Udaan co-founders on how their set up earned the fast-growing unicorn tag

Sujeet Kumar, Vaibhav Gupta and Amod Malviya talk to Bibhu Ranjan Mishra about how Udaan took flight

As we get busy with our conversation, I realise that while the world outside might be lauding their venture as the fastest-growing Unicorn in India, the founders of udaan would rather downplay the fact. That is understandable. Startup valuations are unpredictable, dependent as they are on myriad factors. On top of that, the three entrepreneurs whom I am meeting over lunch have learnt the rules of the game the hard way.

As we sit down at Go Native, a restaurant in HSR Layout, Bengaluru, I tell myself I could perhaps use that startup cliché to describe all three — they are self-made. Sujeet Kumar and Amod Malviya have their ancestral homes in a remote town in Bihar’s Kaimur district; Vaibhav Gupta, who was born in Haryana’s Sonipat, grew up in Rohtak.

Our restaurant does not look anything like an eatery from the outside, despite being located along a busy main road. I am pleasantly surprised seeing the ethnic artwork on display (and also for sale) in the first two floors that are connected by a wooden staircase. The place where we are sitting has enough daylight — the owners of the restaurant would have worked hard to recreate as much of a natural ambience as possible. Go Native has a vegetarian menu.

As we start talking and the three — who are in their late 30s — pepper their story with jokes and giggles, I can't help feeling they resemble college students more than working professionals. We decide to order the food first before getting into any serious discussion. Kumar orders a desi sizzler, which is a thali comprising khichdi, paratha, curry and pickle, along with a solkhandi, a coconut juice-based drink with a lot of herbs and spices. Gupta settles for a millet-palak khichdi with a ragi buttermilk. Malviya makes it clear that he had a late breakfast and orders some jaggery and coconut barfis. Though a bit intrigued by their choice of food, I decide to go with the flow and end up ordering a desi sizzler and a ragi butter milk, which I realise later is too heavy for a working Monday afternoon.

Sipping the drink that was served in a jiffy, Kumar says, it is just a coincidence that all three of them resigned from Flipkart around the same time (mid-2015). It was only later when they spoke with each other that they thought of starting something together. The first one to leave (Flipkart) was Kumar who was the third employee at the firm handling the logistics business, Ekart, though he spent few more months with the company in Singapore to ensure the transition. Gupta, who was based in Seattle, went on a nine-month sabbatical from mid-July 2015.

“After working at a crazy pace for many years suddenly you find a lot of time to kill,” says Kumar. “My wife never fails to remind me that the day after resigning from Flipkart I was out of the house by 9.30 am. For the next few days, almost every day, I was at Starbucks, meeting people,” adds Malviya who met Kumar and Gupta only after joining Flipkart. The other two, however, had known each other from much before: Gupta was a batch senior to Kumar at IIT-Delhi. In fact, Sachin Bansal, co-founder of Flipkart, was Kumar’s junior at IIT-Delhi and both were residents of the same hostel.

Amid much boredom, Kumar and Malviya decided to pay Gupta, who was in Seattle, a visit. That was November 2015 and the three of them agreed they would “start something”. Over the next few months, they did a lot of research and finally in February of 2016, when they went to the US again, they decided they would do something in the business-to-business (B2B) space. Much of that discussion happened over a long drive between Las Vegas and Los Angeles.

A number of ecommerce companies —including Indiamart and Tolexo (also an Indiamart company) — were eyeing the B2B space by then. In fact, a VC investor who had evaluated the space that time had found that there were at least 300 B2B ecommerce companies, though mostly vertical players focused on categories such as industrial products and food, says Malviya.

The next task was zeroing in on a name — preferably a short one that could be remembered easily. The domain name “udaan” was not available so they considered other names — like “Tiggi” — until one of them stumbled upon the fact that the person who had blocked the “udaan” domain name had put it up for sale. In no time, money was transferred from Gupta’s dollar account to the seller’s account. By April 2016, the trio was ready to take the plunge. The office was inaugurated at Koramangala’s Sony Signal with just nine people including them.

Over the next few months, they visited several towns such as Coimbatore, Vizag, Mysuru, Kochi and Hubli to meet retailers and understand their pain points. The two major problems were supply chain and credit availability. By August-September of 2016, while visiting these places, the udaan co-founders started picking up sample products from suppliers to gauge the interest level of the buyers. Since the app was not up, they used to jot down the orders on paper and send them to potential suppliers.

The first order came in September of 2016 from Mysuru. In fact, they received two orders on the same day — one for garments and the other for mobile accessories. The orders were procured from Chikpet (a wholesale market in Bengaluru) and dispatched using a travel agent they knew since Ekart days.

By November that year, the beta version of the app was ready though access to it was restricted. It could only be downloaded when an udaan executive sent the shop owners a link through ShareIt.

The initial investment to start their business was put up by the three of them. But soon they started receiving feelers from the VC community given their credentials. “One thing we knew was that we would build something that will be different, but we did not know exactly what that would be. We also knew we would raise money once we had reached a certain scale.” Before long, they were convinced by a close friend to raise funds if they got the right value.

After that, everything moved at lightning speed. Lightspeed Venture invested around $10 million as part of series A during the pre-product stage in October 2016. The next one was a $50 million round almost a year later, followed by another $225 million as part of series C in August 2018 at a valuation of over $1 billion. In October 2019, it raised $585 million from Tencent, Altimeter, Footpath Ventures and Hillhouse among others in series D, which valued the company at $2.8 billion, making it the fastest-growing Indian startup.

Udaan is almost synonymous now with the speed at which start-ups aspire to grow. “Now people have started saying, ‘I am building the udaan of Indonesia or the udaan of Vietnam’,” chuckles Malviya.

That said, the udaan co-founders know they have hardly scratched the surface given the opportunity that B2B ecommerce offers. According to Gupta, udaan supplies around 5,000-6,000 tonnes of food a day even while the top 100 cities in India alone consume around 200,000 tonnes of food per day. So roughly, udaan supplies just around 1 per cent of the total inventory of the retailers, leaving a lot of room to scale up. “In terms of reach, we are in most cities. But in terms of the percentage of their monthly requirement they buy from us, we have a long way to go,” says Gupta.

While udaan largely services the supply chain and credit (financing) requirements of its clients, it can offer much more leveraging the customer data it has accumulated over this period. One area where udaan could possibly chip in is customer acquisition and engagement. Or even with ways to make the inventory management at the store level more efficient by giving retailers better understanding of stock movement, agree the co-founders.