A carpenter sands a wood cabinet. (Photographer: Brent Lewin/Bloomberg)

It’s A Long Road To Profitability For UrbanClap

One of the leading home services startups in the country, UrbanClap Technologies India Pvt Ltd., saw its losses mount to close to Rs 60 crore in the last financial year, according to the company’s filings with the Registrar of Companies.

The Bengaluru-based startup which counts Ratan Tata, Saif Partners, Accel Partners, Bessemer Venture Partners, Snapdeal founders Kunal Bahl and Rohit Bansal amongst its investors, also saw its total revenue grow exponentially to touch Rs 2.8 crore for the year-ended March 2016, versus just Rs 2 lakh in the same period last year. More than 60 percent of the revenue came from other income, like interest from investments made, as per the company’s filings. Only Rs 80 lakh came from commission received on services provided. Losses on the other hand increased from Rs 56 lakh to a massive Rs 59 crore in just one year in financial year 2015-16.

Until December last year, the company did not monetise at all, and instead focused on getting sellers and customers on board, Abhiraj Bhal, co-founder of UrbanClap told BloombergQuint over the phone.

From January to December 2015, we had taken a bold decision to not monetise and spent heavily on marketing and, in fact, charged zero commission from sellers on the platform. Whatever revenue you see is from January 2016, and that is when we started to reduce our marketing spend and shifted focus on charging commission from the sellers.
Abhiraj Bhal, Co-founder, UrbanClap

According to the company’s filings, the marketing expenses and promotional discounts increased from Rs 7 lakh to Rs 31.9 crores accounting for a major chunk of the company’s expenditure. This was followed by expenditure on salaries, staff welfare expenses, and employee compensation which grew from Rs 25 lakh in financial year 2014-15 to Rs 21 crore in financial year 2015-16.

The Road Ahead

Bhal said the firm is eyeing a revenue of Rs 15-20 crore in the current financial year and aims to restrict losses to Rs 50-55 crore.

“While we continue to have losses, as we are still on the investment path and continue to expand and grow, we will be cutting down on our losses as we go forward. We have already reduced marketing spends significantly, while customers on the platform have increased four times, compared to last year,” he explained.

Until last year the cost of customer acquisition was as high as Rs 700-800 per customer. The firm has already brought it down to Rs 300-400, and will continue to do so in the coming year, added Bhal.  

There is still enough depth for us to monetise as we are growing, he said. “We have started charging commission on standardised services from January this year and slowly rolled out customised services. In fact, our revenue from commission in December alone is Rs 1.5 crore, which is more than the total revenue we earned in the first three months of this 2016.” he stated.

Founded in 2014, the startup connects home services professionals such as plumbers, interior designers, home cleaners, and many others to customers. It serves around 6,000 customers every day and has a presence across nine cities. Bahl says the target is to turn profitable in 2019.

Competition

The high cash burn has taken a toll on a number of home service provider startups in 2016, with some shutting shop and others being acquired.

Bangalore-based Qyk, changed its business model to become a house building service aggregator under a new name, Paperstone in May. FindYahan was acquired by bigger rival Zimmber. Paytm had completed its acquisition of services marketplace Near.in in January. Doormint, a Mumbai-based laundry services startup shut down in September.

UrbanClap competes with Housejoy, Zimmber, Timersaverz among others.

BloombergQuint