Zepto Founder Says $1.4 Billion Valuation Isn’t A Meaningful Long-Term Metric, What Really Matters Is Valuation In 2033.

If you are a startup news lover, then unicorn is no new name. Unfortunately, this unicorn game, which spiked during and after COVID-19, seemed cool in the first half of 2023. However, the wait is over as 2023 got its first unicorn, Zepto, founded by two new-age entrepreneurs, Aadit Palicha and Kaivalya Vohra. Zepto achieved the $1.4 billion valuation funding, making it to the headlines of the monsoon month.

However, is this valuation enough to determine whether the company’s metrics and financials are optimum? Does it have a proven business plan that shows a direct route to profitability? Let’s dive down the lane to figure out this discussion.

Valuation, once a process of defining the worth of an asset or a company, suddenly made headlines after Softbank, the Japanese conglomerate, injected a hefty amount of funds into the company, spiking its valuation to around $ 7 billion. The following years saw baby booms for the company before its drastic failure of Paytm IPO. Eventually, the once oh-so-competent company lost its charm in the eyes of retail and institutional investors, which made people believe that a hiked valuation may not be an important parameter for the long-term sustainability of the business.

Moreover, as you hear the word startup founder and entrepreneur, it runs a chill in your blood as to how competent, talented and rich these people would be. And after the airing of Shark Tank, the word ‘founder’ even got the ‘fame’ attached to it. However, there are a plethora of stories that voice that founders have compromised the core of their business by running behind this ‘fame’. Further, writing ‘founder’ of XYZ company in your LinkedIn profile has become one of the coolest things in the startup domain.

But are these startups worth investing in? Are they solving any real problems in the Indian subcontinent? Are they complying with Indian Corporate laws? And many more. These questions are something that startup founders need to address before they jump into the vanity game of valuations, money and fame.

One captivating thing that Zepto Founders said in a recent interview is that they do not want to fall prey to the vanity of unicorn things and want to get back to work. It’s good that Zepto has received such a great valuation, but what matters the most is what will be the valuation 10 years down the line in 2033. It’s good that these new-age entrepreneurs are focussing more on the functions of the business rather than on the charm of the business.

So what can be the factors on which Zepto needs to prove its efficiency to maintain the same and even better valuation after a decade?

Keep the core business model at its best.

The rapid commerce business model, supported by dark store distribution centres, underpins Zepto’s ultra-fast delivery service. A network of over 100 dark shops and fulfilment centres supports Zepto’s rapid delivery business strategy. These facilities enable the firm to meet its ten-minute delivery promise on up to 90% of orders. Therefore, Zepto would ensure that they do not compromise with their 10-minute delivery service, as not complying with this will force their customer to switch to another brand.

Adoption in recent technical developments.

Zepto’s business strategy is augmented by technology that predicts where a dark store should be placed and efficient delivery routes that minimise traffic and connection concerns. Technology is also utilised to improve delivery network performance by taking weather, traffic patterns, population, geography, and last-mile supply availability into account. As a result, Zepto must guarantee that they focus on cutting-edge technology to remain competitive.

Handling team issues.

A quick delivery commerce business is supposed to be done by a pool of delivery executives, who are crucial parts of the team. Therefore, ensuring the smooth functioning of delivery people is something Zepto need to be careful about.

Legal Issues. 

Adhering to Indian Corporate Laws and not making any kind of financial irregularity within the company is very important for running the wheels of the company. It is essential to note that the company or its members do not make any misconduct in the company, either financially or non-financially.

Compare the feasibility of any new product in the market.

The check for product-market fit is absolutely necessary for survival in the market. There are a plethora of cases where businesses have launched the product in the market without doing proper pilot testing. This will divert the business from its core and will eventually burn cash and human resources.

Have a command of the cash burn.

A high cash burn rate is one of the major causes of concern in the Indian Startup ecosystem. When it comes to choosing between success or failure in a high cash-burning industry like fast commerce, the availability of funds may be a game-changer. Players with established infrastructure and solid support have been able to compete in this arena while their parent companies continue to invest money in the project. The recent funding that Zepto got will be able to support access to capital; however, at the same time, the company should always focus on reducing cash burn to attain sustainability.

These were a list of a few domains that not only Zepto but any other company should work on to stay and survive in the market. There can be many more arenas where Zepto will need to work to achieve great valuation even after a decade, as expected by the founder, Mr. Aadit.

I hope these new-age entrepreneurs don’t get entrapped in the vicious cycles of inflated valuations, multiple fundraising and high cash burns, financial irregularities, hefty paychecks to themselves amidst layoffs and unjustified fame, and deliver the Indian startup ecosystem like a great startup idea like Zoho and Zerodha!

Conclusion. 

Most individuals have this fantastic image of themselves as entrepreneurs or founders. It’s a billboard showing a young college dropout standing next to the logo of a billion-dollar firm they started, surrounded by celebrities and, of course, a lot of cash. Everyone appears to want to be on the poster all of a sudden. And everyone feels that being the founder of a firm is the only way to get on that poster. In fact, the current government appears to want everyone in the country to be on that poster. 

However, If you are not the founder, the FOMO will be there, and you will have lost out on the startup revolution. This view is so far from reality that it is dangerous. Remember the words by prominent blogger in the startup venture capital world Mark Suster, who described entrepreneurship well: “Being an entrepreneur is sexy… for those who haven’t done it.”