[The Turning Point] How B2B unicorn OfBusiness started with connecting the dots
Recently, Gurugram-based B2B startup entered the coveted billion-dollar unicorn club.
The startup raised a $160 million round led by SoftBank's Vision Fund 2, with participation from existing investors, including Falcon Edge Capital and Matrix Partners, which almost doubled OfBusiness’ valuation from $800 million to $1.5 billion — making it the 18th unicorn to enter the $1 billion valuation club this year.
OfBusiness was launched in January 2016 by Asish Mohapatra, Vasant Sridhar, Ruchi Kalra, Bhuvan Gupta, Nitin Jain, along with the extended founding team of Lokesh Garg, Dhruva Shree Aggarwal, and Pratyush Nalla, who have a collective work experience across McKinsey, Religare, Royal Bank of Scotland, ITC, and Snapdeal.
Back in 2015, everyone was in different stages of putting their papers down and were looking to start something of their own. They felt that businesses of real India — which are SMBs — have a large piece of the puzzle to fix.
They were connected through an extended network, and one knew another. “We all connected with each other and agreed on solving B2B problems of India, and the dots were connected,” Co-founder Vasant Sridhar told YourStory.
The co-founders wanted to build a large B2B platform, catering to small and medium enterprises across sectors like manufacturing, construction, etc.
“The spark was that B2B was an unknown market back in 2015. It was a big wave of B2C at that time,” Vasant says. The founding team was very clear that although it is a good time for B2C, B2B business in India is an even larger market.
“We knew that the way the B2B ecosystem was operating, there was no innovation, technology adoption, or just efficiency in the ecosystem. Fundamentally, all of us believed in that, because we all had seen B2B as part of our corporate jobs,” he adds.
OFB Tech (OfBusiness) is a tech-enabled platform that facilitates raw material procurement and credit for SMEs with a focus on the manufacturing and infrastructure sectors.
It integrates technology to SME's buying behaviour to make available better products at better prices in better timelines to customers with comprehensive online and offline support.
It helps procure key raw materials, including metals, chemicals, polymers, agri commodities, petrochemicals, and building materials.
In fact, OfBusiness provides SMEs access to cash flow-based financing for buying raw materials through its NBFC 'Oxyzo Financial Services'.
The company also offers a host of tech services for SMEs, including BidAssist for new growth opportunities.
OfBusiness aims to be profitable by crossing more than $1.1 billion revenue run rate in commerce by September 2021. The startup claims to be growing 4X annually.
Turning to finance
The real turning point was the launch of its NBFC arm, OXYZO, in 2017. The lending vertical is the second-largest business vertical of the unicorn, with a loan book of over $200 million.
“In the initial years, we realised that one large piece of the puzzle that needs to be fixed in B2B is financing,” says Vasant.
He explains that any B2B transaction is layered with a lot of credit, cash flow, and capital requirements, which indirectly means finance is a part of it.
“In India, whether it is a large company like ITC or an SMB, who procures something from a vendor, the transactions happen on credit,” Vasant explains.
The founders asked themselves in a long car drive that “what is that one thing that could give a great stickiness and moat that will ensure you hold the customer with you forever?”
And, the answer was lending. “Because we layer credit on top of commerce, our repeat rates today are 90 percent of our customer cohort,” says Vasant.
The founders claim the financing feature has driven the startup’s growth to where it is today, and hence, this has been the true turning point for the company.
YourStory’s flagship startup-tech and leadership conference will return virtually for its 13th edition on October 25-30, 2021. Sign up for updates on TechSparks or to express your interest in partnerships and speaker opportunities here.
For more on TechSparks 2021, click here.
Applications are now open for Tech30 2021, a list of 30 most promising tech startups from India. Apply or nominate an early-stage startup to become a Tech30 2021 startup here.