The Indian Grocery market was at 396 Billion Indian Rupees in 2022. 

Over 95% of Indian grocery stores are made up of Kiranas or small grocery stores. 

While supermarkets account for about 4% of total grocery shares, online groceries are not even near one percent. 

Which stands as a huge potential market for companies like BigBasket, Blinkit, Swiggy Instamart, Zepto, JioMart, and Dunzo to scale.

Zepto pioneered 10 min grocery delivery In India. It’s a phenomenon that took India by storm. And this is a unique Indian offering. Nowhere in the world has 10 min delivery been pioneered and scaled like in India.

 

And there are very few businesses born once in a decade that change consumer behavior permanently. Flipkart pioneered e-commerce in India, BigBasket pioneered grocery in India delivered in 3-4 days and Zepto has pioneered grocery delivered in 10 mins.

 

In this episode, we have Aadit Palicha, Founder & CEO, Zepto sharing his journey so far with us.

During the conversation, Aadit also mentioned about his first startup, moving back to India during Covid, dropping out of Stanford, and starting Zepto.

Notes – 

00:00 – Intro

01:36 – The life story of Aadit before starting Zepto

02:36 – First startup at age 16

08:18 – Dropping out of Stanford

10:21 – First round of funding from Y-combinator and Nexus

12:30 – Growth & Challenges in Zepto’s journey so far

17:35 – Is grocery a big enough category to build a large enough business? 

20:54 – Is it possible to become profitable in this space? 

25:50 – Headwinds in their business

28:46 – Going public in India at $10 Bn

34:00 – Where does 99%+ of his learnings come from?

37:45 – Avoid taking a hit on culture as you scale 

 

Read the transcript here

Aadit 0:00  

When we were 16, we actually started something that was fairly interesting. It was a ride-sharing platform for school commutes. And we launched that in Dubai. And it ended up scaling to a couple of 1000 users. The best excuse to be in California Silicon Valley was to go to college there. And so we applied to study computer science at Stanford, both of us were lucky enough to get in. And that was supposed to be the beginning of a pretty exciting journey abroad. But when the pandemic hit, we both found ourselves back in Mumbai, which is when we started experimenting with the grocery space, I mean, the overall round was 9 million. And then 50 million led by Glade Brook Capital, and then 100 million led by Y Combinator, that was, I believe, July 2021, to December 2021. So crazy period, because if we’re going to become a company of 1000s of crores, whether we’re a 12-month-old company or a 12-year company, will have expectations and comply, there was a format that we took, let’s bring on board senior folks that have clarity, can build teams and already understand what needs to be done so that we can avoid making the mistakes that will almost inevitably happen if we try building it first principles if we stopped growing, stopped launching new markets, which we will not do, but if we did that, we would have a clear roadmap to getting to cash flow breakeven as an overall business within a reasonable timeframe. Not three years, five years but within a year, a maximum year and a half. Once we get there, five years from now I’ll be talking to you so you know what, we’re a highly profitable public company in grocery. what’s next?  But for now, I know what’s next is first getting to that level.

 

Siddhartha 1:23  

India never expected it. So I would put you in the same category as Mark Zuckerberg of India because he was 19 when he started building Facebook.

 

Siddhartha 1:36  

Hi, this is Siddhartha Ahluwalia. Welcome to the 100x Entrepreneur podcast. Today I have with me Aadit Palicha, CEO of Zepto. Aadit you have taken the E-commerce and grocery industry by storm. You are the fastest-growing company ever in India, in E-commerce grocery was never imagined to be a 10-minute delivery category. So thanks to you for creating that category, and disrupting the category.  And just to give a background to our audience, Flipkart was the one who pioneered doorstep delivery of any goods in India. Then Big basket came and said, we can deliver groceries in X number of days. And I think you came last year, you said that forget about the number of days or the hours, will deliver to you in 10 minutes.

 

Aadit 2:21  

It’s wonderful to be here. Thank you so much for having me. And you’ve obviously been very generous with the introduction. But I think when you make it sound that way, I think I should probably use you in my investor pitches. But you know, it’s wonderful to be here. And happy to dive into the journey.

 

Siddhartha 2:36  

So Aadit, to go back and understand your background, Where you grew up, and what you did in your education. And then how did Zepto come out? There were a lot of pivots that I wanted to dive deep into.

 

Aadit 2:47  

Sure, happy to give you a sense of the background. I’m gonna give you a sense. Both Kaivalya and I are originally from Mumbai. But we spent most of our childhoods in Dubai. So we studied there, although most of our family was in Bombay, we ended up being in Dubai growing up. And we spent a couple of months a year in Mumbai, to come visit the family. So we’re always connected to the city. But for us, most of our bonding happened, pretty early on in life. So I actually met Kaivalya when we were about nine years old. And the two of us had a lot in common, Bombay kids in Dubai, same school. And both our dads were engineers by background. And that sort of pushed both of us into a love for building, fortunately. And that’s how we started. KV was always a little bit more technical. And taught himself how to code at a fairly young age. I used to experiment with multiple different smaller projects, like everything, basic stuff, Chrome extensions, mobile applications, and websites growing up.

