Continuos exits, struggle to raise new funds: Urban Ladder's uphill task

Online furniture retailer Urban Ladder is seeing rough weather on many fronts. The eight-year-old firm is struggling to raise new funds, contain top-level attrition and survive amidst rising competition.

On Monday, co-founder Rajiv Srivatsa announced that he was moving on. While it is not unusual for co-founders of startups to hang up their boots after some years — recently, Zomato co-founder Pankaj Chaddah also moved on — for Urban Ladder this is quite a blow. 

“There have been murmurs for some time that Rajiv and Ashish (Goel, co-founder and chief executive officer) were having differences on strategic decisions,” said a source close to the company, requesting anonymity. Srivatsa had an event in his personal life two years ago and has since been focusing on writing about health and wellness, the source added. Srivatsa blogs at Medium, an online social platform, and goes by the handle @telljeeves.

At Urban Ladder’s Bengaluru headquarters on Tuesday Srivatsa told employees that he was “starting out on a fresh slate,” and would explore new ideas. However, he plans to continue to come to office for some more time. Srivatsa and Goel, batchmates at Indian Institute of Management, Bangalore (IIM-B), launched Urban Ladder in 2012.

Srivatsa’s departure is not the only event that is spooking the company. Vani Kola, Managing Director of Kalaari Capital, one of Urban Ladder’s major investors, has also stepped down from the company’s board. “Of greater concern is the investor vacating the board seat,” said a senior investor not associated with Urban Ladder. “This never happens in start-ups. When an investor has money in a company, they stay on to influence decision-making until they write-off the investment,” he added. 

Calls to Vani Kola went unanswered till this article went to press. In an emailed statement, Urban Ladder CEO Goel stated, “Kalaari Capital continues to be a shareholder. It is their internal call to appoint an alternative director. Vani, of course, continues to be a guiding force for us.”

The current situation at Urban Ladder follows a series of top-level exits and at least two instances of company-wide retrenchment. Over the last two years, Rushabh Sanghavi, vice-president, category and sourcing, Nikhil Ramprakash, vice-president for online sales and marketing, Parag Shah, vice-president, fit-outs, urban interiors and alliances, and chief marketing officer Sanjay Gupta, among others — have quit the firm. 

In July this year, the company retrenched 90 people and brought its total employee strength down to 711. Several people were also laid off in 2016, when Urban Ladder had its highest staff strength of over 3,000.

Urban Ladder and its chief rival, PepperFry, started out in 2011-12. Till 2015-16, they were growing neck-and-neck on the back of huge venture capital funding. Around this time, both players realised that consumers were reluctant to buy furniture unless they got to have a look and feel of them. So both pivoted to an omni-channel strategy, and over 2017-18, opened ‘experience stores’ across metros. Stores required more capital, and from hereon, the VC balance tiled towards PepperFry.

To date, Urban Ladder has raised Rs 744.7 crore while PepperFry has raised over Rs 1,350 crore, which is almost double that of its competitor. Significantly, Urban Ladder’s last two funding rounds in 2017 and 2018 were entirely funded by existing investors Sequoia, SAIF, and Steadview Capital.

“For sustained growth in any e-commerce business a constant supply of capital is key, which is what seems to have dried up (for Urban Ladder),” said K Ganesh, a serial entrepreneur and investor. “Also, if horizontals get into a category, it is very difficult for that category to exist on its own,” he said.

Last year, global furniture heavy-weight Ikea opened its first store in India and subsequently, started furniture e-commerce as well. 2013-14 saw furniture rental firms Furlenco and RentoMojo scale up massively, which impacted the sales of Urban Ladder and others of its ilk. And, finally, in 2017, e-commerce biggies Amazon and Flipkart stepped on the gas in the furniture segment.

Meanwhile, Urban Ladder has tried to cut costs and focus on unit economics. According to the latest available figures, in FY18, the company cut losses by 74 per cent to Rs 119 crore and doubled revenues to Rs 204.73 crore. Total expenses in the year were Rs 284.91 crore — down from Rs 560.99 crore. 

Amazon and Flipkart have been in on-again off-again talks with both PepperFry and Urban Ladder for a potential merger. Many industry watchers say this is the only logical move forward for niche players such as Urban Ladder. But those talks haven’t fructified yet.

Pinakiranjan Mishra, partner and national leader, retail and consumer products at EY, feels that it is much easier for an Amazon or a Flipkart, which have massive traffic and large consumer bases, to introduce and grow any new product category. “However, some niche categories like, say, grocery, FMCG, furniture and jewellery require specialised product offerings and still gives scope for vertical players to thrive,” he said.