Udaan’s Valuation Falls By 45% In Major Down Round

Thus far, most of the valuation cuts that Indian startups were facing were only on paper — investors had been updating downwards the values of the investments they’d already made. But these markdowns are now becoming increasingly real.

B2B retail unicorn Udaan was valued at $1.8 billion in a round last month in which the company converted debt notes to equity. This is a sharp fall from the valuation of $3.2 billion at which the company had last raised funds at in January 2021. With a halving of its real valuation in three years, this is one of the biggest down-rounds among Indian startup unicorns.

A down-round is a funding round which occurs at a valuation that’s lower than a valuation a startup has previously raised funds at. Startups are meant to quickly grow their valuations and turn into large companies, so a funding round which sees a startup’s valuation fall instead of rising is thought to be a red flag both for investors and customers.

Udaan had once been a rising star in India’s startup space. It had been founded in 2016 by 3 former Flipkart executives, and had created a record by becoming India’s fastest unicorn, attaining a $1 billion valuation within 18 months of being founded. In October 2019, Udaan had been valued at $2.8 billion, which further rose to $3.2 billion amid the heady boom times of 2021. But three years later, the company has seen its valuation fall back to $1.8 billion.

Udaan has been grappling with headwinds over the last few years. In 2021, companies like Parle and Amul had stopped supplying goods to the company after their distributors had complained that it was undercutting their business. Udaan also had to contend with newer players like Reliance Jiomart, which have created their own B2B arms. As its losses soared, Udaan was forced to cut costs — in 2020, as the coronavirus pandemic had hit, Udaan had fired 500 full-time employees and 2000 contract workers. In June 2022, the company had fired 200 employees, which had then constituted 5% of its workforce. In November 2022, Udaan has gone ahead and fired 350 full-time employees.

Udaan has now seen its valuation be halved over the last 3 years. It isn’t the only unicorn which has had to contend with a down-round in recent times — PharmEasy had seen its valuation slashed by 90% in a funding round last year. And with global tech companies continuing to lay off workers, and new funding remaining scarce, there could be a whole lot of down-rounds in the offing for India’s embattled unicorns.