While the focus in the startup segment has been largely on the B2C model, there are B2B ventures silently building their businesses and have been able to attract decent funding proposals as well. The latest to be in the news is Udaan, a B2B e-commerce startup founded by three former Flipkart employees.
Udaan has received a substantial $50 million (₹320 crores) funding in a fresh round from the startup’s existing investors, Lightspeed Ventures and a new Russian investor, Yuri Milner. The Russian investor has pitched in with the funds in his personal capacity. Lightspeed is an investor from Silicon Valley and has Snapchat as a major recipient of its investments.
In the case of Udaan, Lightspeed is said to have picked up around $30-35 million, leaving the rest to the Russian billionaire. The fund infusion has been handled through their US and Indian investment arms.
Udaan follows a business model in which they facilitate companies, particularly the small and medium enterprises, in making their purchases. These enterprises could be in the business of manufacturing or simply trading.
To start with, they have selected the sectors of clothing, electronics, FMCG and staples and may add more, going ahead. The founders have indicated that the current funding will be deployed towards improving the logistics infrastructure for handling the pick-ups and deliveries for their clients. The startup is able to make deliveries to 500 cities in the country and pick up from 80 cities. Though not officially confirmed, Udaan is reportedly clocking a turnover of Rs 100 crores a month.
Interestingly, the biggies, like Amazon and Alibaba, are also seriously eyeing the B2B sector and within the Indian startup ecosystem, there are many other ventures engaged with the same business model. Some of them are: Industry Buying, OfBusiness, Power2SME, Moglix, and mSupply.com. Udaan will therefore have enough competition to contend with. The general belief however is that though the direct consumer-oriented business may bring in high turnover, the initial burns are also very heavy and early stage investors worry a lot on this score.