Ali Hasan
Introduction of The Success Story of B2B Startup Udaan
Udaan is a B2B trade platform that brings manufacturers, traders, retailers, and wholesalers into a single platform. The platform is about making business easy in India by making B2B commerce convenient and efficient.
How Udaan helps Small Business Owners
They believe B2B is the new B2C in India. It connects retailers with wholesalers and traders who sell more than 15 lakh products ranging across categories from electronics and apparel to grocery and fresh produce.
Udaan also has a chat feature that allows you to have a personal and secure conversation in real-time, in the language of your choice. It enables a direct connection between buyers & sellers which allows one-on-one discussions to negotiate terms of trade between transacting parties.
India has more than 50 million SME (Small & Medium Enterprises), who form the core of the Indian economy and society. They are the entrepreneurial pulse of India. Udaan believes the internet is a great equalizing platform for these small business owners.
They want to bring their energies together in bringing the power of the Internet to these millions of entrepreneurs. Udaan was founded in 2016 by ex-Flipkart executives Sujeet Kumar, Amod Malviya & Vaibhav Gupta and is headquartered in Bangalore, India.
Today we will know how Udaan is actually making a difference in the lives of small businesses. But first, we will give you a little background.
How Udaan start?
The 3 co-founders left their jobs at Flipkart and decided to start something. They deiced to pursue a business venture which met 3 criteria which were as follows:-
- It has to impact a lot of people.
- It should be a venture where technology can play a disruptive role.
- It should help India in a unique way.
Hence, they started Udaan. They knew that the B2C segment has been saturated by Amazon and Flipkart and there’s nothing much that they can do in terms of competing against the big boys. When they researched why small & medium businesses aren’t growing, they knew what to do.
They found many reasons for the slow and sluggish growth which were as follows:-
- Lack of Funds
- Lack of Knowledge
- Lack of Distribution System
- Lack of Satisfactory Pricing
They immediately knew that there was a huge opportunity to capture the market. Their main focus was in tier 2 and tier 3 cities where many business owners don’t use technology or are lacking funds, knowledge, or distribution system to grow their business.
They began developing their own distribution network and logistics services in order to facilitate the transportation of goods. The available logistics services were capable of delivering packages that were small in size and were light-weighted but since this time, business owners were involved, their packages were quite big and heavy.
The Promoters of the company also found that financing working capital has been a major headache for end retailers. The retailers end up borrowing from local lenders who charge exorbitantly.
They intend to provide working capital (funds) to them at a reasonable rate. So, apart from being a platform for retailers and wholesalers, it has also started underwriting loans for these small businesses. It has also received a non-banking financial company (NBFC) license to provide finances to SMEs.
Initially, they don’t intend to make money through providing funds for working capital for their buyers so they don’t charge any interest on the credit.
Marketing Strategy of Udaan
Pankaj Tripathi has been the brand ambassador of Udaan and is frequently seen in their ads as Dimple Bhaiya who is attracting a lot of customers to his shop and is enjoying huge margins of profits by ordering from the Udaan app.
In these ads, they try to position themselves as an effective and easy solution for business owners where they will get quality products without any hassle. They also try to convince the business owners that they won’t be scammed and their money is safe.
To sum it up, Udaan wants to change the mindset of small business owners and make them more digitally oriented where the business owners will be encouraged to use the internet to increase their business much fold.
UserBase & Valuation
Udaan’s app on the Google play store has more than 5 million downloads. Udaan has 3 million retailers across 900 cities and connects them to 25,000 sellers across 200 cities.
As a startup, Udaan’s journey has been quite successful in terms of achieving the valuation of $1 billion as it became a unicorn in just 26 months after starting the business. It’s also one of the fastest-growing startups in India.
In 2019, they had a valuation of $2.8 billion after they received a funding of $585 million. In 2020, they valued themselves at a whopping $7.5 billion and thus became the 4th highest valued Indian startup. Now they are only behind:-
- Paytm ($16 billion),
- Oyo ($10 billion) &
- Byju’s ($8 billion).
Funding of Udaan
Udaan has raised a total of $900 million in funding over 5 rounds. Their latest funding was raised on March 23, 2020. They have a total of 11 investors, 10 of which are Lead Investors.
The investors are as follows:-
- Trustroot Internet
- Altimeter Capital
- Citi Ventures
- DST Global
- Footpath Ventures
- GGV Capital
- Hillhouse Capital Group
- Tencent Holdings
- Lightspeed Venture Partners
Revenues & Losses
Udaan’s revenue works on the 15% — 18% commission that it charges from the buyers for funding their purchase.
Udaan spent Rs 849 crores to gain ground in the Indian market and ended up making a loss of around Rs 779.5 crores. This shows that the cash-burn rate is quite high for them.
They recorded a 14.3X jump in operating revenues to Rs 46.36 crores during FY19 as compared to Rs 3.24 crores in FY18. Around 60% of Udaan’s earnings were generated through the delivery income of Rs 27.7 crores, which grew 12X from the Rs 2.3 crores it made in FY18.
It generated an interest income of Rs 5 crores on loans and advances given and another Rs 11 crores on bank deposits.
Acquisitions & Partnerships
Udaan has invested $1.9 million into restaurant management and food delivery platform Petpooja on February 10, 2020, to incorporate the startup’s data on fresh food supplies into Udaan’s business.
Controversies
So far, there hasn’t been any major controversy in Udaan but during the Covid-19 pandemic, they had to lay off more than 2,000 contractual employees across different business roles such as Sales, Marketing, Operations, and Credit Collection, stated by 4 employees.
Present Conditions & Future Goals – As of 2020, Udaan is catering to various segments such as:-
- Mobile & Electronics
- IT & Computers
- Staple
- Food
- FMCG
- Clothing
- Footwear
- Home & Kitchen
In the future, they will keep pursuing business in these categories and expand into new categories as well.
Conclusions – So far, Udaan’s journey has been amazing. The secret sauce for their success was the strong founders’ team. They were best at what they did in Flipkart and were appreciated for it. When other Flipkart employees got to know about the birth of the startup, they also quit their jobs and extended their support with the founder’s trio.
So on Day 1 the work productivity, was at its best which most of the companies lack due to experience in the field. But they already knew the execution. The only thing to be done was the workflow of executing it in smaller towns.
They are equipped with everything that makes a startup successful such as:-
- Capable Co-Founders
- Strong Team
- Value Creation to millions of people
- Adequate Funding
- Increasing Revenues
From providing credit to logistics, Udaan has played a key role in making India digital by helping millions of small business owners to adopt technology in daily business transactions.
We wish all the best for their future and hope one day each & every business owner will play a major role in contributing to the economy of the country. India will truly become a superpower when all the business owners are empowered and educated.
