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Explained: Grocery delivery app Zepto’s $100 million funding, and q-commerce model

Zepto has raised $100 million in Series C funding, valuing the 10-minute grocery delivery firm at $570 million. Who has invested in the quick commerce startup and where will the funds be utilised?  

Written by Pranav Mukul , Edited by Explained Desk | New Delhi |
Updated: December 21, 2021 11:38:38 am
Zepto is a Mumbai-based quick commerce startup.

Mumbai-based quick commerce startup Zepto, which was founded by two Stanford University dropouts, has raised $100 million in Series C funding led by Y Combinator’s Continuity fund, valuing the 10-minute grocery delivery firm at $570 million. The latest fundraise by Zepto follows a series of deals and investment announcements in the increasingly buzzing q-commerce space.

Who has invested in Zepto and where will the funds be utilised?

Y Combinator’s Continuity Fund has led the funding round, with participation from new and existing investors, including Glade Brook, Nexus, Breyer Capital, Lachy Groom, Global Founders Capital and Contrary Capital. This Series C round has come just 45 days after the company announced its $60 million fundraise in November.

“The company’s leadership includes senior executives and operators from Flipkart, Uber, Dream11, Pharmeasy, PepperFry, and Amazon – to name a few. With this injection of capital, Zepto plans to expand coverage across multiple cities in India and scale its team rapidly and is currently hiring across all functions, including operations, supply chain, marketing, finance, product, engineering, and human resources,” Zepto said in a statement.

What is the q-commerce model?

The supply chain disruptions triggered by the pandemic led to a new sub-vertical of online grocery segment being — Quick Commerce, or q-commerce — where the promise of deliveries within 10-30 minutes of ordering is the unique selling proposition. The focus of most of these ventures is on setting up micro-warehouses located closer to the point of delivery and restricting the stocks at these ‘dark stores’ to a focussed set of under 2,000 high-demand items, as against the traditional formula of well-stocked large-format warehouses located on the outskirts of towns and cities.

Zepto founders Kaivalya Vohra and Aadit Palicha

What are some of the other recent announcements in the q-commerce space?

On Monday (December 20), Zomato-backed online grocer Grofers, which has rebranded itself as Blinkit, announced “temporary closing down” of its service in areas where it couldn’t deliver grocery under 10 minutes. The company originally started as a conventional e-grocer but pivoted to the q-commerce model earlier this year.

“…we will temporarily stop serving all other areas where we are not able to offer deliveries in 10 minutes. In the near-term this call will have a significant impact for our business size, and for a large number of our customers. We expect this to impact around 75,000 of the 200,000 daily customers we are serving,” the company’s founder and CEO Albinder Dhindsa wrote in a Twitter post.

In addition to this, earlier this month, food-tech platform Swiggy announced it will make a $700 million investment into its q-commerce vertical Instamart. Swiggy said that by January 2022, it will make deliveries in 15 minutes by having the network of dark stores very close to the majority of its customers.

How Zepto works

Which are some of the other players present in this segment?

In addition to Zepto, Blinkit and Swiggy, other players in the segment include Mumbai-based Fraazo — a direct-to-consumer brand in the fresh fruits and vegetables space — has also announced tripling of the number of its dark stores to 750 by June-July 2022. Other existing players such as Dunzo, and Tata Group-owned Big Basket’s BBNow vertical that will be extended to the Tata Neu superapp — have either launched or are contemplating full-scale operations in the q-commerce space.

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