Instamart, Zomato-acquired Blinkit, and Reliance-backed Dunzo. Notably, Dunzo is also in the final stages of closing a $100 million fundraising, indicating robust investor interest in this sector.

Quick commerce, often abbreviated as Q-com, has emerged as India's fastest-growing consumer internet category, outpacing segments such as ride-hailing and food delivery. Unlike traditional e-commerce models that prioritise cost-efficiency in the supply chain, Q-com players prioritise delivering the best service (fastest delivery time) at an optimal cost.

This shift has reshaped supply chain networks and led to the proliferation of dark stores, which serve as localised hubs for rapid last-mile product delivery.

Typically, the Q-com business model involves a mother hub, distribution centres, and last-mile delivery stores, commonly referred to as dark stores. These compact warehouses, spanning 800-1,000 sq. ft., stock around 1,000-1,500 different product SKUs.

As Indian start-ups like Zepto continue to thrive and redefine the consumer delivery landscape, the investment community is closely watching their progress, anticipating further disruptions and innovations in the dynamic quick-commerce sector.