In an internal email to employees, Vaibhav Gupta said Udaan has made strong improvements in gross margins and operating costs. Udaan cut its cash burn by more than 40% in the first half of 2022 CEO. However, Gupta also warned of market volatility and high inflation, saying the startup is looking to tighten its budget.
Udaan B2B platform
Business-to-business b2b e commerce platform Udaan is on track to have a positive unit economy by the end of the June 2022 quarter, CEO Vaibhav Gupta said in an email to startup employees.
The email, said that Udaan has improved its unit economic by more than 1,000 basis points bps over the past year. Additionally, he said the startup has made strong improvement in gross margins and operating costs.
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Gupta also said that Udaan reduced its cash consumption by more than 40% in the first half of 2022. He attributed this to the startup’s active work on cost structures to create a sustainable business model.
We started the drive economy journey almost 3 quarter ago and the transformational results are now in front of us! We achieved CM1 and CM2 profitability in Q4 2021 and Q1 2022, respectively, and are on track to reach our CM3 target by June 22, Gupta said in the email.
The contribution margin CM level 1 of profitability essentially refers to the gross margin, while CM2 or level 2 include logistics and payment gateway costs. CM3 refers to the cost of marketing, among other things.
just like how we took the unit profitability target and solved it over the last 3 quarters with a constant QoQ movement of CM1 > CM2 > CM3, now we have to build the muscle for the next challenge of driving and delivering consistent and cumulative 10% quarter-on-quarter growth, the email read.
Founded in 2016 by Flipkart Gupta alumni Sujeet Kumar and Amod Malviya, Udaan is an e-commerce platform designed to connect small and medium-sized businesses with manufacturers, wholesalers, and retailers to sell products.
In the email, Gupta said that Udaan visible and invisible waste was around 200bp and that he was working to reduce it.
However, he also warned of the economic slowdown, market volatility and high inflation.
we will also need to make the right adjustments/decisions in our investment outlook and cost structures given this new materially different prospective reality, Gupta said.
The startup is looking to tighten its budget amid global market volatility, high inflation and disruption in supply chain management, the CEO said. What this means is that our cost of capital will increase and we have to stay tight and be judicious with our capital spending.
The statement comes at a time when there are prediction of an impending recession and rumor of a funding winter amid the war between Russia and Ukraine. With a decrease in funding, many startups have shelved their expansion plan, while many of them have also laid off their employees.
Udaan has raised $1.5 billion in funding so far. In January of last year, the e commerce platform raised $280 million in funding from investors including Octahedron Capital and Moonstone Capital.
Udaan, bound for the initial public offering, competes with IndiaMART, Flipkart Wholesale, among others.
According to a report by investment bank Jefferies, India’s B2B e commerce market is estimated to scale to $100 billions in size by 2032, growing at a compound annual growth rate CAGR of 40%.
