The startup Zepto (formerly known as Kiranakart) was founded earlier this year in April by 19-year-olds Aadit Palicha and Kaivalya Vohra, who dropped out of their computer science degree programs at Stanford University to concentrate on Zepto. Zepto assures grocery deliveries in 10 minutes (up to 90% of orders) through a network of dark stores and micro warehouses. The service promises delivery of groceries in under 10 minutes or less, and the best part is customers can order from 7 am to 2 am.
Zepto Story and Founders’ Journey
Aadit and Kaivalya have been friends since school days, primary school to be precise. They used to play a lot of table tennis together. Ultimately, both of them went into Stanford University’s recognized computer science engineering program.
“Never imagined we would reach where we are now,” they say.
After some time at Stanford University, they dropped out to follow their entrepreneurial passion. The idea to begin Zepto came from the confines of their homes between the pandemic. A rise in need for home deliveries meant that groceries and other necessities would reach the customer in a matter of a couple of days, leaving space for instant delivery. So, Zepto was established with that consideration in mind.
According to Palicha, during the lockdown in 2020, the pair was disheartened by the mess of fulfilment in the online grocery delivery market. “I think a lot of the competition in the space is either mis-executing grocery delivery or is focused on multiple different models, which is where we saw the opportunity.”
While Zepto was grabbing headlines, Palicha and Vohra’s original startup KiranaKart did not reach the same fanbase. The plan for Zepto is, however, obtained from KiranaKart. As the name hints, KiranaKart too, was a grocery distribution platform. It had tied up with Kirana stores to deliver groceries within 45 minutes.
It had raised $730,000 in a pre-seed round driven by Global Founders Capital, Contrary Capital, 2 am Ventures and angel investors. At that time, Vohra and Palicha were striving to make the first 1.5 lakh deliveries at a delivery cost of Re 1.
Zepto Business Model – Dark Store & Cold Rooms
A dark store is a small neighbourhood repository that consumers cannot enter directly and only order online for home delivery. While dark stores are not unusual to the Indian market, the model is still to be explored entirely, Aadit states.
“The magic of this model is how we pack and dispatch goods in under 60 seconds. The last mile is like any other delivery model,” he describes.
Mr Vohra states that the idea came to them after a lot of iterations. He concludes that grocery delivery has been an interesting space in India. “This model is something that’s done pretty well globally,” he adds. On his pitch to convince investors, he says they just asked investors to order something themselves once, and the experience was enough to convince everyone that this was going to be “the next big thing”. They say they do the same when looking for potential hires.
Zepto declares its network is highly optimized using location intelligence and geospatial data, including geography, demography, road patterns, traffic dynamics, weather, last-mile supply availability, real estate prices, etc. Furthermore, the startup’s dark stores and cold rooms are explicitly custom-designed to fit requirements such as ease of travel navigation, allowing packers to go as quickly as possible to pack the things in order.
Zepto Funding and Investors
The funding craze in start-ups has mounted a new high with 10-minute grocery distribution firm Zepto raising $60 million from US-based growth equity funds Glade Brook Capital, Nexus Venture Partners and Y-Combinator. One of Zepto’s earliest rounds, the investment round also observed participation from individual funders like Lachy Groom, Neeraj Arora and Manik Gupta, valuing the company at $225 million.
The online grocery market is supposed to grow to $24 billion by 2025, according to a new Redseer report. Zepto will compete in the market with unicorns like Ola, which is working aggressively to access this domain ahead of its $2-billion IPO next year. It has set aside a fund of Rs 250 crore for the grocery delivery industry with a mandate to begin this section by mid-November.
Other companies that have started gaining market share in the domain include Swiggy, which runs Instamart and Grofers.