Business is an unpredictable phenomenon. You can be a millionaire, if your start-up is successful, or run a complete shutdown if it fails. The only thing that keeps a business alive are the reliable investors and the dedicated employees. UrbanClap, a Delhi based start-up faced a similar situation where it encountered huge loses and was in a verge of shutdown, until Ratan Tata acted as a saviour.
UrbanClap one app for all your local services
Urban Clap is home service company that is based in Delhi. The company was founded in the year 2014 and it has been maintaining a growth ever since. By 2015, the amount employees that were working in this company gave a count of 10,000. Now by 2018, the amount jumped to 20,000. This was mainly, due the increase in orders. Meaning earlier it was serving 1.5 million customers and by fiscal year of 2018 it jumped to 3.3 million customers showing a rise of 3x jump. Achiral Singh Bhai, who happens to be the co-founder of the company wishes to serve more number of cities, since as of now it only serves 10 cities across India.
Reason behind the fall of UrbanClap
The company was already under the loss of 66.7 crores by 2018. The two investors that backed this company were Vy capital and Bessemer Venture partners. The main reason failure, was the fact that it did not increase the service charges for the customers for 2 years straight. Meaning they invested a lot on products and services, but did not manage to make a profit out of it. The products that were given to the customers were at the price that they brought from the market.
Furthermore, the Urban Clap application offered discount on services which added to the burn. Urban Clap is a company that spends huge amounts in house training. The professionals are updated with the latest trends in beauty and electronic appliances which require large capital. So if you offer discounted services with talented professionals then you are bound to suffer loss isn’t it? Urban Clap was so busy in making more customers that they did not realise that they are not generating enough revenue.
For instance the Urban Clap was only company that used jet spray Japanese technology to clear the dust and moisture from ac. All the machines were imported from japan, and an in-house training was provided to the new hires and the existing employees. All this, required huge capital and overhead cost. The professionals on the other hand, charged a very nominal pricing for the customers. The service charges were low and hence the customers were happy.
Ratan Tata Invests in UrbanClap
Since the company was undergoing losses at an alarming rate, Ratan data acted as a saviour and made the company a profitable enterprise. Ratan Tata acted as the new investor for Urban Clap and thus Urban Clap managed to reduce the loses from 72 crores to 57 crores. The loses shrank, which made the company to have a boost in expenses. Now the company records an increase in expense of 31 %. Meaning the expenses spiked to 109.6 crores to 83.7 crores from last year.
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