From product-tech startup to home services unicorn, the long and winding journey of Urban Company
Shradha Sharma sat down with Abhiraj Singh Bhal to talk about the challenges of creating a consumer services brand that has now become a household name, and how the company has evolved from a non-profitable product-tech company to a prominent service company.
Sunday November 20, 2022,
6 min Read
Consumer and home services are a tough nut to crack—not just in India but across the world. Finding a suitable and efficient business model for a services marketplace is always an uphill challenge. In the last few years, many entrepreneurs and existing businesses have tried to create scalable technology-based platforms matching supply and demand.
—the largest tech-enabled home services platform in India today—cracked this puzzle and successfully addressed the needs of both consumers and MSMEs, especially micro-entrepreneurs.
Entered the coveted unicorn club last year, the company was at an exciting growth stage when it closed a $255 million funding round just a few months later, in June 2021, at a valuation of $2 billion. Further, its operating revenue grew by 76.7% to Rs 437.6 crore in FY 2022.
But Urban Company’s story stretches back to 2014 when Abhiraj Singh Bhal teamed up with Raghav Chandra and Varun Khaitan to found the company, which was then known as Urban Clap.
While the trio did their share of permutations and combinations to find a winning model, they have constantly evolved their business model based on changes in the market.
“We realised this is what product-market fit looks like. When you get it right, you realise it and see that sort of hockey stick growth starting to kick in,” Co-founder and CEO Abhiraj tells YourStory Founder and CEO Shradha Sharma in an interaction.
Over the last four to five years, Urban Company followed a bottom-up approach for building capabilities using training, product procurement, standardisation of tools, financing, etc— which formed the foundation of the entire vertical stack that the company leverages for an efficient business model today.
“As an end user, you only see the tip of the iceberg, and that's all you are bothered about. What you want to be assured of is that if you click a button, somebody shows up in uniform and delivers an immaculate service at the right price. All the backend operations, technology, training and products have to work efficiently to deliver that,” he adds.
That's what Urban Company has built over the last eight years.
Respecting the gig economy
The one thing the company does best is providing value addition to its marketplace operators. The company has four pillars - the building blocks of a long-term sustainable platform - by empowering professionals who, in turn, deliver happy customer experiences.
“On our platform, the end professional is all that matters,” says the CEO.
The first pillar is earnings. “As a starting point, we ensure that our service professionals at least get a living wage, if not more. Many of them make a lot more.” This was corroborated by its recently published second version of the UC earnings index for Q3 FY22 where the company’s partner earnings grew 11% quarter-on-quarter compared to Q2 FY22. The top 20 percent of its partners earned an average of Rs 38,263 per month.
The second pillar is social security, under which the company provides life, accidental and health insurance to all its professionals free of cost in India, along with offering financial inclusion programmes.
The third pillar is training and upskilling.
“We have created a path for career progression for all of these service professionals. So, a beautician can start as a level one beautician, go to level two, and on level three, they eventually become a trainer on our platform. Out of the 400 trainers that we have, about 200+ come as prior service professionals,” Abhiraj shares.
Alongside these provisions, Urban Company recently said it would allot company stock options worth Rs 150 crore to its gig workers—who comprise plumbers, electricians, cleaners, groomers, and so on, using the ‘partner stock ownership plan’ (PSOP).
“One of the values is called win-win, which means you have to create solutions that win for the consumer and win for the service professionals.”
The scope of operations for home services has also expanded in the last few years. This has opened the doors for new support ecosystems such as background verification, skill upgradation, and continued coaching. The journey starts with a rigorous screening process for a service provider at UC, followed by two rounds of personal, skill-based interviews.
“During these trainings, we don't just look for skill; we look for attitude. We look for customer centricity, and we see if this person is coachable,” Abhiraj explains.
With a growing assortment of choices in the market, niche players differentiate themselves by retaining both—individuals by tapping into their satisfaction quotient, and incentivising their service providers—the latter Urban Company has mastered.
“You want to ensure that the service professional is incentivised to create delight, not just to follow SOPs,” he adds.
The onset of COVID-19 around the country proved to be a significant roadblock. “It was an existential moment for the company. For the first one and a half months in the lockdown, our business was zero,” shares Abhiraj.
However, as opposed to slowing down or cutting costs, the team decided early on to double down. They started by protecting their entire supply side through safety protocols and vaccination drives.
Long-term vision and challenges
From a long-term adaptability standpoint, the company focuses on delivering better experiences for its flagship services through a constant array of experiments and pilots.
“Unfortunately, we can't do everything ourselves. So, we're now also looking at other companies," he said.
As the home services business continues to rebound and grow, the company is preparing to capitalise on an influx of demand and adapt to rapidly changing customer needs. It is also battling a long list of challenges—from worsening EBITDA margins to a 90% surge in expenses for FY22.
It’s not an easy act to balance supply and demand amid rapidly growing marketplaces. At the same time, Urban Company has to ensure the fundamentals of standardisation are maintained during service while operating at a massive scale. According to Abhiraj, the last-mile delivery remains and will remain, for the better part, un-automated as the company has a massive dependency on human efforts.
Where does Indian consumerism stand today?
The Indian consumer is opening up the purse strings and is willing to try out new experiences, especially those provided by home services.
According to Abhiraj, the Indian consumer is not a monolith.
“There are some wonderful stories, and I'm often amazed at how our consumers develop deep relationships and bonds with their service professionals. There’s respect, and there's a sense of belonging to a community and that matters.”
The CEO believes that such bonds make it pivotal to retain these professionals on the platform as service providers can easily bypass the platforms and cater to consumers directly. The company prevents this through dedicated initiatives that enable loyalty to one aggregator.
The home services industry has leapfrogged in recent years in terms of its evolution, adaptation and consolidation rates, and is expected to become a $65 billion industry by 2026.
“One of the things we take great pride in is that we have a great team at Urban Company. And we're not just great at recruiting talent; we're great at retaining talent. That talent stays for a long period, and they make this company their own,” Abhiraj signs off.
Edited by Kanishk Singh