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Recently, India received one of the biggest boosts to its startups – as many companies including Swiggy, Zomato, PayTm, Policy Bazaar, OLA, and even Cure Fit – catapulting many of these tech giants into the coveted unicorn club. Honestly though, we’re not even surprised. With the quality of startups and the amount of talent in India, investors are beginning to realize the potential that the country has yet to offer. Udaan is perhaps the only exception. The company is currently valued at 2.3 billion USD, and is the fastest Indian startup to have reached that stage.
Udaan began its journey just recently, in 2016, making it the fastest Indian startup becoming a unicorn after securing $225 million USD from investor companies DST Global and Lightspeed Venture Partners. The Bengaluru-based startup left every single media platform surprised, given the fact that it had made very little noise before then. And because not a lot of people know about Udaan, we thought this might be a great opportunity to get the readers acquainted with the company, how it operates, and most importantly, how Udaan makes money, to the point that it got valued at $2.3 billion USD in just four years. Let’s take a look.
About Udaan : How does udaan work ?
At its core, Udaan is a B2B trading and marketplace, designed for the empowerment of small scale and medium scale businesses, and bringing in more retailers, wholesalers, traders and manufacturers through the power of technology. The company is run by Hive Loop Technology Pvt. Ltd, and is based in Bangalore. It was founded by the former Flipkart employee Amod Malviya, along with friends and partners Sujeet Kumar and Vaibhav Gupta. The trio worked magic into the company, taking it from zero to one billion USD in just 26 months. The need for such a platform in the market was just too big, and Udaan filled that need.
Udaan was brought into reality with a simple goal in mind – to connect many wholesalers, traders and retailers and even manufacturers and help them get their trades going through a single platform. Both the Udaan website and app allow you to access a lot of insights into product distributions and handling, along with a lot of premium B2B trade features. With an enormous network that seems to be growing almost every single day and has no idea of stopping anytime soon, Udaan is a great idea woven into the perfect business model to bring in entrepreneurs and rake profits for the company. We’ll get more into how Udaan operates in a minute, but before that, let’s take a look at the Indian giants first steps into uncharted territory.
How Udaan Started: The Initial Days
Way before Udaan came into the limelight as the fastest growing unicorn in India, Amod Malviya and his partners had a much smaller goal in mind. The company was initially started only as a logistics platform for small buyers as well as sellers in electronic appliances and apparels.
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Udaan focussed on growing its logistics for around 8 to 10 months before realizing the amount of need in the market for such a platform. It then got a lot of exposure within the country because of the government’s support in encouraging the rise of startups and small and medium scale businesses. What started off as a logistics platform soon developed into a lending business to financially support startups and traders. It is now trying to build a fully stacked platform for the mid-sized as well as small enterprises which will provide a combination of marketplace, logistics and lending. But how exactly does Udaan make money from this? The answer is simpler than one might think.
Also Read – How Swiggy makes money?
Revenue Model Of Udaan : How does udaan make money?
Explaining Udaan’s business model is quite simple – it is a business-to-business marketplace which provides manufacturers and wholesalers with an opportunity to sell products to retailers through an online platform or even a mobile app. The company also provides logistics, and a secure way to process payments. It even provides great technical support.
Assets
If we were to judge them on their business model, Udaan might be considered an “asset-light” player – meaning that the company doesn’t carry many assets – and it seems they are not planning to go asset-heavy for the time being.
App Portal
The Udaan mobile app provides business owners to discover customers as well as suppliers and products, through a wide range of categories, which helps them connect and inquire about wholesale deals and the best offers. It connects to over 150000 traders retailers wholesalers daily across India. Everything from electronic appliances and hardware components to fresh fruits and vegetables, office supplies, fashion accessories, apparel for both men and women and FMCGs are all available at the tap of a button.
A lot of positive reviews have started flooding in for the B2B E-Commerce platform because of various elements such as a smoother interface, greater acceptance of digital payments, and even a uniform taxation system through the Goods and Services Tax (GST). And AI and Machine Learning to provide each customer with their unique experience on the app only makes the customers feel more at ease.
