Less than two months after raising a $665 million pre-IPO funding round, quick commerce startup Zepto has raised its valuation to $5 billion with a $340 million follow-on financing led by US-based venture capital firm General Catalyst. New investors Dragon Fund and Epic Capital joined the round, while existing investors Stepstone, Lightspeed, DST and Contrari increased their stakes.

The Mumbai-based company is on course to secure some of its biggest funding rounds so far this year as it reshapes India's e-commerce sector, prompting giants including Walmart-backed Flipkart and Tata's BigBasket to move into instant deliveries. The new round will enable the firm to strengthen its balance sheet while poised to deliver “strong growth and operational excellence”, according to Zepto's founder and chief executive officer Adit Palicha.

“While these recent fundings reflect strong confidence in SEPTO's performance to date, we recognize that we still have a lot of execution ahead of us to fulfill our ambition of building a world-class Internet company from India. At Zepto, we truly feel that we are at the beginning of our journey,” Palicha said.

The deal is one of the first investments by General Catalysts after acquiring Venture Highway. In June, it was reported that the merged entity plans to invest between $500 million and $1 billion in early growth stage investments in the country. Zepto, which is preparing for a public market listing next year, achieved unicorn status a year ago when it raised $200 million at a valuation of $1.4 billion.

According to consulting firm RedSeer, India's quick-commerce market is set to grow by 77% to $2.8 billion in gross merchandise value (GMV) by 2023. GMV, a key metric in e-commerce, tracks the total value of all goods sold on a platform, excluding discounts and other costs. ZEPTO was founded in April 2021 by Paalitha and Kaivalya Vohra. The four-year-old startup is gearing up for an initial public offering of its shares next year, aiming for a multibillion-dollar listing..