 

When we were 16, we actually started something that was fairly interesting. It was a ride-sharing platform for school commutes. And we launched that in Dubai. And it ended up scaling to a couple 1000 users and quite a few schools in the city. And eventually, we had an exit from that startup, which was pretty mind-blowing to us, because we never realized that this hobby of ours of building out interesting technology products could actually be a rewarding career path financially and professionally. So that’s when we took a step back and said, hey, we’ve grown up, we’ve been experimenting with different projects, KV, and I’ve been working together on a couple. But over getting the basics of product building, and actually figuring out what customers could use on a frequent basis. What we really wanted to understand was, how do you build an organization around those products. And how do you build an Amazon or an Airbnb or an Uber or Flipkart? And we figured the best place in the world to go along that would be Silicon Valley in California. And so after selling that first small business to us at about 17 years old, we decided the best excuse to be in California Silicon Valley was to go to college there. And so we applied to study computer science at Stanford. Both of us were lucky enough to get in and that was supposed to be the beginning of a pretty exciting journey abroad, but When the pandemic hit, we both found ourselves back in Mumbai, which is when we started experimenting with a grocery space. 

 

To give you a sense of that journey, I mean, for us, the reason why we got into groceries in the first place was a problem that hit us right in the face. Firstly, we couldn’t stay with our family because they were quite old. We didn’t want to expose them to school at the time. Secondly, we couldn’t find a reasonable apartment because we were two bachelors in Bombay, in the middle of the pandemic. And so it was a complete no from a landlord’s perspective. And so we moved into Kaivalya’s home, in Sher-e-Punjab in Andheri East. And the first thing that we realized as two guys, living alone in the first lockdown in Mumbai, it was an absolute nightmare to get groceries, all the offline options were shut, the online options were taking six, seven days to deliver even in some cases. And that is, it was very difficult for us to manage. And so and more importantly, our neighbors around us, our newfound neighbors had exactly the same problem. 

 

And so it started with the idea of delivering from local options. KV, and I used to go out and deliver ourselves. But then slowly, we sort of realized that he also the service that we had, and was called Kirana cart initially, where we were delivering to people, locally in neighborhoods, ourselves, all of that was slowly growing, and you were starting to bring delivery partners on board making a service out of it, we realized that, really, if you wanted to get a significantly better customer experience we had to innovate  on a new model. Because when we spoke to customers, they said, okay, in our early rendition, we were delivering in 45 minutes,  it was not very reliable, and we might have gotten the wrong items at different times. But when he spoke to customers and said, Look, we’re using it, because there’s no other option. The second lockdown is over, we’re going to go back to something as the experience was not great. 

 

So we said, okay, fine, we need to build a much better experience so that we can have you hold on to customers post the lockdown. And that’s when we started experimenting with the dark store model. And we figured that with a dark store model, not only can we streamline our entire process to get deliveries done much faster, which when we looked at the data and spoke to customers, was a very exciting value proposition for them. But also, we were able to figure out how to sustainably provide on our platform, more assortment and do it with more reliability, because we were able to design the process with a lot more clarity than if it was just local deliveries that were ad hoc, sort of Man Friday model, that gave us the ability to launch the first rendition of Zepto took us a year of pivots. And we tried multiple things. The local delivery was just one attempt. We did everything from the SaaS based model to a pick up and shop model, there were all sorts of different pivots. But eventually, when we started experimenting with the dark store model, the first thing that we realized is that customers loved it. We will speak to customers and say, Hey, this is special, like we are now going to use you a lot more. 

 

And we showed them the data as well. The retention rates of customers improved significantly, customer satisfaction scores improved. And we tried to be as methodical as possible with the numbers  so that we knew we weren’t drinking our own Kool Aid. And once the numbers told the stories that they did in the customers and the customers around us local customers we’re delivering to said, Hey, this is something that we’d really be excited about. That’s when we got the clarity to say, Okay, we’ll double down on this dark store model, let’s rebuild the company in a new light. Let’s call it Zepto. Let’s get started. So that was the journey from Dubai to dropping out of Stanford, coming to Mumbai and starting this company.

 

Siddhartha 8:18  

When did you get this insight that you want to drop out of Stanford to relocate back to Mumbai?

 

Aadit 8:22  

It was a pandemic, and we were anyway not able to go to college at that point. And so we had to come back home.

 

Siddhartha 8:33

But you could stay there. 

 

Aadit 8:34

Not really, I mean, a lot of international kids ended up coming back because it was very uncertain. So most people ended up coming back doing classes online. So we said, firstly, online classes were terrible. So we decided to avoid that, and took a year off. And you’re able to take a year off at Stanford and say, Okay, I’ll rejoin next year. And that was the idea initially. So we tried the online class test, it was terrible, so we said let’s just do it a year later, it would be a much better experience. And in the meantime, let’s see what we can do. Can we solve some problem statements? Can we learn something ourselves? And so that idea was not very well thought out. Kaivalya and I didn’t have a great internship lined up at Goldman Sachs or JP Morgan, like some of our more responsible friends, we just said, Hey, let’s take a year off and figure out an addressing problem statement. And over the course of the year, we started getting obsessed with groceries. 

