BlackBuck ‘s Gallop to Be a B2B Unicorn

Last fortnight, BlackBuck reported it was planning to scale to a million drivers as it raised capital to be a unicorn.

Owl By Themselves

In the summer of 2010, Rajesh Yabaji was about to begin his journey at ITC, a large FMCG conglomerate known for its supply chain complexity.

An army boy who dreamt of becoming a fighter pilot, Rajesh graduated from IIT Kharagpur and his love for operations took him to ITC.

During his ITC stint, Rajesh realized that transportation was the hardest to crack as each unit be it factories or production plants had its own transportation with no synergies or integration.

Historically, transportation has remained amongst the hardest and most non-glamorous areas to start up. Massive inefficiencies, inadequate warehousing infrastructure, poor skills of logistics professionals and hesitancy to adopt technology have been some of the biggest challenges plaguing the industry for decades.

But within the enormity of the problems, Rajesh saw a big opportunity in the ‘dhool mitti’ (grassroots) industry.

The three-year project in ITC, which also helped him identify his other two co-founders Rama Subramaniam and Chanakya Hridaya, made him realize that while the overall cost of the supply chain had fallen to 25%, they were able to manage only 1.3% reduction in freight.

Yabaji realized that this inefficiency in the supply chain was part of a larger systemic problem and what they did on a ‘small scale’ for a ‘large business’ like ITC could be done for the entire nation.

A bigger opportunity clearly awaited, and the three decided to take a crack.

In the summer of 2015, BlackBuck would begin.

Baby Don’t Herd Me

The trio started with the mission to make trucking simple, intuitive and efficient through cutting edge technology.

The two biggest pillars it aimed to rest on was being an asset-light model and taking an ecosystem approach. The three zeroed on the long-haul full truckload model (FTL) where customers book an entire truck for intercity shipments.

BlackBuck would be an online trucking aggregation platform that matched a shipper with a trucker to facilitate inter-city freight transportation.

Like any other two-sided matchmaker, it would provide “buyers”, or companies looking to ship cargo, access to a large network of “sellers”, or fleet owners and truckers.

BlackBuck intended to provide higher product demand and higher service levels, resulting in increased business for both shippers and truckers. By virtue of being a marketplace, it would facilitate efficient price setting that helped both sides of the market.

The cost savings would, in turn, be passed on to both the customer and suppliers creating a strong moat and a win win situation for its stakeholders.

Blackbuck appeared to have a strong edge over traditional peers and could be off to the races.

Whale, Hello There

Blackbuck witnessed exponential growth right from the start.

Starting with 10K trucks in Dec 2015, it was operating 50K trucks by May 2016. Its monthly revenue growth was 60% with clients ranging from ones who ordered ~20K trucks a day to SMB’s ordering 3 trucks a month.

By the end of the year, it already had a presence in over 40 locations across the country. BlackBuck picked up $30MM on the way, which seemed like the kind of capital that most year old startups can only dream of.

But BlackBuck had a long journey planned as it was sitting on a massive market opportunity.

It aimed at leading the digitization of India’s inefficient, legacy and fragmented freight industry, of which road freight comprised a significant 63%. In 2017, the road freight market was pegged at a massive $140Bn.

By 2020, as India’s total freight industry grows to $307 billion, road freight is estimated to grow to $193 billion, amounting to an 11% YoY growth.

Trucking alone contributed 5% to the GDP and was growing faster than the economy itself. The roll out of GST unified the market with a downstream effect on the logistics sector.

Organising this huge, fast-growing market through its tech solutions was one of BlackBuck’s goals, if not the end destination.

But why would businesses in India and drivers of 18-wheel vessels be willing to ride with BlackBuck in its journey?  The marketplace was only just the surface of the suite of benefits it had on offer for the industry.

Creating a marketplace for an asset-heavy industry allowed Blackbuck to completely transform it.

Boaring Through

Through its model, BlackBuck was disrupting the deep nexus of trucking intermediaries who connected shippers, truck owners, freight forwarders, loaders and unloaders.

Shipping companies had to pay for each of them separately, resulting in unnecessarily high logistics costs. It was no surprise that they readily bought into BlackBuck’s “demand” app.

The app allowed them to achieve cost reduction as they found cheaper cargo carriers through direct contact with the truckers and prevented transportation delays through access to a larger pool.

But how did it manage to appeal to a large segment of uneducated, tech-distanced population, the truckers?

The answer lies in not just the ease with which the app could be used by anyone, but also in the tangible economic benefits it provided to truckers.

India’s trucking space is largely unorganised, with 85% of it being occupied by small fleet owners with 5-20 trucks. Being an asset-heavy business, the high fixed costs of EMIs, made a high utilisation of the trucks critical for the sustainability of operations.

