Three is company
The former Flipkart executives’ B2B e-commerce start-up valuation crosses $2.5 bn in three years
Business-to-business e-commerce start-up udaan is now valued at around $2.5 billion after the latest financing round when it raised $585 million. The firm was founded in 2016 by former top Flipkart executives Amod Malviya, Sujeet Kumar, and Vaibhav Gupta.
Malviya, Kumar, and Gupta, who are all engineers from the country ’s top Indian Institute of Technology (IITS), hail from small towns in states of Uttar Pradesh and Bihar, where, growing up, they didn’t have access to supermarkets, and had to travel to the nearest big city large purchases. An alumnus of Iit-kharagpur, Malviya was the chief technology officer of Flipkart and quit the firm in 2015. He is considered the person who built the home-grown ecommerce firm’s technology backbone. Kumar, an alumnus of IITDelhi, played a key role in building the supply chain at Flipkart. Gupta, who is also an alumnus of Iit-delhi, held the role of senior vice president for business finance and analytics at Flipkart in 2015.
The trio, who became friends at Flipkart, had decided to work together before the idea to launch a venture like udaan was formed. They wanted to start a company that would have an impact on a large number of people, where technology could play a disruptive role and the firm should solve problems that are native to India using technology. In fact, the initial venture capital investment came to the founders even before the product was launched because the investors thought that something good would emerge from the team, according to industry sources.
The founders then decided to build a large scale e-commerce distribution platform like udaan, which would be based on mobile, internet and ecommerce technology. The aim was to help small businesses, especially in the tier-iii cities, improve their sourcing and earnings. However, business-to-business e-commerce is different in many aspects when compared to business-to-consumer ecommerce. Malviya along with other engineers, still writes codes to build many new features that are unique to B2B e-commerce.
The three founders also leveraged a large part of the learnings they garnered at Flipkart for udaan, especially issues concerning last-mile connectivity, hiring and culture. Interestingly, udaan does not have titles like CEO because the organisation prefers to give greater importance to the value provided by the talent. This form of decentralisation is actually relevant to business-to-business e-commerce.
Udaan now operates in categories such as lifestyle, electronics, home and kitchen, staples, fruits and vegetables, fast-moving consumer goods, toys, and general merchandise. It enables small manufacturers, farmers, mills, and brands to sell their products across the country at low costs, with 100 per cent payment security and transparency. While doing so it enables small businesses such as shopkeepers, kirana, restaurants, street vendors, chemists, offices, small factories and contractors to source from a large selection of high-quality products at low prices with the convenience of ecommerce. Udaan’s marketplace has a network of 3 million retailers in 900 cities by connecting them to 20,000 sellers across the country.
“After seeing a decade of B2C ecommerce internet-based startups scaling up, tasting heady valuations and value creation through exits, I feel the B2B sector has come into focus,” said K Ganesh, serial entrepreneur and promoter at Bigbasket and Portea Medical. “Udaan is off to a great start. The opportunity to bring various small traders and businesses online, create a marketplace, and provide muchneeded financing and other services is huge,” said Ganesh.
This week udaan raised $585 million from Tencent, Altimeter, Footpath Ventures, Hillhouse, GGV Capital, and Citi Ventures. Existing investors Lightspeed Venture Partners and DST Global also contributed to the round. This takes the total funds raised by the e-commerce start-up to $870 million since 2016. Analysts say that Tencent led the Series D financing round by contributing roughly a quarter of the total raise, giving the firm a “post-money valuation in the range of $2.5 billion”. With this fundraise, udaan will continue its long-term investment approach in building its platform.
The Indian market has a large number of small businesses across manufacturing and trade, including over 100 million farmers and 15 million small manufacturers, as well as above 30 million traders, retailers and service businesses.
“The udaan team has executed strongly to build a company that positively impacts millions of small businesses in India by enabling discovery, trade and financing in a trusted digital environment,” said Bejul Somaia, Partner, Lightspeed Venture Partners after the company’s latest financing round. “The market opportunity is turning out to be much deeper than we envisioned when Lightspeed led the company’s Series A financing in 2016.”
According to Saurabh Gupta, managing partner at DST Global, by reducing supply chain complexity, udaan is making products more accessible and affordable for consumers across the country.