For Aadit Palicha and Kaivalya Vohra, both 22, Zepto’s entry into the unicorn club is more than just a valuation milestone—it’s a validation of their bold decision to drop out of college and set up a grocery delivery startup.
After all, the quick commerce space they operate in is considered treacherous terrain even by industry veterans who find it challenging to strike the right balance between the goal of positive unit economics and high customer satisfaction.
Naturally, even though Zepto grew at a scorching pace, there were questions around the viability of the model, especially when rivals like Dunzo are struggling to survive.
“A lot of people underestimated how well the business is doing, especially with respect to profitability,” said Palicha, Co-founder and CEO of Zepto, who dropped out of Stanford along with friend and Co-founder Vohra during the pandemic to set up the startup.
The quick commerce unicorn incurred a Rs 390-crore loss in FY22 but plans to be profitable at an EBITDA level in the next 12-15 months. Also, a majority of Zepto’s 200-plus dark stores are now EBITDA-positive, Palicha said before announcing the latest funding round that valued the startup at $1.4 billion.
Zepto’s $200 million fundraise comes at a time when the global economy is undergoing a deep downturn, that has disrupted funding across growth- and late-stage startups.
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“We’re grateful to have raised money in the bear market,” Palicha said after becoming the first startup to enter the coveted unicorn club in 2023, adding that the process has taught Zepto valuable lessons about entrepreneurship.
What’s even more impressive is all this has been achieved within two years. Zepto now generates revenue of $50-60 million every month, but has managed to reduce cash burn by 70% from last year.
The constraints of a bear market—including investor pessimism and aversion to risk—have empowered the team to take more disciplined and high-quality decisions, and “juice out every penny of operating leverage”, Palicha said on Friday.
“Two years ago, when capital was free and fiscal discipline wasn’t in vogue, we didn’t make strong- and high-quality decisions because we focused on growing the business and capturing customers. We didn’t have the DNA to operate in situations with deep constraints,” Palicha said.
However, things have turned around since. The bear market has instilled fiscal discipline that has helped execute plans with rigour and keep a closer watch on the operating nuances of the company, the co-founder added.
The firm is focused on achieving growth along with profitability and draws inspiration from the “D-Marts and Maricos of the world” who have built sustainable consumer businesses over decades.
“We have indexed deeply on the investors we’re bringing on board and if they truly understand the operating mechanics. If yes, then the investor is not going to swing their perception based on market cycles,” Palicha said.
The co-founder of the two-year-old startup had said in an earlier interview with YourStory that Zepto’s network is well-optimised to use location intelligence and geospatial data, including geography, demography, road patterns, and traffic dynamics.
The success of the model is based on packing and dispatching goods in under 60 seconds. The last mile is like any other delivery model, according to the company.
“Our culture of deep frugality and worshipping customers has gotten us here, but there is still so much for us to achieve. We are in this to build a generational company and it truly feels like this is just the beginning,” Palicha said. “This business is about execution and we are succeeding because our execution is strong.”
Edited by Kanishk Singh