 

And by the end of that year,  mid 2020, to mid 2021. That’s when Zepto was really born. And we started seeing a lot of scale, a lot of quick growth. And then when the clock rolled out and said, hey, it’s time for you to re enroll at Stanford. We had this time we had data, a solid product and a fast growing business. And it was a lot easier to make that decision where you had something real, really concrete behind you. So yeah, mid 2021 is when we had to make the final decision on whether to enroll or not enroll at Stanford and we took the decision, obviously not to do so.

 

Nansi 9:50  

Hi, everyone. Before we begin, I would like to share that this podcast is brought to you by Prime Venture partners, an early stage VC fund led by Amit Somani, Shripati Acharya and Sanjay Swami. Prime is often the first institutional investor in category defining tech startups in FinTech, SaaS healthcare and education, such as Markit Quizzes, Planet Spark, Bolt and Glip to know more about Prime visit https://primevp.in/ 

 

Siddhartha 10:21  

And when did Y Combinator and Nexus happen for you? 

 

Aadit 10:24  

So we had been in touch with Nexus for quite some time, they actually reached out to us very early on as we were going through that journey of pivoting from the early versions of our business to eventually Zepto and they were in touch with us. They were constantly helping us brainstorm, I actually got a ping very early on in late 2020, from Arjun who was a good associate on the team saying, Hey, you heard some interesting things about you. And he kept in touch with us, kept brainstorming, picking on how we were actually thinking about building this business. And then once they saw that clarity, and they saw that conviction on the product market fit the model of your building, they came and said, Yeah, this is interesting. This is something that we think makes sense. So they came in, I believe, we started drawing something up around March of 2021. And by July, August, things wrapped up, we had money in the bank, from Nexus. 

 

After that there was just a crazy journey, we started growing 100-150% month on month, which is not for the faint hearted. It was definitely quite an experience. But more importantly, that growth does obviously attract investors. We’re talking about mid to late 2021. And we had a couple of folks that we were talking to but Y Combinator, Continuity reached out we were in touch with YC. Because even in the early days, I mean, we were a Y Combinator startup. So you’re part of the early stage batch. And so they were constantly in touch with us and said, Hey, you guys are growing really fast. And you’re now getting to millions of dollars in sales. Why don’t we talk to the growth folks at YC, later stage guys. 

 

And so we spoke to them, and they were very excited about the thesis. We found them to be incredibly thoughtful and high quality investors. And so we ended up just taking a term sheet for them. And that is actually our Series C. So series A was an excess. We did a series B with Glenbrook capital, which was a thing about a month and a half after Nexus, then a mantra of after Glenbrook. We did yc. So it was like a good three month period where we raised three rounds. 

 

Siddhartha 12:17

So the first check was 2 million from Nexus?

 

Aadit 12:19

No, it was more, I mean, the overall round was 19 million. Okay. And then 50 million led by Glenbrook and then 100 million led by Y Combinator. That was, I believe, July 2021, to December 2021. So crazy period. But yeah.

 

Siddhartha 12:30  

And how has been the growth in the company?  What are the challenges that you faced in growing the company?

 

Aadit 12:35  

So we went from zero rupees in sales to 1000s of crores of annual sales in the span of 16-17 months. So it was a lot to answer your question. But the challenges and growing I think, our thesis on blitz on scaling this fast was, we are in a market that everybody’s interested in, because we’re building out what I feel is the best product in the largest market in the country,  This product format of delivering incredibly quickly, has had much stickier customers a lot more excitement among customers than any other online grocery product that’s come before that. And grocery in general, in the online world has been the biggest unopened question or unsolved question for e-commerce for over a decade now. 

 

So we came in saying there’s gonna be a lot of interest in the space and a lot of the larger players, we need to scale so that we can get a foot in the door very quickly. And so when that became apparent, we realized a couple of things. First, this is a very complex supply chain business. And although Kaivalya and I, with first principles, we’re trying to pick up supply chain theory ourselves, we realize that look, we can bring on board, strong expertise that understands this, and has got, a decade plus of experience in businesses of this type to come in and help us accelerate the learning curve. Because if we’re going to scale quickly, we have to learn faster. And more importantly, we can’t make mistakes. Because if you make a mistake today, and we’re going to be 150x, in 12 months, then that problem is going to be 150x bigger. 

 

And so bringing your board with someone that had that clarity and did not need to go through the same learning journey that Kaivalya and I had to go was imperative. And so we brought on board, the best supply chain folks, we also brought on board, the best marketing folks that we could find, and the best business and category folks that we could find. And that really sped things up. And so that was number one. And number two is once the team was set up Blitzscaling. I think the leadership team could take a step back to make sure that okay, we have seen your folks, they build a team around them, we’re able to start scaling very quickly. Now, because there’s a team that’s been built underneath and is constantly being built, the leadership team can take a step back and focus on all the pieces that are not related to scaling. 

