“When we started this work 12 months ago, every conversation we had was, ‘You’re completely out of your mind, this is never going to work,’” said teen CEO Aadit Palica. .
However, Palicha’s company has managed to prove those suspicions wrong – it’s now close to unicorn status and is one of India’s fastest-growing rapid commercial apps. Unicorn is a startup valued at over $1 billion.
Zepto is a startup that promises to deliver groceries in less than 10 minutes. Although only one of many participating businesses instant transaction wave, it caught the eyes of investors.
The most recent cash injection of $200 million in May 2022 valued the business at $900 million, just nine months after launch.
Driving its massive growth were Palicha and Kaivalya Vohra, two 19-year-olds who dropped out of Stanford University to pursue their entrepreneurial dreams.
“At that point, we had scaled up to several million dollars in annual revenue. We said it was an opportunity to raise a large amount of capital, which clearly suited the product market. “, said Palicha CNBC Make It.
“How many people in their lifetime get the chance to build a next-generation company? We realize it’s just a more exciting opportunity than studying in an elite university. ”
At that time, demand for delivery services spikes like many people at home.
“Online grocery store [would] take six, seven days to deliver, offline options are in fact turned off or unavailable. Palicha, CEO of Zepto, said.
“We’ve had similar conversations with neighbors complaining about the same problem. That’s when we said… why don’t we try to build a solution for the people in the neighborhood. ours?”
But Palica and Vohra are no strangers to the instant grocery delivery business. In 2020 – at the age of 17 – they started KiranaKart, which the company says delivered groceries in Mumbai in less than 45 minutes.
“Some people have already received their goods [within] 10-15 minute intervals,” Vohra said.
“In terms of their retention rate, how much they like the platform, and how often they refer to their friends, [it] significantly higher for those who received delivery within that time frame. “
“That’s why we said, ‘Look, there might be some value in discovering that.'”
They were not wrong. According to research from consulting firm Redseer, India’s Online Grocery Market Palicha said it could be worth as much as $25 billion by 2025, and it’s an opportunity “too tempting to ignore”.
“If you look at all the other major categories of e-commerce – electronics, clothing, you take them all and combine them, they’re just a fraction of the grocery market,” he said. more.
To complete grocery orders in less than 10 minutes, the duo set up a network of small dark shops or distribution centers. across cities.
The dark shops are closed to the public, the merchandise is for online ordering only.
“We design our network across the city, to ensure that our pickup points are very close to residential clusters in a particular area,” said Palicha.
“What ended up happening was that the average distance of our deliveries was so short that we could finish deliveries consistently in 10 minutes.”
The startup added that the average distance for their deliveries ranges from 1.7 to 2 kilometers. Other forms of hyperlocal distribution can be 2 to 2.5 times longer.
Today, Zepto says, it operates hundreds of dark shops across 10 cities in India, with tens of thousands of delivery drivers at work. Palicha added that it currently ships “90 to 95%” of its orders between five and 20 minutes.
But speed isn’t Zepto’s only secret to customer retention and loyalty building. The startup, whose name comes from the zeptosecond – the smallest unit of time – claims that it is adding 100,000 new users a day.
“To really retain customers long-term, what you really need to build is trust and reliability. Reliability is multi-faceted,” said Vohra, who is also chief technology officer.
“Yes, we deliver on time, but also ensure reliability – if I order 10 items, I will receive exactly 10. And if I order fruit and vegetables, [they’re] highest quality possible. ”
Investors are also excited about Zepto’s popularity.
To date, the company has attracted $360 million from investors, including Y Combinator, American healthcare group Kaiser Permanente and Nexus Venture Partners. Its latest funding round puts the company on track to be valued at $1 billion.
Palicha says one of the key drivers of Zepto’s investment success is “executive discipline.”
“When we met investors this time, we showed very, very clear paths to profitability. We went from $0 in revenue about a year ago to today. Now, we’re making hundreds of millions of dollars in annual sales,” he added.
“We’re still talking about multiples, not percentages when it comes to our growth, and that’s something we’re excited about.”
Zepto claims it has managed to reduce its cash burn rate by 5x on a per-order basis, while achieving a quarterly revenue growth of 800%.
“We’re in a position where you look at the size of our balance sheet, we’ve had the capital to last for many, many years, in this downturn,” Palicha said.
“Since day one, we’ve been … forcing ourselves to work hard to earn every penny. We can fulfill more orders with the same amount of cash, we can attract more more customers with the same amount of cash.”
The duo say keeping costs lower than competitors in the high-growth technology category has given them an edge.
“That just puts us in a position where we can continue to grow sustainably, where others are forced to … cause axbasically pulling back growth plans and contracts to survive in a market like this,” added Palicha.
Because of that difficult environment, Palicha and Vohra were unable to rest on their laurels despite Zepto’s new funding.
“The main focus now is on just building the incremental scale we need to break even in key markets. Once we have a balance sheet that is currently breaking even, we can start to open up. expand into new cities with much more confidence and clarity.” Palicha said.
It was previous report that Zepto is making $200 million to $400 million in annual revenue, and that the founders are now hoping to “hit the billion dollar mark.”
Palicha added: “[Zepto] debuted as a personal project between Kaivalya and [me] to see if we could solve a small-scale problem in our neighborhood. “
“It eventually grew into the company we are today, for which we are immensely grateful.”
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