“When we started this 12 months ago, every conversation we had was, ‘You’re out of your mind, this is never going to work,'” said Adit Palicha, the fledgling CEO.
However, Palicha Company has managed to prove those doubters wrong – it is now approaching unicorn status and is one of India’s fastest growing business apps. A unicorn is a startup valued at over $1 billion.
Zepto is a startup that promises to deliver groceries in less than 10 minutes. As one of many businesses to join the booming business wave, it has caught the eye of investors.
The last $200 million cash injection in May 2022 valued the business at $900 million, nine months after its launch.
Driving its meteoric growth are Palicha and Kaivalya Vohra, 19-year-olds who dropped out of Stanford University to pursue their entrepreneurial dreams.
“At that time, we had already grown to two million dollars in annual revenue. There is an opportunity here to raise a large amount of capital, we have a clear product market fit,” Palicha told CNBC Make It.
“How many potential generations have had the opportunity to build a company in their lifetime? We found that to be a more exciting opportunity than studying at a prestigious university.”
45 to 10 minutes
The idea for Zepto came in July 2021 – when childhood friends were stuck in their homes in Mumbai amid the Covid-19 pandemic and nationwide lockdown.
At that time, many people stayed at home, so the demand for delivery services increased.
“Online shopping [would] Take six, seven days for delivery, offline options are practically closed or unavailable. It was incredibly difficult for us to find merchandise,” said Zepto CEO Palicha.
“We had the same conversations with our neighbors who complained about the same problem. That’s when … why don’t we try to create a solution for the people in our neighborhood?”
But Palicha and Vohra were no strangers to the quick grocery delivery business. In the year In 2020 – at just 17 years old – they started Kiranakart, which delivered groceries in less than 45 minutes in Mumbai, he said.
“Some people were getting their stuff. [within] A time limit of 10-15 minutes,” said Vohra.
“How much they like the platform and how often they refer their friends, in terms of staying. [it] It was very high for those who got the shipment at the time.
“That’s why we said, ‘Look, there’s going to be some value in investigating that.’
They are not wrong. According to a study by consulting firm Redsear, India’s online grocery market could reach up to $25 billion by 2025 and this opportunity was “too compelling to pass up,” Palicha said.
“If you look at all the other major e-commerce categories — electronics, apparel, you take them all together, they’re a fraction of the grocery market,” he said.
Building trust and reliability
To fulfill grocery orders in less than 10 minutes, the duo has set up a network of dark stores, or microdistribution hubs. In cities.
Dark stores are closed to the public, furniture is intended for online ordering only.
“We design the network around the city to make sure our exit points are closest to the population clusters in a particular neighborhood,” Palicha said.
“It ends up being that the average delivery distances are so short that we can consistently deliver within 10 minutes.”
The average delivery distance is between 1.7 and 2 km, the startup added. Other types of hyperlocal delivery are “2 to 2.5 times longer,” he said.
Today, Zipto says, it operates hundreds of dark shops in 10 cities across India, employing tens of thousands of delivery drivers. Palicha added that he is currently delivering 90 to 95% of his orders within five to 20 minutes.
But speed isn’t Zepto’s only secret to retaining customers and building loyalty. The startup, whose name is zeptosecond — the smallest unit of time — says it’s adding 100,000 new users every day.
“What you really need to build to keep customers long-term is trust and reliability. Reliability comes in many forms,” said Vohra, chief technology officer.
“Yes, we deliver on time, but in terms of reliability — if I order 10 things, I’ll get those 10 exact things. And if I order fruit and vegetables, [they’re] As high quality as possible.”
Low cash burn
Investors are also excited about Zipto’s popularity.
So far, the company has attracted $360 million from investors including Y Combinator, US health-care consortium Kaiser Permanente and Nexus Venture Partners. The latest funding round puts the company at a $1 billion valuation.
Palicha says one of the key drivers of Zepto Investments’ success is “operational discipline”.
“We’ve shown very, very clear profitable paths to investors this time. We’ve gone from roughly $0 in revenue a year ago to hundreds of millions of dollars in annual revenue today,” he added.
“We’re still talking multiples, not percentages, when it comes to our growth rate, and that’s something we’re excited about.”
Zepto says it has reduced its cash burn rate by 5 times per order and achieved 800 percent quarter-on-quarter revenue growth.
Even so, the days of easy money are over for cash-burning tech companies as interest rates rise and investors demand more yield. However, the young founders did not succeed.
“We are in a situation where you look at the size of our balance sheet, we have successfully obtained capital that will sustain us for several years in the context of this downturn,” said Palicha.
“Since day one, we’ve been pushing ourselves to be efficient to make every dollar last. We’ve been able to do more orders for the same amount of money, and we’ve been able to get more customers for the same amount of money. .”
The duo said keeping costs lower than competitors has paid off with the rapid growth in technology.
“This puts us in a position where we can grow sustainably, while others are forced to scale back, essentially pulling back growth plans and surviving in such a market,” Palicha added.
Touching the billion mark?
Because of that tough environment, Palicha and Vohra are not resting on their laurels despite Zepto’s fresh funding in the bag.
“The key focus now is to build the incremental scale we need to break even in key markets. Now that we have a balance sheet that works at breakeven, we can start expanding into new cities with more confidence and clarity.” Palicha said.
Previously, Zepto had an annual revenue of 200 million to 400 million dollars, and the founders now hope to “touch the billion mark”.
Palicha added:[Zepto] It came out as a personal project among Kaivalya [me] To see if we can solve a problem in our area on a small scale.
“It ultimately evolved into the company we are today, for which we are incredibly grateful.”
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