Leading domestic mutual funds are pushing back against Zepto's proposed IPO valuation of $4-5 billion, demanding a 30-40% reduction. The quick commerce startup is now scrambling to secure investor support ahead of its planned launch.
TL;DR
- Zepto's IPO valuation faces resistance from top mutual funds, who seek a 30-40% cut.
- Private equity firms are shifting investments from IT services to AI-native startups.
- AI-native companies accounted for 59% of software and AI deal value in H1 2026.
What happened
Top domestic mutual funds are unwilling to invest in Zepto's IPO at the company's sought valuation of $4-5 billion, according to sources familiar with the matter. These investors are pushing for a 30-40% reduction in the valuation.
Zepto has already lowered its IPO valuation expectations from its peak of $7 billion in October 2025, when it raised $450 million from US pension fund Calpers. The company is now targeting an IPO launch within the next two weeks and hopes to wrap up discussions with asset managers by Tuesday.
Private equity firms are redrawing their tech investment strategies, shifting capital from traditional IT services and software companies to AI-native startups. This shift is driven by the increasing adoption of AI, which is pushing down valuations in legacy software and IT services.
Kedaara Capital plans to invest $30-40 million in healthcare AI startup RapidClaims at a valuation of $150-160 million. Additionally, EQT Partners is in talks to invest $100-120 million in enterprise AI integration startup UnifyApps. Other funds, such as Creaegis and A91 Partners, have also invested in AI startups like Emergent and Deccan AI.
Why it matters
For developers and startups, this news highlights the increasing importance of AI-native technologies and the shifting investment landscape. The demand for AI solutions with strong data, workflows, and profitability potential is growing, making it a prime area for innovation and investment.
Investors should take note of the strategic shift in private equity towards AI-native startups. This trend indicates a broader market recognition of the value and potential of AI-driven businesses, which could lead to increased funding opportunities for AI startups.
The competitive angle for AI startups is clear: those with strong data, workflows, and proprietary technologies are likely to attract more investment. This trend could drive further innovation and growth in the AI sector, as startups strive to differentiate themselves and capture investor attention.
Key facts
- Zepto's proposed IPO valuation: $4-5 billion (down from $7 billion peak).
- Mutual funds seeking a 30-40% reduction in Zepto's IPO valuation.
- Zepto's planned IPO launch: within the next two weeks.
- Kedaara Capital's investment in RapidClaims: $30-40 million at a $150-160 million valuation.
- EQT Partners' potential investment in UnifyApps: $100-120 million.
- AI-native companies accounted for 59% of software and AI deal value in H1 2026, up from 19% a year earlier.
- Deal value involving non-AI software companies fell about 40% over the same period.
Context
The resistance to Zepto's IPO valuation reflects broader market dynamics, where investors are becoming more selective and demanding better terms. This trend is not limited to the AI sector but is a reflection of the current economic climate and investor sentiment.
The shift in private equity investments towards AI-native startups is part of a broader industry recognition of the transformative potential of AI. As AI technologies continue to evolve and mature, they are increasingly seen as key drivers of growth and innovation across various sectors.
For the AI industry, this news underscores the importance of developing solutions that address real business problems and create durable competitive advantages. Startups that can demonstrate strong data, workflows, and profitability potential are likely to attract more investment and achieve greater success in the market.
