After the funding boom of 2021 that saw India adding a unicorn every week, there has been a slowdown in capital inflow and a decrease in venture capital funding for startups. After September 2022, when diagnostics chain Molbio Diagnostics turned unicorn, no startup has managed to achieve the unicorn status, until now.
On August 25, Zepto, the homegrown delivery and quick commerce platform, which leveraged changing consumer habits during the pandemic times and capitalised on the surge of online orders for daily essentials, said it raised $200 million (around Rs 1,653 crore) in a funding round led by private markets investment firm StepStone Group. The funding made Zepto the only startup to turn unicorn this year.
The latest funding round of the grocery delivery startup saw participation from new investor Goodwater Capital, based in California, apart from StepStone Group. Existing investors like Nexus Venture Partners, Glade Brook Capital, Latchy Groom and others also participated in the Series E funding round.
Zepto is planning to launch its Initial Public Offering (IPO) by 2025. It said it intends to become EBIDTA-positive in 12-15 months. EBITDA stands for 'earnings before interest, taxes, depreciation, and amortization'.
Indian startup ecosystem saw as many as 44 companies turning unicorns in 2021. The next year, India added 23 more unicorns, making the country the world’s third-largest unicorn ecosystem in the world. However, since September, there has been a slowdown in funding, raising concerns over a funding winter.
The slowdown has been attributed to many factors, including geopolitical tensions and economic uncertainty. According to industry experts, venture capital firms and private equity investors have become more punctilious in their assessments and cautious about the companies they pick.
Angel investor Prateek Toshniwal had recently told Entrepreneur.India that venture capital firms are now giving priority to startups that show a distinct route to profitability, effective operations, and solid fundamentals. He said in the past the focus was on rapid growth and scalability.
There was even an opinion that a funding winter may have been good for India's startup environment as it would lay the framework for well-run, sustainable companies.
The interest that venture capitalists and angel investors have shown in Zepto, which is in competition with Zomato-owned Blinkit, Swiggy's Instamart, and is behind these two in terms of order volumes, is an indication that there is a thaw in the funding winter.
Zepto co-founder and CTO Kaivalya Vohra said Zepto is likely to achieve $1 billion in annualised sales by the next few quarters.
"We are building one of the best supply chain product stacks in the country today and we are investing heavily in customer-facing product as well," Vohra added.
India's diverse consumer base, and the pool of young and talented professions, along with government initiatives like 'Make in India' and 'Digital India' make the country's startup ecosystem an inviting investment destination. Zepto turning unicorn could arguably be seen as the winter finally giving way to a brighter and more prosperous spring.