 

So the biggest challenge it’s growing this fast in a business as complex as ours is that you can blow up  if you’re not prudent if you’re not careful, things can go out of hand. And so we took a step back and said, okay, the scaling process is underway. Let’s focus on everything that’s not related to growth. Let’s focus on building the right system so we can optimize the unit economics, let’s focus on building the right controls internally so that we don’t have any serious issues going down the road. Let’s focus on compliance. Because if we’re going to become a company of 1000s of crores wherever a 12 month old company or a 12 year old company will have expectations and compliance. And so there is a format that we took. Let’s bring onboard senior folks that have clarity, can build teams and already understand what needs to be done so that we can avoid making the mistakes that will almost inevitably happen if we try building it first principles. 

 

And once that senior team was in place, we were able to build a team underneath them because they obviously had clarity on what team needed to be built. And that team was able to start Blitzscaling. And then as a leadership team, collectively, we could take a step back and focus on all the controls and guardrails around the scale that we needed to build everything from the right unit economics processes to the right controls and compliance we needed internally. So that we could actually build a company that was not just going to go absolutely crazy, and frankly speaking, that is probably the only reason why we were able to raise $200 million later, in May of 2022, when the NASDAQ was losing a few 100 points a day. It’s only because investors were seeing surprisingly, despite the very heavy investments in growth, they were seeing some pretty solid trends on unit economics emerging quite quickly and matured dark stores trying to hit that profitability point. 

 

And also they saw maturity in the processes and the controls that we built internally. The reason why we’re able to do rounds back to back with pretty esteemed investors, is because our diligence was sorted. We had a good cadence with the right folks, EY did our financial due diligence for the round that we raised mid 2022. So that put us in good stead where even though there were a lot of headwinds in the market, May of 2022, to still pick up $200 million in cash in a world where people were losing term sheets rounds was not getting closed.

 

Siddhartha 16:52  

And right now, how is the business growing month on month? At what rate?

 

Aadit 16:56  

If you’ll forgive me, I’ll refrain from absolute numbers. But we are currently on a year on year basis. We’re not growing in percentage points. We’re growing in multiples. And so we’re feeling pretty good. We’re multiplying year on year. I think currently, this industry is definitely the fastest growing consumer internet industry in the country right now. And you’re benefiting from that. So yeah, I think I like most consumer internet companies from ad tech to FinTech to food delivery, e-commerce ride sharing, cryptocurrencies, everything. Most of them are sort of flatlining and environments like this. We’re growing pretty healthy. And we’re expecting to multiply significantly by the end of this year, given where the growth rate is  now.

 

Siddhartha 17:34  

Do you think there’s an upper market cap in the ceiling like you already touched $1 million in valuation?

 

Aadit 17:40  

So what question looks like, I think crazy is massive, I tell people this all the time. That D-Mart phenomenal company was started before I was born, Obviously with a different business model, different thought process. But wherever the fundamentals are, we both are trying to do different things in the grocery space. And we have a lot of admiration for a company like D-Mart. They started before I was born in May of 2002. In the 2021 years, they’ve built a 30 to $35 billion business fluctuates, but around that and they are less than 10x, our size in sales, and we are growing multiples every year. So we are living in a world where we can conceivably be in a handful of years, the same size as D-Mart, hopefully. And if we do that, to show you on a business, that’s 30 $35 billion, has the potential to be worth 30 to $35 billion. 

 

And so, right now, we’re looking at the ceiling. I think we have barely begun. If anyone can build the largest business on the internet in the country, it will be online grocery. 75% of all consumer white goods spending in this country happens in grocery. So this is the category to build a large business, that’s the biggest advantage we have, it’s a tough business. It requires a lot of discipline, a lot of rigor, it’s low margin, no doubt about that. But if you crack it, you’re sitting on the potential to build one of the largest companies in the country. And so yeah, that’s the way I look at it D-Mart, 21 years old, just a couple of years away from their scale. So that’s a $30 billion dollar company.

 

Siddhartha 19:12  

And right now, the pace you are stealing it, for I see that within three, four years, you should be closer to the sales number 30-35.

 

Aadit 19:20  

They are worth 30-35 billion, but they’re only, 

 

Siddhartha 19:23

Net revenue would be like around 3 billion, I believe. 

 

Aadit 19:26

I believe you. I mean, you know the numbers are off and that’s what we’re hoping for. I mean, I’m saying that there’s a realistic world if we execute well, yeah, we can get obviously if you don’t execute well, we can’t. But I’m quite hopeful that that’s where we can get in. That’s the ambition of the team. And it’s definitely possible. Whether we’re able to, like whether we will do it or someone else will do it time will tell but I can tell you for sure it’s possible in a business and a market like us.

 

Siddhartha 19:48  

And by that scale, you will be the largest internet company in India. 

