How CEO Abhiraj Bhal Looks To Lead UrbanClap To Profitability In The Next 12 Months

Abhiraj Bhal thinks that the term ‘hyperlocal’ is overused. In fact, according to him, the term might even be abused. Abhiraj Bhal would know what he is talking about, since he is the co-founder of hyperlocal startup UrbanClap, which he launched along with Raghav Chandra, Varun Khaitan on November 10, 2014.

An IIT Kanpur and IIM Ahmedabad graduate, Abhiraj Bhal, left his illustrious career as a consultant at The Boston Consulting Group to embark on the exhilarating journey of entrepreneurship. For the uninitiated, UrbanClap is a mobile marketplace for on-demand local and home-based services in up to 97 different categories including beauty services, photographers, electricians, home cleaning & repairs, yoga & guitar instructors, etc.

Operating in eight cities – Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Kolkata, Mumbai, and Pune – the startup boasts of investors such as Snapdeal co-founders Kunal Bahl and Rohit Bansal and Ratan Tata. Till date, it has raised $60.7 Mn funding in six rounds led by major VC firms like SAIF Partners, Accel Partners and Bessemer Venture Partners. Over the last two and a half years, UrbanClap has amassed a rather impressive user base of more than 1.5 Mn customers and 65,000 verified service professionals. In January 2017, Bhal authored a detailed article for Inc42, where he wrote:

“If 2015 was the year of product market fit and liquidity, and 2016 was the year of monetisation and customer experience, 2017 for us will be the year for user and supplier growth. While supply growth is often a function of time and hard + smart work, user growth is a harder problem to crack.”

With his eyes set on bolstering growth and expansion, Bhal currently handles operations and service provider on-boarding at UrbanClap. The marathon running and sky-diving enthusiast admittedly falls back on his past experience as an advisor to Fortune 500 companies in Germany, India and Southeast Asia to do it all. We at Inc42 recently conducted an AMA discussion with the man himself.

Here are the most interesting insights Bhal offered during the session:

Inc42: What is the one thing that has helped UrbanClap survive the end of the so-called hyperlocal bubble in 2016?

Abhiraj Bhal: The one thing that has helped us thrive is a very sharp focus on the quality of experiences, both for our service professionals as well as our users. Typically, UrbanClap has less than 15% acceptance rates for service professionals. This means that, if we interview 100 professionals, only around 15 of them will actually be taken live on our platform. For the 1,000-odd beauticians who are currently working on the UrbanClap platform, we have interviewed more than 19,000 beauticians. That is an acceptance rate of about 5%.

We have a sort of fanatical focus on user experience, quality of services, quality of our service partners as well as the experiences that our service partners have. That is not just the reason why we have reached the point we are at today, but is also why we continue to do well. We have continued to focus on high-quality user and partner experiences, which is what will eventually help turn UrbanClap into a large, legendary company.

Inc42: How defensible is opening a hyperlocal startup today?

Abhiraj Bhal: First of all, I think the word “hyperlocal” is a very overused, and maybe even abused, term. Fundamentally, hyperlocal startups try to solve a problem at a very localised level. I think there are multiple problems that remain unsolved at the localised level. It completely depends on what problem one is looking to solve using a localisation approach.

Obviously if one is trying to provide hyperlocal food delivery or hyperlocal services, it might not be very defensible because we already have incumbents like UrbanClap, Swiggy or Zomato in the space. But if one is trying to solve a completely new hyperlocal problem, which hasn’t been solved so far, then it could very well become successful.

Inc42: How was UrbanClap’s journey in enabling trust on the platform in the first six months?

Abhiraj Bhal: The first six months were very interesting. A lot of what we were trying to do was actually figuring out how to remove friction from the core user’s journey. Trust, at that point, was harder to build because we were a new venture. At the same time, we did not have scale.

So, this meant that the co-founders could directly get involved in every transaction, and that helped grow trust among customers. Doing that also helped enhance our understanding of what was critical for users in that particular transaction journey, what were the points of pain, and so forth.

Inc42: Are you looking for an IPO? If yes, what are the major hurdles you’d like to cross off your list before looking for an IPO?

Abhiraj Bhal: Absolutely, I am definitely very keen to take UrbanClap public, and I do think that it is something we can achieve in the next four to five years. There are three hurdles that I would like to cross before that. Number one is a minimum revenue and scale. In my mind, $100 Mn-$200 Mn should be the threshold for our commissioned revenue, which I think is a reasonable scale to take the company public. At that point of time, it will be really helpful if we also Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) positive, and I think we should be. There are two or three long-term goals that we have identified and have started building towards. The most important one of them is a deep, five-level integration with our suppliers and service professionals. I would like UrbanClap to have consolidated these two or three long-term moves before going public.

