The Success Story of B2B Startup Udaan
Created on 06 Oct 2020
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Updated on 23 Jul 2022
In the sector of tech startups, Udaan has added another feather to India’s cap. It is one of the fastest-growing unicorns in India that helps small entrepreneurs by providing them with the benefits of online commerce.
The Indian startup Udaan helps all the traders, wholesalers, distributors, and manufacturers in the smaller towns and villages by giving them a suitable platform and an opportunity to grow as entrepreneurs.
How did Udaan start?
Udaan India was founded in 2016 and is based in Bangalore. The company was started by three former employees of Flipkart, Amod Malviya, Vaibhav Gupta, and Sujeet Kumar. Vaibhav worked there as a senior vice president, Sujeet worked in the supply chain as a logistics executive and Amod worked as the Chief Technology Officer.
Their main aim of starting this business was to make the goods reach the remotest areas of the country like Bhabua in Bihar. While working in Flipkart, they had realized how the company had such a strong distribution network but was still unable to reach these places.
Business Model of Startup Udaan
Udaan India is a Business to Business (B2B) Model where traders and wholesalers are connected to manufacturers and can sell their products and services on the online platform or via mobile application. It mainly operates in 3 verticals- food (staples, fruits, and vegetables), non-food (electronics and fashion), and pharmaceuticals.
This application provides small businesses and entrepreneurs with an opportunity to connect directly with the manufacturers and discuss the transactions of the trade. The company collaborates and works with the entrepreneurs and helps them with sales, marketing, logistics and operations, etc. It also offers facilities to small business owners so that they can handle their payments and accounts in a better way.
Another thing that the company noticed was that retailers and wholesalers often face trouble financing certain operations. Due to this reason, retailers opt for taking loans from local lenders who charge really high-interest rates.
Udaan India aims to provide retailers and wholesalers with sufficient working capital loans at cost-effective rates so that the business owners are not exploited. So, it has started underwriting loans for retailers as well.
The unicorn startup Udaan has also received a Non-Banking Financial Company (NBFC) license to provide funds to Small and Medium Enterprises (SMEs).
Why is it a success?
One of the major reasons why Udaan India has been successful is that because a year after starting, the company did logistics at quite subsidized rates, which really helped them in getting the right market share and exposure.
Another reason for this is the strong founding team. The founding members of the company already had the required knowledge and experience after working at Flipkart. Due to this, many other Flipkart employees also joined the startup, which helped them in increasing their efficiency and productivity. It enabled the engineers to work on their creativity, which is encouraged at Udaan.
Also, the success of the company can be attributed to the solution that it provides to the retailers and wholesalers, who use the online platform. It provides them with an option of online services that can help them in effectively competing with the big retailers and the big branded stores and websites.
Hence the success of Udaan can also be attributed to the viable model and platform that it provides.
The challenges it faces
As a startup in the e-commerce sector, Udaan has to face its fair share of challenges.
One of the major challenges it faces is the establishment of a proper supply chain network. This is one of the most important things to look at when a business is operating in the e-commerce sector.
This is especially important when an e-commerce site has to compete with big brands and other e-commerce giants. Getting its logistics and distribution system in place is very important.
Another challenge is to persuade and convince retailers and wholesalers to go online with their business. This is a challenge that Udaan had to face initially.
In India, many such small business owners still operate in the traditional offline mode and so they might not be ready to accept any change in their way of thinking. So, bringing such businesses on board was a very integral part of making its B2B model a success.
Competition in the Market
Being in the logistics industry, Udaan India has to face intense competition. Some of its top competitors are:
It is one of the biggest competitors of UDAAN. Started in 2018, Bengaluru-based Zoomtail Technologies Pvt. Ltd. was formed to provide e-commerce solutions to small and medium-sized fashion enterprises. Its main goal is to help the small retailers identify the trends in the fashion industry, purchase inventory, and use various other tools to expand their businesses.
It has constantly been raising finance for the last two years to develop and improve its technology and seeks to become one of the largest B2B e-commerce platforms for fashion consumer goods.
BigTrade, which was started in 2017, has grown to become one of India’s top B2B wholesale trading platforms. It seeks to connect the small retailers with the wholesalers, thereby increasing their operational efficiency and reducing their costs.
It helps manufacturers and distributors establish a brand for themselves and get a strong foothold all over India. In 2019, the technology division of Walmart, Walmart Labs, acquired BigTrade. The interest of this US giant in BigTrade tells us that it’s going to be a fierce competitor for the emerging Indian startup, UDAAN.
Like UDAAN, TradeKosh too is an e-commerce B2B platform which connects the retailers with the manufacturers. It aims to provide retailers with products at the wholesale level and wants to develop its stock management and seller management with the help of data analytics and data science.
However, even after facing such high competition, the company has been successful in its endeavours. This is because it has a competitive advantage which sets it apart from its competitors.
What is Udaan India’s Competitive Advantage?
A major thing that sets unicorn startup Udaan apart is that it not only serves as a B2B marketplace, but it also provides the retailers and wholesalers with a platform so that they can avail services for improving their logistics and payment systems.
Other than that, it also provides the business owners with the option of taking credit from them at much more reasonable rates, which helps them to not get exploited.
Another interesting thing about Udaan India that sets it apart from other such sites is the way it functions. The company has no CEO. According to the founders, it was a decision they had taken by choice.
The company and its founders believe that they can use their strong team of employees to their advantage, and therefore they try to decentralize the decision-making process. This makes their operations more effective and much quicker as well.
The company, unlike others in the industry, works horizontally; that is, it doesn’t just focus on one specific sector. It works across different sectors, which also helps it stand out.
This is one of the reasons why the company has been doing so well.
Funding and Investors of the Company
Since its launch in 2016, the Indian startup Udaan has raised about $900 million of funds. It has done so in around 8 rounds of funding. It raised close to $585 million in funds in September 2019 alone. In its latest funding round in March 2020, Udaan raised about $30 million.
Several venture capitalists such as Tencent, Altimeter, Footpath Ventures, Hillhouse, GGV Capital, and Citi Ventures were a part of the funding round.
It’s valuation reached $2.8 billion after the funding. UDAAN plans on using these funds for developing their core capabilities and technologies to make more improvements and developments in its delivery and payment verticals.
The company became a unicorn in the year of 2018, in a Series C round of funding when it raised approximately $225 million from its original investors, DST Global and Lightspeed Venture Partners.
Charting the Growth of the Company
The Indian startup Udaan achieved the status of a unicorn in 2018 and became the fastest company to do so. It achieved this milestone in a short period of just 26 months. This is tremendous growth.
Udaan was initially started as just a logistics company and focused on this aspect for a period of more than one year. This really helped the startup to get a good foothold in the market. Since its inception in 2016, the company is now operating in a total of 900 cities. Now, the company has evolved and provides lending, logistics and payment services as well.
The growth achieved in a matter of 4 years has been phenomenal, and the company is planning to expand further as well. Udaan expects to see a faster adoption rate among retailers and other business wonders, especially during the COVID pandemic and are optimistic about the future as well.
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