 

Aadit 19:51  

That’s the ambition, I’m sure the other large companies in India by the time we get there might have grown also, but it’s the ambition. Hopefully we can. I’m sure every entrepreneur that you’ve spoken to in this space has the same ambition that I do. So I don’t think I’m probably unique there. But I feel like we’re in the space that can do it. Like there’s a bit of what grocery. So it’s the, it is the space that where you can build large businesses out of

 

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Siddhartha 20:54  

I think one difference can be can you reach there profitably? And is that even possible? Because no internet business in India that has even gone public in the last year? Nobody’s profitable.

 

Aadit 21:06  

Yeah, it’s a very fair question. Look, I think we found something interesting. Most of the Indian ecosystem for startups was built between 2011-2012 and 2021, that 9-10 year period added in that period,  American interest rates were effectively 0%. And capital was essentially free. And so there was this huge amount of cash flowing into the country. I mean, we saw the amount of unicorns ever created, especially in the last year from 2020 to 2021. It was just mind blowing,  Huge amount of inflow. And what that abnormally long bull market cycle has done, frankly in my mind, is catered to a lot of companies that lack fiscal discipline, because capital was free. But we are one of the only companies in the country right now at our valuation scale, that has been built predominantly in a bear market. Most companies have spent four or five years in a bull market, and only this year in a bear market or the previous year 2022. And so we’ve actually spent most of our lifecycle in a bear market. And that’s given us a bit of a different DNA.

 

 I think we’ve got a lot more maturity of processes and governance than most companies do at this stage. I think we’re in a position where if you look at our unit economics you should be quite surprised. And that’s one thing that I could do to bank on. And frankly for me, looking at where we are right now, we’re sitting in a world where a mature dark store is a fully loaded, turning fully loaded, cash flow positive, without exaggeration, I know there is a lot of creativity in what’s above and below those numbers, can I remove my replenishment costs, can I put customer support costs in corporate, you can do all that Excel arrangement. But today, we’re in a position where fully loaded, looking at all the line items we have, we’re actually turning dark stores fully profitable. And not in the future, nine months, not like this quarter. And while that’s happening, we’re also realizing that that’s happening faster than supermarkets turn profitable in India, you look at Nielsen’s data, the average time it takes for a D-mart, Reliance fresh, more retail, Spencer’s retail, etc. All companies, we have a lot of respect for, take 18 to 24 months to turn a new supermarket profitable, we’re doing that sooner than 18 months. And so that’s our first batch, we expect that timeline to get shorter and shorter in the future as our playbooks get tighter and tighter. 

 

And so sitting in a world where we are one of the fastest growing consumer internet companies in the country, we are turning our dark stores profitable, faster than supermarkets. Sure it’s a different business, we have a different model. So different ways of generating revenue and sales. But yeah, I mean, fundamentally, I’m looking at the signs as a very early company, I could not be more bullish on where the long term prospects of profitability lie. And to me, if I see stores generating cash, that to me is just a function, okay, I now need to get all my young stores to that same level. And I’ll be golden. And so it’s obviously a function of how much we want to grow as well. If we keep investing in new markets, there will always obviously be an investment cost to that. 

 

So I don’t want to leave you with the impression that we are 9-12 months away from getting to fully loaded business profitability. But if I be honest with you, if we stop growing, stop launching new markets, which we will not do, but if we did that, we would have a clear roadmap to getting to cash flow breakeven as an overall business,  within a reasonable timeframe, not three years, five years, but within a year, maximum year and a half. I feel fairly good about that. 

 

Siddhartha 24:23

And in how many cities are there right now? 

 

Aadit  24:24

Every major city in the country Mumbai, Bangalore, Delhi, Hyderabad, Chennai, Pune, Kolkata, Noida, Gurgaon, Ghaziabad, then we’re scoping out a couple more. 

 

Siddhartha 24:32

And you would have touched 1000 in dark stores numbers?

 

Aadit 24:34

No, we don’t have 1000 dark stores, but we’re a few 100 right now.

 

Siddhartha 24:38  

India never expected. So I would put you in the same category as Mark Zuckerberg of India because he was 19 when he started building Facebook, and it is a different domain  America’s internet first company India is a very hardcore infra company. That country is like the New Age entrepreneur creating bits.

 

Aadit 25:00  

I think it’s a very flattering comparison. I think we’ve got an extremely long way to go before we’re even in the same zip code in my mind. To be honest with you, I don’t operate with the mentality that we’ve succeeded. I think that’s what Kaivalya and I wake up every morning knowing that if we make the right decisions, we’re sitting on that D-mart level outcome of building a $30-40 billion company. And if you make the wrong decisions, we won’t build a valuable, meaningful company. And so I don’t think we’re there yet where we can really be in a position where we are compared to serious levels of success, like Mark Zuckerberg, a long way to go for us for sure. And hopefully, in a couple of years, we might feel better, but until then, I can tell you in good faith that we’ve built an enduring institution that’s created value for shareholders that is sustainable until that point. I was so mean, with the mentality that we have a long way to go.

