Gurugram-based home services start-up Urban Company announced Wednesday, June 2, that it has become a unicorn after a new round of funding that values the company at $ 2.1 billion. Funding for the F series of $ 255 million was led by Prosus Ventures, Dragoneer and Wellington Management, with the participation of Vy Capital, Tiger Global and Steadview. With the latter investment, Urban Company is now the 13th unicorn to hit this year.
Founded in 2014 by Abhiraj Bahl, Raghav Chandra and Varun Khaitan, Urban Company (formerly Urban Clap) is a home service company that focuses on beauty and massage, appliance repair, plumbing, carpentry, cleaning and painting.
It is currently present in more than 30 Indian cities including Ahmedabad, Bengaluru, Chandigarh, Chennai, Delhi NCR, Hyderabad, Jaipur, Kolkata, Mumbai, Pune as well as four international markets – Australia, Singapore, Dubai and Abu Dhabi. Last year it rebranded itself as Urban Company because it wanted a more globally acceptable brand name.
The company had reported a operating turnover of 212 Cr INR during the financial year 2020 (FY20), up 84.2% compared to INR 115.2 Cr in FY19. His losses increased by 95.5% over the same period
Urban Company says its operating model focuses on service professionals with the aim of turning them into micro-entrepreneurs, multiplying their income by 2-3 times. It has more than 35,000 service partners, including more than 10,000 estheticians and hairdressers.
Inc42 spoke with Urban Company Co-Founder and CTO, Raghav Chandra, to discuss the startup’s journey and growth plans. Edited excerpts:
Inc42: A $ 255 million stack is a lot of dry powder. What are you going to use it for?
Raghav Chandra: The investment will go into three buckets. We are setting up our tech headquarters in Bangalore with around 100 people and the number to 250-300 next year. Much of the money will be spent on building supply chain capacity, such as increasing inventories of cosmetics and spare parts for the services we provide. This also includes the establishment of a quality playbook of services for safety and health. In addition, we are looking to enter the next 100 cities in India next year and launch one or two more international cities in the coming years.
Inc42: How has the pandemic impacted your business?
Raghav Chandra: We do not yet have verified figures for income, but income has likely doubled in the year ending March. Generally speaking, we aim to double it again by the same time next year. I would say the pandemic has led to a better appreciation of safety and health. Going out to a nearby salon is no longer an option for many people. This has made our efforts much more relevant to consumers.
Inc42: Was the second wave different from last year from a business point of view?
Raghav Chandra: Last year and this year have their own different flavors. In 2020, we spent a lot of time figuring out how to operate during the pandemic, how to deploy the technology, and how to ensure that the livelihoods of our partners are not disrupted. We saw almost no activity in May and June of last year. In comparison, we climbed to around 1 Mn of orders in March. That’s a lot because it’s almost 2X of our pre-Covid peak which was in February of last year.
Inc42: Unlike food delivery or e-commerce, gig workers on your platform have to spend time inside a customer’s home and be in physical contact for certain services. What have you done to minimize the risks?
Raghav Chandra: We have temperature and process controls to detect if partners are wearing personal protective equipment when they are inside the house. But it was all done last year on her own. We are proud of the fact that over 60% of our 35K + partners have already received their first dose of Covid vaccination. This was made possible by encouraging partners to take the jab and making it easy for them to find and book slots. However, once we realized that was not enough, we also partnered with several vaccination camps to increase the number of partners vaccinated. I think we should be able to immunize 80% of all our partners with at least one dose by the end of this month.
Inc42: While aggregation-based platforms have benefited from the pandemic, concert workers providing the services have complained about the drop in their wages. What’s the scenario at Urban Company?
Raghav Chandra: When the lockdown happened last year, we were the first to reach out to partners and tell them they shouldn’t go out. We raised money for them and also gave loans when they needed money. I think they were very understanding and appreciated that we had their best interests in mind even when a particular month can be slow in terms of activity. The problem with revenues is that they haven’t been consistent across categories – some services are deemed essential while others are not according to government guidelines.
Inc42: Speaking of the differences between the categories, it has been reported that the beauty and grooming segment has made up the lion’s share of your business since the start of the pandemic. Are you making efforts to rectify this by strengthening other categories?
Raghav Chandra: It won’t be fair to say that one category takes the lion’s share. Yes, salon services are one of the biggest categories and the demand for men’s care has come as a surprise. But, other services such as air conditioning maintenance and repair, home cleaning and disinfection services represent a fairly similar share. It is at the end of the first quarter that the AC category begins to recover very well. This year and the last were no exception. I would say that the strength of a category varies depending on the seasonality and the geography considered. And we have seen good progress at all levels.
Inc42: Categories such as air conditioning and household cleaning are considered to have a lower ‘lifetime value’ compared to the customer’s acquisition cost due to their low frequency nature – and therefore not good for the economy of the customer. unity. Are you exploring new categories?
Raghav Chandra: We have long been an extremely healthy unitary economy enterprise. You don’t have to shop daily to do well. Also, there is a difference between the order values for different categories – while a haircut or grooming session can cost you 1000-1400 INR, painting the house will cost you around 40,000 INR. So the frequency doesn’t matter much at the end of the day. different categories of concerns. I think you can actually find us experimenting with new categories, deepening a few, or tweaking them. The reasons could be the size of the ticket, ambitious bets or a natural extension of the business. It’s happening everywhere, but I don’t think we’re exploring new categories to make up for bad choices.
Inc42: Several home and beauty service startups that have gone online are launching private labels (of products used in the service such as cosmetics) to improve their margins. Do you have such plans?
Raghav Chandra: This is not something we are concerned about, although it can happen. There is a team working on this theme, but there is nothing substantial going on in this direction right now. We have worked very hard to standardize the products and cosmetics used in our operations so that it becomes very easy for partners to buy what is desired. This will continue because it is an integral part of the customer experience.
Inc42: The customer experience charged by Internet companies is “convenience”. What if people in level 2 and 3 geographies don’t pay for home services after the pandemic ends?
Raghav Chandra: We entered 10 new cities in the previous quarter including Kanpur, Kochi, Coimbatore, Guwahati and we see these geographies doing well. The question is not whether Level 2 is ready to adopt, but whether there is a product that meets their needs. Of course, there will be a lot of challenges to solve, but we have to remember that they have money and that they are ambitious. Every time I went to my hometown of Kanpur before the pandemic people would ask me ‘Why don’t you come here? I think these people have been ready for years now. Additionally, not every household in South Delhi spends much – there are pockets of higher and lower consumption in all cities, whether it’s Tier 1 or Tier 2.
Inc42: The economy is bad and unemployment is increasing. Don’t you think this is a cause for concern for the tech industry with billions of dollars invested
Raghav Chandra: India is poised to do great things over the next two decades. And the reason is that we are a young population. Companies like ours say, ‘Okay, great, there are some issues to be solved. But instead of just sitting on the fence line, can we really be a part of this nation building? ‘ The slowdown in the economy and unemployment due to the pandemic is a global phenomenon and these things will recover. I think we need to get out of the jugaadu mentality as a country and ask ourselves if we are doing something in the best possible way. Many companies in the tech industry have this problem in different industries. It’s our job to create that infrastructure and innovate to help the country thrive.