Bengaluru: Udaan, an online marketplace for businesses, has raised $50 million in a fresh round of funding led by existing investor Lightspeed Venture Partners US, as it seeks to accelerate expansion.
Another existing shareholder, Lightspeed India, as well as funds associated with Russian billionaire Yuri Milner, also participated in the round, which is one of the largest Series B funding rounds raised by any Indian start-up.
In November 2016, Udaan, had raised $10 million in series A funding from Lightspeed India and Lightspeed US.
“We continue to be big believers in the team and market opportunity, and the company’s performance in terms of scale, growth dynamics, buyer/seller retention and frequency benchmarks to the best marketplace platforms we’ve seen globally," Lightpseed India managing director Bejul Somaia said in an email. Somaia and Ravi Mhatre from Lighspeed US led the $50 million investment.
Udaan will use the new capital to add new sellers and buyers, expand its logistics network, hire more engineers and sales executives and launch new services like lending, co-founder Sujeet Kumar said.
The Bengaluru-based company is an end-to-end marketplace that connects businesses in consumer goods, fashion and electronics, offers logistics services and has recently started lending. With sellers across 80 cities, it delivers to more than 500 cities and will expand to more areas with the new capital. Its average order value is between Rs6,000 and Rs7,000.
Udaan is one of the many start-ups trying to tap India’s B2B e-commerce market potential. The overall B2B market size is expected to be around $700 billion by 2020, according to an April 2016 report by the Confederation of Indian Industry and Deloitte.
Last year, B2B e-commerce start-ups raised more than $200 million, the highest since 2010, according to Tracxn, a start-up tracker. The biggest deals were a $100 million investment into Just Buy Live, Power2sme’s $35 million series E round and $12 million raised by Moglix.
Still, Udaan’s $50 million raise is unusually large both for a Series B round and for a B2B start-up.
“We’ve raised this round because we have validation that our product is working. The market opportunity is huge and in just 15 months of launching, we’ve reached more than 500 cities. We also account for more than 15-20% of the business of many of the sellers on the platform. And our average repeat transactions are seven times a month. These metrics are big validation that there’s massive demand for our kind of end-to-end marketplace," Kumar said.
Udaan was launched in November 2016 by Kumar, Vaibhav Gupta and Amod Malviya, former senior executives at Flipkart, India’s most valuable start-up. At Flipkart, Kumar was logistics head, Malviya was chief technology officer and Gupta was business finance chief.
The B2B market has been touted as a high-potential market for long but its growth has been far slower than what investors expected. Indian businesses are said to be reluctant to use technology and the problems around trust, price transparency and logistics, among others, have held back the expansion of B2B e-commerce.
That’s changing fast, especially after the introduction of the Goods and Services Tax last year and the launch of 4G mobile internet networks, Kumar said.
“After GST, moving goods across states has become much easier and it’s helping us solve the logistics issues that were earlier very tough. And with 4G, data consumption has gone through the roof so businesses are now adopting technology very naturally. We’re seeing that as long as you curate the marketplace properly, you’re building trust in the platform. That’s the key starting point. Once enough sellers come online and conduct business in a transparent way, they will see the benefits of e-commerce and bring their network of sellers. It’s a long-term play but it’s started to happen," Kumar said.