 

Siddhartha  25:49  

So I assume, Not everything would be a tailwind in your business. What are the challenges that you’re facing on a daily basis?

 

Aadit 25:57  

There are tons of headwinds, no doubt about it. So when I look at the fundamentals, I honestly might be surprised, but I don’t see as many headwinds as, as our friends in the media would like people to believe, but also key headwinds. I think my thought process right now is how do we,  off the bat, obviously, there is a dearth of capital available for any high growth consumer internet company. And so that doesn’t affect our ability to sustain and run day to day. But it does mean, we have to be more conservative with our plans today, when I look at our business right now. And I look at the potential to grow and not just grow, but also drive scale economics that will improve our overall p&l. But more scale for us, also gives us better utilization of fixed costs and the assets that we have. And it also helps us drive you to a better variable cost with higher throughput. 

 

So I see a lot of potential to grow more to drive better operating leverage from our fixed costs. But obviously we can’t do that, we have to be conservative in a market like this. So that’s the biggest challenge where there are lots of opportunities for us that I would like to realize today. But I suppose we’ll have to wait for a while to be able to realize that which is fine. That’s life in the big city. But definitely, I think for us, as things stand right now, we’re operating in the model where we’re gonna be fine in this downtown. But hopefully, things continue to go well, but we could do a huge amount more, there’s a lot more potential that we are waiting to unlock. And so,  when capital becomes available, we’ll be great to unlock that value. But frankly, speaking,  for the next couple of months, I don’t see the need or the requirements to raise capital, especially in a situation where we will just be pushed back on rationing. 

 

So the good news is that we’ve divided enough operating leverage that we don’t really need capital. But could we use capital to grow? Absolutely. Will we raise capital at some point? Yes. Should it be today? Do we need it today? Not really. So let’s wait a couple of months, or maybe even longer than that. So yeah, that’s currently my thought process and the biggest headwind, that’s not just facing our business, but I’m sure it’s facing a lot of good internet companies.

 

Siddhartha 28:03  

And it’s a fair point. And in the US, and the US is the largest market for capital, a large investor could get a public company at 400 500 million valuation the entire company, we’re just doing a 200 mil revenue. So where does the new capital come from?

 

Aadit 28:17  

Yeah, that’s a good question. I mean, I don’t know the answer to the wetness of new capital coming from our business. Like we have to just be more efficient, and save more money, drive better operating, leverage, and take the capital that you’ve saved and then invested back into the business. So right now, in this market, the best source of capital is the capital that you’re able to drive from the mechanics of your business. And I think you’ve done a reasonable job of that so far. But can we be better? We absolutely and will be improved. No doubt about it in my mind, quarter by quarter.

 

Siddhartha 28:44  

I think that’s the first very large milestone for you to be hitting the first 100 mil ARR. On the net revenue in the business, not that GMV. But the net revenue in the business. 

 

Aadit 28:57  

I think we crossed that milestone a while ago. That was a while ago. But I think, obviously, that doesn’t mean that that net revenue is generating cash for us in the bottom bottom line. But I think we’re in that territory for some time.

 

Siddhartha 29:08  

And do you feel like D-mart went public really early on? Because see, I have a fundamental belief that startups in India shouldn’t go public with a $10 billion valuation, because retail investors don’t buy that story. D-mart went public really early on, it made retail investors a tonne of money. What is happening was, especially last year, and I being a VC myself, no offense against other VCs, but VCs are trying to capture the maximum value in a company. So companies got listed at a $20 billion valuation, 10 billion valuation and you being an Indian company, are listening of course, it’s not an exit strategy, but it’s a checkmark of the next phase of maturity in our company. So I think a company in India can’t go public at $10 billion in valuation.

 

Aadit 29:53  

I agree. I think for some reason, in my mind, we treat technology companies differently from legacy companies in India and there is this subconscious disdain for the old Indian flag bearers.  they are too traditional, they were not progressive enough. The reality is that a lot of them did well, yeah. And they build businesses with the right principles, like today we’re sitting opposite the Larsen & Toubro office, which is in my mind, one of the best managed companies in this space, not just in India, but in the world for the space they operate in. And then you’ve got folks like D-Mart that not only build a business with the  principles, but decided that your value creation can happen in public markets and my culture, retail shareholders sharing that value. 

 

And so for me, I don’t know why you can’t build a technology company with the same principles, obviously, capital operating with a high growth mentality, being venture backed, no issues with that at all. But fundamentally, the principles are the same, whether you’re a bootstrap company, a venture backed company, or something in between. So for me, I look at our business, if we are lucky enough to build a business that has got the quality to go public, which I think we are doing, but if we do, I will try my best to do it in a way where we can accrue value as a public company. While as a private company. So that’s my thought process.

 

Siddhartha 31:10  

What I was just trying to say is that D-Mart also went public with around a 3 billion kind of valuation, where it made today 10x For the retail investor. 

 

Aadit 31:17  

Yeah, and I don’t see why Zepto and other internet companies can’t do the same. I agree with you. Okay. You don’t have to go public at the end.

