Founded by Amod Malviya, Vaibhav Gupta, and Sujeet Kumar (pictured above from left to right), Udaan is India’s largest online business-to-business (B2B) marketplace. Udaan has been associated with Microsoft since its beginning, having been a part of Microsoft Accelerator program (now Microsoft for Startups) and by running on Microsoft Azure from day one.
“The day we were valued at a billion dollars, we just had 17 engineers. That’s the kind of productivity improvement that Microsoft Azure has offered,” Malviya says.
We caught up with Malviya to talk about Udaan’s journey. What follows are edited excerpts from our conversation:
How did the three of you decide to get into B2B commerce?
The three of us worked together at Flipkart building business-to-consumer (B2C) commerce and enjoyed problem solving. We left in mid-2015 for our individual reasons and a few months later we thought of starting something together.
We laid down three criteria for us to decide what we’d do. The first was it has to be a large problem to solve. It couldn’t be an incremental utility for someone, it has to make a big difference for a large number of people. Second, it has to be in an area where it is possible to create disruption through technology. And finally, it has to be something that has a unique Indian flavor.
We realized that B2B commerce in India satisfied all the three elements.
Let’s talk about scale. Every B2C commerce has its genesis in B2B—be it manufacturing, or the way distribution happens that eventually makes its way through different channels to customers. B2B commerce is the backbone of Indian economy, and almost trillion dollars’ worth of trade happens in this segment across different categories.
When we started out in February 2016, there were a few players that were trying to bring the power of the internet to the industry, but they were making little headway. It was essentially a virgin market and the timing was right for us to enter this segment.
But most importantly, B2B commerce had a uniquely Indian flavor. Unlike B2C commerce, where the nature of the market tends to behave similarly across different geographies across the world, in B2B commerce in India has characteristics that you don’t find anywhere else. If you look at the 50 million SMEs in India that includes retailers, traders, manufactures, small bodyshop workers, farmers, and so on, they are just a massively large number of fragmented people trying to do business, which means that this sort of a market does not exist. Either you have a very homogenized, very structured markets of the West or the unstructured markets of the East, but not as humongous as India.
So pretty much that’s why we decided to do this.
What were the challenges in the B2B commerce space that Udaan set out to solve?
Irrespective of the category we look at, there are three distinct things that sellers want – growth by getting access to larger number of buyers; access to credit; and a reliable supply chain.
The buyers, again irrespective of the category, want access to selection of goods and sellers. The options they have are to either make a monthly trip to wholesale markets and lock up their capital, or to rely on local sellers who act as intermediaries and they don’t get the price advantage of wholesale markets. Even if they make that monthly trip to the wholesale market, they get locked to sellers with whom they have built trust to get a line of credit as most buyers don’t have sufficient working capital to finance a month’s worth of inventory. It is usually always a trade-off for them.
With Udaan, we wanted to bring these sellers and buyers together on a single platform and solve for their problems. But the size and volume of B2B transactions are very different from B2C transactions. We decided to solve for payments at B2B scale, a supply chain for B2B oriented volumes which didn’t exist, and credit.
Tell us about Udaan’s early days. How difficult was it to convince sellers and buyers to come on an unknown platform?
In the very early days, we would manually go and ask people for what is that they are looking to buy, and we would find the appropriate seller. So, there was a lot of manual order taking and manual supply management in order to get a better understanding of how people make their purchase decisions and the pains of this market. We launched a private beta of our platform in November 2016 and remained in private beta till June 2017.
Initially, it was difficult to even get sellers to entertain us. I remember a mobile accessory seller who made us wait for more than two hours outside his office before he refused to meet us. It’s another story that later he came on our platform when he saw the volume of transactions that were happening.
On the other hand, while we were still in private beta and no one could find the app on the Play Store, we received a call from a man who had a shop in a village 70 kilometres away from Coimbatore that he had downloaded the app but was unable to log in. He’d found about us from his uncle in the city, who told him he could buy inventory for his shop from an app. Our app was entirely in English and this man had asked for his son’s help to navigate it as he couldn’t read English.
It was a revealing moment for me. The community that we are building this platform for is amongst the hardest working and the most enterprising people that you will get in India. These are people who have been waiting for technology to work for them and the moment this technology was made available, the speed at which they were willing to lap it up.
We started with two very different categories—mobile accessories and clothing—because we wanted to build a horizontal e-commerce platform based on our belief that the nature of problems is pretty common irrespective of the category. Clothing tends to have relatively long purchase cycles whereas mobile accessories have very short purchase cycles. Both grew very fast on the platform and that was a great validation for the choices that we made. Today we are enabling B2B commerce across a fairly large number of categories.
Not many people know that Udaan was part of the 2016 cohort of Microsoft Accelerator (now Microsoft for Startups). How did that program help Udaan?
We were just about starting Udaan and one day I dropped a note to Microsoft and other cloud players. The next morning, I was having breakfast with people from Microsoft and was amazed at how promptly things moved. To be honest, the big draw for me to get into the Microsoft Accelerator program was the Azure credits but what really took me by surprise was how vested the Microsoft team was in the success of the startups in the cohort. Another thing, which I saw other startups in the cohort experience, was how Microsoft enabled go-to market programs for them.
Why did you decide to build Udaan on top of Microsoft Azure?
In terms of why we got started, I think the reason is pretty simple: Microsoft was most prompt and eager to get our business. And once that initial engagement started, they’ve continued to demonstrate a high amount of focus and energy in ensuring any issue we run into is resolved.
What really mattered to us is the public position that Microsoft has taken. We see Microsoft as partners who empower us to be successful, and we don’t have to worry that someday they’d compete with us.
Azure has also allowed us to have an extremely lean engineering setup. To give you an example, the day we were valued at a billion dollars, we just had 17 engineers. That’s the kind of productivity improvement that Microsoft Azure has offered.
We decided not to have any engineer focused on infrastructure. We let Microsoft take care of that with the PaaS offerings on available Azure. We were able to focus every single engineer on a product problem.
We are big consumers of Microsoft’s cloud offerings, including Data Lake, Cognitive Services, we lap up anything new that comes us. For instance, we also run a credit business and regulations require us to go through a KYC process. We wanted to ensure our customers upload the right photos and documents by prompting them in real-time whether the document they have uploaded are correct or not. With the help of Microsoft’s Vision API, just one engineer was able to create a solution in less than a week!
Udaan is now a unicorn. It is the largest online B2B commerce player in the country. What keeps you awake at night now?
The biggest thing that keeps me awake is the size of the problem and the size of the opportunity. The more we solve for B2B commerce, the more interesting problems show up, and secondary and tertiary opportunities open up. Now that Udaan is solving for reliable and quality supply for retailers, they are now expecting Udaan to solve other challenges in their business.