Making of the Fastest Unicorn, Udaan
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When Flipkart executives Sujeet Kumar, Amod Malviya and Vaibhav Gupta quit the e-commerce giant, they did not have a concrete idea about the next venture; the only thing they knew was that they would work together.
Business to business (B2B) market was not a hot ground for startups and back in 2015-16. Investors were also not really active in the space. Players including IndiaMart’s Tolexo, ShopX, and Wydr were present.
Kumar, Malviya, and Gupta had no idea that they were going to create a business which would become India’s fastest-to-be-Unicorn, operating in the business-to-business (B2B) space catering to wholesalers among other middlemen.
Unlike, other startups were ideas come first, for these three the decision to work together came first, followed by the idea. “The initial funding, we raised was because they (investors) knew us (the team),” said Kumar during TiECon Mumbai, a start-up event.
In October 2019, Udaan (Hiveloop Technology Pvt. Ltd) raised a staggering $585 million in a funding round, which boosted its valuation to $2.8 billion. China’s Tencent, which has previously invested in ride-hailing Ola and food-delivery platform Swiggy, along with Hillhouse Capital and existing investor Lightspeed Venture Partners, among others, participated in one of the largest late-stage venture rounds.
Hailing from Bhabua, a small town in Bihar, Kumar’s first aspiration was to get a well-paying job and then get into civil services. After graduating from Indian Institute of Technology (IIT), Delhi, Kumar did prepare for Union Public Service Commission examination but after receiving an offer from Sachin Bansal he moved to Bengaluru, India’s technology hub. “It was a quick decision. Sachin called me to Bengaluru. We spoke, I understood their plans about Flipkart and in three-four days I had moved to the city,” said Kumar during a fireside chat at the event.
In 2015, Kumar quit WS Retail Pvt. Ltd, Flipkart’s largest seller and logistics business. He is known to develop Flipkart’s operations model from scratch, which he handled until 2012.
“When we left Flipkart, we wanted to solve a problem that a large number of people were facing. It had to be big enough to chase,” he said. The idea though seemed easy, it was quite different from a consumer-facing start-up.
“In a consumer-facing business, people can return goods for multiple reasons but in B2B they only return goods if it is defective,” said Kumar. The business is also based on trust. “Once a wholesaler knows that products on your platform are not good, they will not buy it from you because their reputation is on the line. The quality needs to be really good. No amount of discount can bring them back,” he added.
E-commerce platforms are largely driven by discounts. Major sale seasons including Flipkart’s Big Billion Sales and Amazon Inc.’s Great Indian Festival offer massive discounts on electronics, apparels and kitchenware, among others. This tactic does bring in huge traffic but once discounts are pulled out, the traffic also falls. But the same model does not work for a business-facing start-up.The Bengaluru-based Udaan has almost 10,000 employees and is in a rapid expansion mode.