Deal focus: Udaan signals India's digital progress

The unicorn mountain is getting easier to climb in India. This week marks the close of a $585 million Series D round for Udaan that values the B2B online marketplace at $2.5-3 billion. It follows a $225 million Series C last year that tipped the company over the $1 billion mark, only two years after inception. 

This trajectory does represent a departure from India's current class of tech leaders. Hospitality platform Oyo, e-commerce giant Flipkart, and financial services provider Paytm had longer runs to the big time, largely because their launches predated Reliance Jio Infocomm's rollout of national broadband infrastructure in late 2015. Jio has floated all boats, but its impact is magnified for start-ups in earlier stages.  

"The first generation of digital companies in India had to invest in market creation and shaping consumer behavior. Udaan, having launched at a time when the internet was more established, has benefited from a larger, more ready market where small businesses were better connected," says Bejul Somaia, a partner at Lightspeed India Partners. "They hit a core need in a large space at a time when there were a lot of tailwinds for rapid adoption."

Lightspeed, which has backed Udaan since a Series A in 2016, contributed to the Series D alongside Tencent Holdings, Citi Ventures, GGV Capital, Hillhouse Capital, Altimeter Capital, Footpath Ventures, and DST Global. Udaan has now raised $870 million to date, a sum that has been justified by the capital intensive nature of building out financial services and supply chain networks. The new capital will support expansions in the lending business and B2B services in categories.  

Operations revolve around a platform that connects three million retailers with 20,000 suppliers across 900 Indian cities. Services include executing payments, underwriting small business loans, and facilitating end-to-end delivery via a mix of data-optimized subcontracting and various in-house trucking and warehousing assets. As Udaan gets larger, it has become increasingly obliged to exert direct control over its first and last-mile logistical capacities in order to bring a consistent experience to buyers and sellers. 

Conceptually, this is all about resolving India's inter-regional B2B challenges around language, culture and internal tax barriers by approaching them online. But it's important to remember that fragmentation also entails a trust deficit that cannot be narrowed by a mere marketplace. Retailers and suppliers looking to expand their reach while changing the way they do business will need more comprehensive coverage. 

"B2B commerce in India takes a lot more than just connecting buyers and sellers. You have to address credit and payments and logistics and fulfillment as part of the core value proposition," says Somaia. "Udaan can make sure that whatever was committed to be shipped was actually shipped and that only when it is delivered will payment be released. That provides trade security to both the buyer and the seller."   

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• Topics
• South Asia
• Technology
• Expansion
• India
• TMT
• e-commerce
• Lightspeed Venture Partners
• Tencent
• GGV Capital
• Hillhouse Capital Management
• DST Advisors