The rise of India’s fastest growing startup: UrbanClap
Imagine you’ve lost the key to your house, have in-laws coming over whilst your domestic helper is on leave, or have the AC break down in the peak summer time. Perhaps the first thing you do is call the building security or neighbourhood friends asking if they know someone who can help you out. How reliant or price transparent has that been? Most likely you waited for ages before the issue was resolved, and paid more than an average amount for “emergency service”. The most common complaint however, is that it was a temporary fix and the issue resurfaced again—a common tactic used by service providers to get repeat business.
So the problem is: there is no accountability, no trust, no transparency, and most of all, low service quality. That’s where UrbanClap comes in—the fastest growing startup in India that connects consumers to two broad categories of service providers: housekeeping, which includes plumbers, electricians, carpenters, cleaners and pest control; and more creative or personal services such as beauticians, mobile and other appliance repairers and wedding photographers.
Founded by Abhiraj Bhal, Varun Khaitan and Raghav Chandra in December 2014, UrbanClap is a tech-enabled marketplace with a total of USD 110.7 million in funding as of December 2018. In its latest funding round, which took place in November 2018, the company raised USD 50 million in Series D funding led by Steadview Capital. With strong backing from big-name investors such as Ratan Tata, Vy Capital, SAIF Partners, Accel and Bessemer Venture Partners, they are aggressively expanding and strengthening their market position within tier-one and recently tier-two cities of India.
In mid-2018 UrbanClap expanded to Dubai with a limited number of services on offer. However, as per Chandra, they see this more as an expansion of India as the UAE has one of the largest segments of Indian population; and are not planning to expand further out of their home base in the coming future.
Within just 24 months of its inception, UrbanClap has quickly become the segment leader and are proving to be a serious competition to Amazon-backed Housejoy and Tiger Global-backed LocalOye. Whilst these are the major players in the home service industry of India, Traxcn finds that there are 270 similar companies that have been set up in past the five years.
So what’s unique about UrbanClap that led them to grow so quickly in the country of more than a billion people? Exactly that—the problem of low quality and unreliable service providers being faced by the second largest population of people. Let’s look into their the business plan and how they solved the problem.
UrbanClap tackled the challenge faced by the consumers on two major levels:
1. Hiring in-house quality professionals for blue-collar work like cleaning, plumbing, electrical work, and training them well. This increased accountability and consumer trust, as the people could call a reputable company if something went wrong and be assured of good service.
2. Partnering with higher level, skilled professionals, such as beauticians, wedding photographers and designers, who were disconnected from the potential market.
UrbanClap goes beyond a mere search and discovery platform, by on-boarding and training service providers to provide quality to the end consumer. In Bhal’s words, they take quality control very seriously, with only 20-25% of the applicants being accepted after rigorous in-person interviews, background and criminal checks, along with a skills test before taking anyone on-board. In addition, they also monitor quality through customer reviews. Bhal said that if a provider’s average rating drops below 4.0, the platform stops sending them work. Whilst there is a process for those workers to retain their positions, except for cases of misdemeanours, they need to go through re-training.
When it comes to more creatively skilled professionals, the company has a unique operating model that monetises by charging only 20% of the value of services rendered, which benefits both parties. “If you see the economics in a beauty parlour—the beautician keeps 15-20% and the parlour keeps 80%. So, for us, it is reverse math; from earlier making 15%, now (they) make 80% and this is from where they get 3-4x jump in their monthly earnings,” Bhal pointed out.
The company started because “Our personal experiences made us realise that even in 2014, hiring local service providers was actually extremely hard and difficult—whether it is a reliable plumber or a reliable yoga trainer or a reliable wedding photographer,” said Bhal. Even though it’s still running at a loss, like most startups in their initial years, it has seen 309% revenue increase and 25% reduction in loss from the previous financial year.
In all, we see that UrbanClap has got two ingredients for success right at its core: solving the problem at a grassroot level and bridging the gap in the market. With millennials and young families as the primary market for the segment, it simply comes down to the adoption rate. Will its growth spur and leading position in the market continue with internationally backed competitors? This is a question only time will answer.