 

Siddhartha 31:24  

At a 30 billion valuation.

 

Aadit 31:26  

I mean, issues of their own. Obviously, I can’t comment on power, the folks have decided their strategies, maybe for some companies, 20 billion is the beginning and they’re gonna go to $200 billion. But yeah, I mean, what I can comment on is, on my end, I agree with your thought process, like why wait until we are at a very large scale to go public and then have that constant fight with retail shareholders, it’s to build a business that can accrue value publicly.

 

Siddhartha 31:51  

And if we see from our point of view of the institution, today, Hindustan Unilever is valued at 70 billion. Titan would be valued somewhere in that range, 60 to 70 billion, and they would be doing like six to $7 billion of revenue each. And as these groups started to scale, they built different sets of companies. Tata has like 30-40 different public companies. As of today, I think like the same path for Zepto in the future where if you’re building like, one institution in one category.

 

Aadit  32:19  

That’s definitely objective. No entrepreneur will say no to that. It’s such a hard journey, I think  now, like, it’s not even a five year journey, it’s a 30 year journey, 40 year journey. So it’s definitely something that any entrepreneur would want to do with the company they’re building. Hopefully, we can do it indoors as well. But I think in the next 5-10 years, building at one of the companies, which is a high quality online grocery company, that’s really disrupting the way people buy the most bought item in India, which is groceries. That I think is an exciting enough story in itself, but absolutely, like commitment building an institution beyond that, once we get there, five years from now, I’ll be talking to you saying, we’re a highly profitable public company in grocery, what’s next? But for now, I know what’s next is first getting to that level.

 

Siddhartha 33:05  

But do you really feel proud that among your peers who are doing jobs, you have built a billion dollar business at 21-22 years of age?

 

Aadit 33:13  

Yeah, so wish I was 21. I’m not not there yet. 

 

Siddhartha 33:17

You’re 20? 

 

Aadit 33:19

Yeah, but I don’t really I don’t really dwell on that, each to their own journeys, I think for, again, for me, I’ll be able to tell you with a lot more confidence that hey, we really, really made it once you have that enduring company. And the good news in my mind, what gets me excited is that I think we’re moving in the  direction with such a long way to go. But we’re definitely moving in the  direction. Will we get there? I’m very confident that we will. But until then, I can’t tell you with good faith that we are smashing successes, there’s a long long way for us to go. But we’re doing it. I think we’ll get there.

 

Siddhartha 33:46

Red is your favorite color? I’ve always seen you in red.

 

Aadit 33:47

It’s cherry pink. Zepto, the Z in Zepto, it’s Cherry pink, that’s my favorite color. I can’t wear a cherry pink shirt. But I would like to.

 

Siddhartha 33:58  

And what’s besides Zepto that keeps you occupied? Where do you learn from besides the business?

 

Aadit 34:05  

To be honest, 99% of my learning comes from business, And it comes from what I’ve been lucky to surround myself with some very solid leaders that are much more directional than I am and learn from the leaders we have internally and learn from the investors that we have externally. That’s where 90% plus of my learning comes from, and also the rest of the ecosystem,  founders and entrepreneurs and investors that have been part of some really sustainable value creation journeys. I try to surround myself with those folks. So the folks that haven’t done that, , I think the mentality that I’m trying to instill and in myself and instill in other folks is one of building a really high quality company that’s well managed,

 

Siddhartha 34:41  

And what’s the milestone for you for 2023 that you want to achieve? 

 

Aadit 34:45  

Yeah, we’re hoping we can hit a billion in annualized sales by q3, q4, 2023. It’s gonna be tough, but if you can do it, nothing like it.

 

Siddhartha 34:51  

And right now, what’s the priority that you’ll see from the market point of view, what are your investors telling you? Profitability is the key?

 

Aadit 34:57  

Yeah, absolutely. I mean, profitability is key. I think honestly, we don’t operate in a manner where investors ever tell us that I think we’ve been doing that. Believe it or not, even before the whole world, the capital markets became tough. We were talking about that, give us credit that even in 2021, we built very deep dashboards for unit economics and built pathways to improve it. And that pays dividends coming 2022 And now 2023, where our base was quite solid. So unless you’re talking about profitability, we’re also talking about profitability. 

 

So it’s about a mixture of profitability and growth. I think the way that I look at it is that growth and profitability are not at odds with each other. If you want to really build a good company like D-Mart, you have to be generating 1000s of crores of free cash flow and doing it while growing at D-mart scale, 30- 40% year on year, which is great. So yeah, that’s the way that I look at it. They have built notice of them, but like most high quality companies grow and are profitable at the same time. So why can’t we do the same thing?

 

Siddhartha 35:56  

And for you personally, you would have changed a lot since starting. What are the changes that you feel in yourself as a person,

 

Aadit 36:02  

I’ve had to become a lot more mature, I’ve had to behave a lot more like a 45 year old than a 20 year old. That’s cool. I think it’s good. Obviously, that accelerated learning curve over the past year, year and a half, I think I’ve got 20 years of work x in one year, to be very frank with you. So that’s the biggest change, just the huge evolution that I’ve had to do personally. And as a leader, that’s been crazy. I mean, it’s just made me a better founder.