Capital Lending
Udaan has also started offering accounting, order management and payment management solutions to all the merchants on its platform. Financing the working capital was a major headache for end retailers, resulting in them ending up borrowing from local lenders who charge a lot more than they could actually operate with. Udaan realized this problem, and started a lending scheme for helping such people. The company has always intended to provide working capital funds to the people on their platform at a reasonable price. They have been underwriting loans for small businesses apart from only being a platform for the retailers and wholesalers for a while now. Udaan also got licensed by a non-banking financial company to be able to provide finances to a lot of SMEs.
Regarding the loan amounts, initially, a sum of INR 10000 will be provided with no interest charges. And then, upon good credit repayment, the credit limit shall be increased to the maximum amount which is set at 250000 INR. The company hasn’t yet decided to make money by providing funds or working capital to its borrowers because it still hasn’t charged any interest whatsoever. And this has been one of its major selling points. People are automatically attracted to such schemes, and investors are drawn to large crowds.
You can’t put an exact number on the revenue, however, since there isn’t an accurate or credible source to the revenue data which has been collected because most of what Udaan does has remained anonymous so far.
The company has provided a combination of marketplace, logistics and learning so to understand the demand and supply across the various categories, Amod Malviya was focused on logistics for a lot of time. The company has successfully managed to implement that combination. Udaan also provides charges for logistics and information on delivery charges from the buyer which will vary according to the quantity of the product. Credit limit also will only be provided to verified buyers and that will only happen if the eligibility is at its limit.
But operating in a country with around 50 million small and medium scale businesses with a lot more money running around, Udaan does come with its share of setbacks. The company has received complaints regarding some of its logistical issues, as well as problems with capital allocation and lending approvals. When all is said and done, however, is Udaan actually making any profits from this venture? Let’s take a look at the numbers to see if we can find out.
The Numbers Game
During 2018, Udaan had reported a revenue of 65 crores INR and the total expenses formed up to a whopping 66 crore rupees, the losses being around 59.5 crores INR. Udaan also has its own mobile app, with a monthly download count of 22067 – increasing at a growth of 42.98% each month. The company has also improved its website – Udaan.com – a lot over time, and has been ranked at 2600420 among all the websites on a global scale, based on its viewership, which is around 1277588 and counting.
The B2B market still has a lot of potential and Udaan has made sure to bring in a lot of investors before other companies jump in. So far, they’ve managed to raise a whopping 683 million USD for the development of the platform. This started with a 10 million USD raised in a series funding on November 23, 2016, led by Lightspeed Venture Partners. The most recent funding of 300 million USD was a Series D during August 30, 2019, led by Altimeter Capital and DST Global.
Thorns In The Road
Managing all of this money that has flushed into the company almost all at once is a tough task. Luckily, GST has provided a big boost for Udaan. A smoother road has been laid out with the help of digital payments and a single tax structure. This ensures that Udaan has all of its money in order and in the right place, in the government’s eyes, and helps ensure a level playing field for its customers as well.
Another big issue with Udaan is perhaps the most important element which startups should bring to the table – transparency in the pricing section. There is only one common complaint amongst a majority of its users – When you look up on the website or the app, Udaan has a lot of products at really good rates. Many customers believe that what’s too good to be true, probably is. This greatly hinders Udaan’s market share, so it has to work towards building that trust. The company still has a long way to go to show that there is complete transparency in the prices being displayed for the items on the platform, and that their consumers will get the best products at nothing short of the best quality.
Closing Thoughts
Udaan has successfully achieved the much coveted Unicorn status, with a lot of hard work and despite being such a young company. Yes, it still has a long way to go into solving the existing delivery and capital problems, but the company believes that it’s common, and essential, to have challenges along the way, and with the right approach and techniques they are sure to be able to help deliver an output that will solve all these inefficiencies.
Currently, Udaan delivers to 500 cities and also picks up from sellers across 80 cities with the help of third party logistics. It is one of the best platforms to grow a micro and small scale business – thereby proving time and again that the only surefire way to grow a business is to provide value to your customers and clients.
