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Quick commerce unicorn Zepto has raised $340 million in follow-on financing at a valuation of $5 billion amid growing competition and consumer traction in the sector. 

The round was led by General Catalyst Dragon Fund. Epiq Capital joined the company’s cap table while existing investors StepStone, Lightspeed, DST, and Contrary also increased their stakes.

The fundraise comes just two months after the company raised $665 million at a valuation of $3.6 billion from Avenir, Lightspeed, and Avra, along with existing investors. In August last year, it had raised $200 million at a valuation of $1.4 billion.

Co-founder and CEO Aadit Palicha explained the company’s rationale for seeking follow-on financing.

“First, the opportunity to bring on board a lead investor of Neeraj Arora’s calibre from General Catalyst was one we couldn’t pass on. Second, strengthening our balance sheet is a strategic move, particularly as the company continues to deliver robust growth and operating leverage,” noted Palicha in a press note. 

“This is one of our first investments in India following the merger of Venture Highway and General Catalyst,” said Neeraj Arora, Managing Director of General Catalyst which has previously supported Airbnb, Hubspot, and Snap. 

Zepto has been focusing on ramping up its dark store operations and presence in metro cities. It is looking to double store count to 700 by the end of this financial year. It had earlier shifted its base to Bengaluru from Mumbai in a bid to consolidate and expand its talent pool and operations. 

Zepto had earlier said its gross merchandise value (GMV) has multiplied year-on-year to a base of more than $1 billion. Nearly three-fourths of the company’s stores were fully EBITDA-positive as of May 2024. 

The quick commerce space has been heating up on account of new entrants, changing consumer preferences when it comes to grocery shopping and the convenience of 15-minute deliveries, the popularity of quick commerce apps among millennials and Gen Z, and the inclusion of electronics and other items on the apps. According to Redseer Consulting, the quick commerce landscape is predicted to grow at 40-45% GMV CAGR over the next three years.

A day earlier, Swiggy, which operates Swiggy Instamart, appointed Flipkart executive Amitesh Jha as the CEO of its quick commerce unit, just a week after appointing Sairam Krishnamurthy as Senior VP and the first Chief Operating Officer (COO) of Instamart. 

Their listed peer Zomato’s quick commerce arm Blinkit’s revenue more than doubled to Rs 942 crore during Q1 FY25 from Rs 384 crore in the same period last year. The segment contributed 22% to the company’s total revenues and has been adjusted EBITDA-positive since March 2024.