Urbanclap’s Business Model – Revolutionizing The Service Industry

UrbanCompany Business Model Featured Image

Outline

  • Introduction
  • History
  • Facts and Figures
  • Funding And Valuation
  • A Two-fold Business Model
  • Key Resources
  • Revenue Streams
  • Future Plans
  • Closing Thoughts

 

What if you could have all of your house chores done for you, by a professional, at a very reasonable rate? This is the simple thought that struck Varun Khaitan, and which led to the birth of one of India’s biggest service applications – UrbanClap. Over the six years since the company started, UrbanClap has made quite a name for itself, connecting people with almost every service under the sun, in turn also helping businesses, and making a small profit for itself.

But all that’s secondary. How did a small startup – just over five years old – manage to win the trust of millions of people, especially in a country where people would hesitate on trusting their own neighbours? The answer may be hidden in the simple business model that it followed, and still follows.

So in this article we’re going to take a look at how UrbanClap works, what it does, how much it makes, and a lot more. But before that, let’s take a look at how the company came into being.

History

The company was founded and given life by Varun Khaitan and Abhiraj Bhal, along with Raghav Chandra in 2014. The two owners Varun and Abhiraj did their engineering together at IIT Kanpur. They then shifted to the US in 2019 in search of work. Khaitan teamed up to work in Boston Consulting Group, and returned to India in 2013 with Abhiraj. The two college friends founded Cinema Box in 2014 – an app which allowed people to stream movies anywhere across the globe.

As luck would have it, they were introduced to Raghav, who was a computer science engineer and a graduate from the University of California. He used to work for Twitter and had later shifted back to India in 2013. The three of them got together with the sole purpose of creating an online store.

Varun and his gang got really fascinated with creating an online version of the yellow pages that we no longer use. This idea bore fruit in August 2014, when the three of them co-founded UrbanClap with a total investment of INR 10 Lacs. UrbanClap would later change its name to UrbanCompany, and today it provides services to almost every Indian city, with a little over 60,000 professionals in their network.

Urban Clap Now Urban Company

Facts And Figures

The company started tasting success in just a few years of it’s commence as an organisation. The headquarters is based in Gurgaon, India, building slowly into a brand that shouts reliability, trust, and quality. Today they provide more than a hundred services with around 3 million active users and the professionals amounting to over 50000, raking in over 600,000 requests per month on average.

Before UrbanCompany became what it is, it was called Pro Waala, Pro Trumpet, Joy Station, Worthy Fit, and a lot more names. Ratan Tata, the former chairman of Tata Sons Limited, had also invested an undisclosed amount in the company in 2015.

75% of all service provider applications are reported to have been rejected to meet the quality check. This shows how much importance Varun and his team put on ensuring quality service, genuine pricing, and unrivalled services.

In just a year, UrbanClap expanded into various cities including Delhi, Hyderabad, Mumbai, Chennai, Pune, Bengaluru, Kolkata and Ahmedabad. They are also planning to spread towards Jaipur and Chandigarh, before moving overseas – and we can understand why. In this day and age, you will have to expand massively or the competition might take you out.

Fundraising And Valuation

UrbanCompany has been a darling with its investors. The company raised a whopping $75 million USD last year (2019), raising its already skyrocketing valuation to $843 million. We still have to see how well the company has fared in 2020 with the pandemic situation, but for someone like UrbanCompany – that doubled its valuation in just 8 months – we’re pretty sure they would survive, if not get by unscathed.

To be valued at almost a billion dollars is a big deal, and the company has it’s valued business model to thank for it. So let’s take a look at how UrbanClap works before we get to crunching the numbers.

A Two-fold Business Model

UrbanClap’s business model is simple and clear – connect people with whatever service it is that they need. With the help of its application, you can hire electricians, yoga trainers, lawyers, beauticians, chartered accountants, beauticians, even photographers and interior designers.

The use of an automated matchmaking algorithm tweaked to perfection, backed by heavy incesting. Separate background checks and police verifications of the service providers ensure you only get genuine providers on the platform. All of this is well and good, but it does put a strain on the company’s bank account, so how does it take care of all these costs? Two methods: 

Fixed charge

When you go around hiring plumbers, electric workers or even a home cleaning company, payments are made through the app. This avoids any extra charges that the customer may be asked at the time of service, and help maintain transparency.

Service providing without fixing charges

The experts get charged by the organisation for lead generation and sponsored listing. The app doesn’t require that the users pay for the service unless they are satisfied. The professional service providers have to pay a fee to accept the request. If the professional can successfully convince the user to pay them for the service, then the fee paid will be worth it. All the user has to do is book a service that they need at a time that they’re comfortable with, and a provider will be alloted. Around 8000 requests are received on the platform each day. That is a pretty big number, showing how much potential the startup has to scale and grow.

Key Resources

The company hasn’t reported any underlying assets yet, but what we know for sure is that UrbanClap has two extremely valuable resources at its disposal – the official website, and the mobile application. Both of these are very important to any business nowadays, and more so for UrbanCompany. Both of them are powered with almost similar code, design, and architecture, and have the same AI and Machine Learning code embedded inside, for lead generation, upselling, and future notifications.

The AI helps make sure you get better recommendations with each service. Now this software has helped UrbanCompany not only understand the needs of the user but also allocate its different resources to track the whole process consistently. And to be able to pull off such things, the company needs to generate revenue, and a lot of it. Let’s take a look at the different ways UrbanClap makes money.

Revenue Streams

There are three different ways/revenue streams to discern how much commission UrbanClap takes

Commission on Bookings

The first is the commission which the company charges when a customer books a service provider through the UrbanClap platform. To provide this service, they pay a fixed amount with the help of cash on delivery or even digital payments. When it comes to charging the service provider, a commission is cut off there as well.

Reverse Auctions:

The second method is a reverse auction that service providers have the option of participating in. UrbanClap helps the bidders with lead generations and conversions.

Advertising:

The third and final method is advertisements. The company displays featured advertisements on its platform of service providers that are willing to pay an extra fee. This works really well for both the providers and the company.

Future Plans

With a robust strategic vision to empower businesses and enrich consumers’ lives, and 20 mission statements to back that vision, UrbanCompany looks like it won’t be stopping at excelling anytime soon. Throughout the last financial year, there has been a great stride towards this mission by improving the selection process, introducing onboarding and training as well as certification for various services. As an additional input, they have also invested in areas such as product procurement and technology, backed by a little financing to establish market leadership.

Closing Thoughts

Both Varun and Abhiraj have claimed that there are more than a thousand people whom they connected to, through which they got connected to 1,000 more professionals. This strategy worked magic for them, and they’re planning on using the same for now.

We know how the UrbanClap Business Model works, but this model isn’t going to be constant. The team is constantly battling to build a more comfortable platform that’s faster and in a more organised way to help people get quality services. Even the mobile application for both iOS and Android is regularly getting revamped for a more fluent user experience, and we can certainly say that UrbanCompany is going to build a bigger, more powerful network of service providers, stretching not only through India but around the globe.

Shivaharsh Murugan
Shivaharsh Murugan

A company secretary and lawyer-turned SEO geek and also someone who thinks he is deeply passionate about startups.

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