When you take a company public, it is very important that your sustainable competitive advantage is not just identified, but actually consolidated and codified. I think we are on the path to doing that.

 

Inc42: How did UrbanClap manage to avoid the hyperlocal shutdown curse?

Abhiraj Bhal: I don’t think there has been any hyperlocal shutdown curse as such. Every space that is competitive and lucrative sees intense competition initially. And this is true for all consumer Internet spaces. There is probably no space out there that hasn’t, in its heydays, seen 300-400 companies taking a crack at it, be it taxi aggregators, ecommerce, social media, etc. I think the nature of consumer Internet is such that only one of two players eventually survive and get scaled up. That is probably what has happened in the hyperlocal space.

Inc42: Don’t you think UrbanClap pricings are on the higher side? Won’t having competitive prices allow more customers to use it?

Abhiraj Bhal: No. In fact, for the large part, UrbanClap pricing is either competitive to market standards or actually lower. We achieve this by bringing more utilisation to our service professionals, and therefore, driving lower prices. Time is the only commodity that service professionals can actually monetise. Because India has a very large population, we are actually an over-supplied market from a service professional standpoint. And oversupplied markets lead to higher pricing. So, we are actually an overpriced market when it comes to home services and hyperlocal.

By driving utilisation, you can lower pricing. However, as a platform, we have not resorted to discounting. The larger opinion within the Indian consumer Internet space is that online players offer discounts.

Inc42: In your opinion, what are some of the new technology trends we could expect in the hyperlocal segment?

Abhiraj Bhal: In home services, blockchain is one disruptive technology that could gain traction in the coming years. I think almost every marketplace could adopt blockchain to improve trust, quality of experiences as well as transparency of transactions.

Inc42: You have said earlier that 2017 will be all about user and supplier growth. Can you share your progress regarding this claim?

Abhiraj Bhal: We have grown very well in 2017 so far. In the first six months, we have scaled our revenues almost three times. We have also scaled the total number of professionals and consumers on the platform nearly 2.5 times. So, progress has been good.

Inc42: What do you personally think about innovation in the Indian startup ecosystem?

Abhiraj Bhal: I think the Indian startup ecosystem is thriving. There are a lot of innovative companies out there. I also think we can have a lot more people taking up entrepreneurship. India needs a lot of entrepreneurs and problem-solvers. The bulk of India’s problems will not be solved by the government, but by innovators. I am also very inspired by what the Indian startup ecosystem has achieved so far. We are at a very interesting cusp in our evolution as a country, and think there is no better time to be alive as an entrepreneur than today.

Inc42: Are you planning to take a micro-category approach and launch separate brands?

Abhiraj Bhal: Especially under lifestyle and equipment services, I have thought about it. I don’t have an answer to it right now. I think micro-categories would make more sense in the beauty domain. At this point of time, we don’t have the capital to build multiple brands. We’d much rather invest in one brand and grow it further.

Inc42: What does the entry of strong players like Google and Amazon mean for the hyperlocal space?

Abhiraj Bhal: There is almost no large space out there that is not on the radar of Google, Facebook or Amazon. In fact, if you are building something which is not on the radar of these three giants, you are probably not attacking a large enough problem. That said, it means nothing. It is simply because, across the history of time, large spaces have always by entrepreneurial-leg first-time teams. Services is a very complicated and large domain. The kind of expertise it takes to actually win in the home services domain is very unique to the space.

Inc42: Can you tell us when UrbanClap will hit profitability?

Abhiraj Bhal: Right now, the focus is on growth. The idea is to grow the platform and not focus too much on profitability. We are not very far away from profitability. Without disclosing exact numbers, our revenues cover about 65%-70% of our cost today. Our cost has been flat for the last 24 months. So, we have managed to grow the company 10 to 15 times without increasing employee or marketing costs.

I think if we do a good job, we should be able to reach profitability in 12 months. But we may go back into a phase, where we continue to invest in the company and build to large scale. The end game is not to become profitable at a small scale, but to become a profitable company at a very large scale.

For Abhiraj, the focus is on facilitating growth and expansion in an organic way, based on high-quality service and user experience. In the hyperlocal industry, which saw more than 100 shutdowns in 2016 alone, his insistence on organic growth and high-quality customer experience could help secure UrbanClap’s future as a category leader.

Answering a commenter’s question about increasing competition from international players in the hyperlocal space, Abhiraj Bhal concluded, “The honest truth is that I don’t think about competition. We only worry about what we are supposed to do, and whether users have a good experience with UrbanClap or not. Because this space remains unsolved globally, we take ourselves as reference points. We do everything at UrbanClap from the first-principles perspective, and that’s who we optimise for.”