😯The Unheard Zepto Founder Feud
Zepto has been making headlines due to its young founders and its soonicorn status. But this glamorous story has more to it than meets the eye.
The story of Zepto is a fascinating one.
It is the story of a 10-min grocery delivery startup that sprung out of nowhere and became a soonicorn ($900mn valuation) in just a year.
It is the story of two 19-year-old Stanford dropouts who made it to the Rs. 1,000 crore club.
But, this is the side of the story that sells. The story with all the glamour and fame.
Today, we will look at the other side of the so-called success story of Zepto: a story that involves a third co-founder, an unheard name.
Sit tight, and ReadOn!
👀 The Absent Co-founder
It all started before Zepto became Zepto.
Zepto was originally KiranaKart, a B2B2C logistics company digitising kiranas by allowing customers to place orders through its app. Kiranakart got selected by Y Combinator (YC) in November 2020.
Enter Ansh Nanda, allegedly the third co-founder.
Nanda had sent an application to YC for his own startup. To prepare for his interview, he contacted other founders that were selected by YC in the past. That’s how he came across Palicha and Vohra. But Nanda’s application was rejected in 2020.
He did not give up. He prepared for a second attempt and contacted the two boys again.
Now, Palicha and Vohra saw an opportunity here: they discouraged Nanda from applying again, and instead offered him to join Kiranakart.
What would Nanda get in return? 20% stake and the title of co-founder.
He agreed.
He signed an ‘informal’ contract with these terms on January 16, 2021.
The contract would make Nanda co-founder if Nanda continued with the company after March 10, 2021.
In this time period, Jan-March, Nanda gave all he had: he claims that he handled the entire tech and product development. He even set up meetings for KiranaKart with Nature's Basket.
As the March deadline approached, the company became better. It had better features, better connections, and better investment potential.
This is when things drastically changed: KiranaKart was approached by Nexus Venture Partners.
Nexus wanted a 20% stake in the company for a $60 mn investment. At a time when the startup was only making Rs. 14 lakhs per month (300 orders per day)!
But apparently, this investment came at the cost of Nanda’s equity.
Nanda claims that weeks after the offer came, the VC and the two 19-year-old founders no longer wanted him as a co-founder.
They wanted to keep him only as an employee without any equity.
To ensure that he would comply, he was threatened and forced to sign documents claiming he was giving up his equity.
In August 2021, Nanda filed an FIR against Aadit Valicha, Kaivalya Vohra, and some other VCs.
The timing was right. KiranaKart had become Zepto, Nexus was ready to publicly invest.
The FIR shook the deal. Both sides hired expensive lawyers and took the matter to court. Zepto’s team even had Kapil Sibal as a lawyer.
But in just 3 months, this matter was resolved out of court. How?
Undisclosed.
It is also unclear how valid Nanda’s claims were.
Was the case settled to silence Nanda? Or did they want to ensure hassle-free further funding rounds?
These are unanswered questions.
But our key takeaways from this situation are:
Proper contracts need to be signed when you're launching a startup. The startup world runs on technical nitty-gritties as much as it runs on trust.
VC money will come with terms and conditions and a lot of pressure.
Now, we don't really know who was at fault in this situation but Zepto does seem a little sketchy.
🔍 A Closer Look At Zepto’s Business
The 19-year-old celebrated entrepreneurs seem to have almost no stake in the company:
Both their fathers have more stake than them.
It looks like the founders will have almost no equity left after further funding rounds.
But this wasn’t the equity structure initially. It looked much different in November 2021:
So, there could be two possibilities:
The equity of the fathers of the two founders wasn’t disclosed
The equity was transferred to them later.
No matter who’s running the show, Zepto seems to be doing well. It is one of the only quick-commerce services out there (apart from Blinkit) that actually delivers in 10 minutes.
It also offers the second-best discounts (according to a customer survey) and has the best customer service.
The financials, however, seem troubling. Profitability in the near-term is almost impossible and EBITDA margin for FY22 was -259.39%.
Profitability will only be achievable if they reduce discounts and if more people pay for deliveries.
Interestingly, only 3% of people are willing to pay a delivery fee for deliveries under 30 minutes.
Is Zepto’s business model even sustainable in the long run?
More importantly, do the founders have what it takes to thrive in the startup world? Or are they here just for fame and name?
This brings to light a dark reality of the startup world: story sells, and in some cases, stories can also mis-sell. Why did YC back them initially if they had no tech experience (as claimed by Nanda)? Were they also impressed just by the story?
Are these founders just puppets for someone else with deep pockets running the show?
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