 

Siddhartha 36:27  

Did you anytime during the business face anything from internally or externally? Hey, I have more gray hair. So let my decision overrule a 20 year old’s decision.

 

Aadit 36:37  

So not really, I mean, I think both the investors we have in the leadership team have everybody’s very market oriented. But I think that’s the one thing that you find about our culture is that we’re very objective, we have a lot of attention to detail. And we are obsessed with meritocracy. And so it is never Hey, my ideas are better than yours, because I’m gonna have two decades of work experience or my ideas are better than yours. Because I’m a very senior investor. It’s always very objective to lash out our perspectives. We debate with whoever’s objectively going in the  direction of the company. That’s what we ended up going for. And so I think what I really respect about my leadership team is that they’ve had the maturity to put aside, let’s say, an age difference, maybe some of them are twice my age, more than twice my age. 

 

And so they’ve had the maturity to put aside age differences, and really just focus on substance and say that, what’s the substance of what we’re discussing? And here not a lot of the time either this , and a lot of the time I’m , and we have a good relationship that way. So yeah, we’ve tried to keep it objective, rational and merit oriented. And that makes decisions a lot more productive. I think once you start getting into why, and your why discussion is defeated. 

 

Siddhartha 37:45  

Historically, we have seen when a company scale starts for the cube, do 150 x in a year. Culture is the first thing that takes a hit. How did you avoid that?

 

Aadit 37:54  

It’s a great question. I think it’s a work in progress. Our business by nature requires certain qualities to be successful, that is attention to detail, rigor, governance, discipline, intensity, also to go through that. So I think, everything that the business requires, and to get to this level in the first place, is ingrained in our company. Like if you come into a company, I think, we’ve got some of the hardest working folks in corporate India and might genuinely and I don’t see that as like a loose comment, I frankly, believe you’d be hard pressed to find a company with people that are as hardworking as the folks that we have. And so I am truly grateful that that value has been embedded. I think there are other values, attention to detail and rigor and discipline that come because we know the kind of business that we’re building. And we’ve been clear about it since day one, that we’re not building like a 70% Gross Margin SaaS company, we’re building something that’s going to be a lot more challenging and nuanced, but can be a lot bigger. 

 

But with that in mind, these guys have got those qualities embedded. I think for us, we’re working on the other values as well that are important to us. But some of the core values have been instilled just purely as a function of what’s been needed, what people have been having pushed on. And also because we’ve taken our time to really hire, and although we grew fast, we never compromise on the quality of folks we brought on board. So yeah, we never put ourselves in a position where we hired someone because it is easy and convenient. And we needed someone in the short term, even if that person was not worth it or did not meet our standards. And so that was painful in the short term. A lot of issues were created but today we’ve better officers. But can I tell you that we’re absolutely done in our culture building process a lot. It’s definitely a BOIP.

 

Siddhartha 39:28  

How big is a team right now?

 

Aadit 39:29  

for 1300, folks.

 

Siddhartha 39:31  

And it must be another crazy journey for you, taking so many interviews in a span of a year?

 

Aadit 39:35  

I still take one to two interviews a day, even today. 

 

Siddhartha 39:40

And at its peak, it would have been like five to six interviews a day? 

 

Aadit 39:42

I mean, at the beginning of Zepto. I had interviews starting at 8:30am and ending at 11:30pm. When we first interviewed my current chief marketing officer. I spoke to him at I think midnight on Saturday, 12-1, something like that, or 11 to 12 or 12 to 1, but it went on way beyond midnight. So those are the early days now obviously a lot more to do than just hire. But yeah, absolutely. I’ve had days without exaggeration, 13-14 hours of interviews, minimum.

 

Siddhartha 40:11  

And where did this ambition come from to build a very large institution, because I see you don’t come from a very large business family. And at Stanford, you would have seen many multiples of businesses that are getting built, you could have chosen to stay there. But right now you are building and you pivoted many times during your initial journey.

 

Aadit 40:32  

Yeah, I mean, I think honestly, speaking, the idea was never to build a business. We’re just in love with this product. And when we realized how big this product could be, we felt that  to do this product justice, something Kaivalya and I believe in personally, and we’re very excited about, we had to take it to the big leagues, that means building a big business. But if you zoom in fundamentally, what’s the ambition in doing this? I love this product so much. I use it probably twice a day, or probably, like without exaggeration, twice a day. And I mean, it’s something that I feel as many people as possible should experience, because it’s really a game changer. And in that ambition of bringing it to as many people as I can, I have to build a good business.

 

Siddhartha 41:10  

Thank you so much. Loved hosting you on the podcast. 

 

Aadit 41:13  

Wonderful being here. And again, it’s good to have conversations that are oriented towards value creation in a meaningful way. So, thanks again.

 

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