However, an average truck in the market was utilised at only 60% capacity. Reasons for the wastage included brokerage meddling and difficulty in finding a job on the return journey. BlackBuck boosted truck utilisation by solving both these problems.

The marketplace provided access to greater demand opportunities than were possible through brokers or individual networks. Through its advanced data analytics, BlackBuck provided real-time insights for route optimisation that allowed trucks to complete more trips efficiently.

This was game-changing for the trucking community.

It claimed to improve work opportunities for truck owners by 25% – 30%, providing them with additional income and the ability to clear EMIs. Removal of intermediaries also resulted in an increase in direct net earnings of the owners.

BlackBuck’s offer was hard to resist for everyone in the market.

Honest Cheetah

The sticky customer base led it to grow by leaps and bounds.

By 2017, it had expanded its reach by over 7x in two years. The company had 100,000+ trucks across 300+ locations.

Its modular, asset-light aggregation approach ensured that it created a consumption-ready product and scaled rapidly. As the first and only marketplace in the sector, it also reaped the benefits of being a first-mover and a monopoly to start.

It made money by charging a 15% – 20% commission on the transactions that took place on its platform with charges being determined by Uber type dynamic pricing.

In the fiscal year 2017, it witnessed a steep seven fold increase in gross revenues from INR 81 Cr ($10MM) to INR 566 Cr ($80MM). The subsequent year saw operational revenues rise by 60% to INR 902 crore ($130MM).

70% of its customers were big corporations and it boasted of names such as Unilever, Asian Paints, Godrej and Coke as its clients. In just three years from inception, Blackbuck demanded one-fifth market share in the long-haul road freight market.

An additional activity of $15 billion was set to be created in the trucking industry each year, and BlackBuck wanted to partake in it.

Thus, despite raising a Series C in late 2018, BlackBuck was on the market again in May 2019 to raise a Series D.

Koalified Financing

Blackbuck ended up raising a $150MM Series D at a valuation just shy of $1 billion.

The fundraise brought its total funding to $230MM in equity financing and $100MM in debt.

Given the company’s asset-light nature in an otherwise capital intensive industry, BlackBuck planned to dedicate this injection of capital towards improving its technology stack.

It further aimed to reduce the time that its driver-partners are without an active job, and growing both sides of its marketplace model, with the industry estimated to reach $215Bn by 2020.

Keeping its laser focus on the mission of ‘Organizing, Digitizing, and Simplifying Trucking’, each development in BlackBuck’s lifetime, no matter how technical, has come while giving the end user on both sides of the marketplace a seamless and easy interface to work with.

For truckers, a partnership with BlackBuck now came with insurance coverage as well as loans and other credit-building opportunities.

This further built upon the trucker friendly initiatives taken by the company, such as helping manage EMIs, which were a game-changer.

As long-time readers would know, giant companies are built by dominating niches and then expanding.

Blackbuck’s razor-sharp focus would be the reason it scaled so fast.

Bear Hands

Blackbuck kept their focus on the piece they wanted to gain a foothold in, which was long haul logistics trucking services.

This implied that they did not compete with the likes of Delhivery, which focuses primarily on e-commerce logistics, and younger startups like Ecom Express and Shadowfax.

Blackbuck further chose not to concentrate on intra-city logistics, which offered a smaller target addressable market and had established players like Blowhorn and TruckMandi.

Instead, BlackBuck offered services aimed at maximizing efficiency for underutilized trucks and optimizing routes for shippers through technology, all without owning any trucks themselves.

As the industry grew more attractive, product offerings like SmartShift, a demand aggregation platform from behemoth Mahindra and Mahindra, came to market. But, like large conglomerates trying to expand into a market half-heartedly, it failed to make a tangible dent to BlackBuck’s relentless growth.

Each large market is an area to be captured, and competitors approach the same area using different modes of attack.

While BlackBuck took an asset-light marketplace approach, another startup would be approaching the same market with different designs.

BlackBuck’s most formidable competition would arrive in the form of Rivigo.

The Otter Side

Rivigo offered a similar solution to BlackBuck but took an entirely different approach.

Rivigo differentiated itself by owning a fleet themselves and offers a ‘relay as a service’ model to prevent very long shifts for drivers. Rivigo was akin to the inventory heavy model of Amazon, while BlackBuck was akin to the inventory light model of eBay.

Signalling the massive opportunity, despite the difference in operational and business models, BlackBuck and Rivigo have both been privately valued at 900-950M USD by their respective investors in recent funding rounds.

It is a rare occurrence for one market to have two unicorns, signalling what a massive problem both Rivigo and BlackBuck were solving.

BlackBuck ended up bringing $135M in FY18 revenue on a loss of $17M compared to Rivigo’s 105M in revenue on a $35M loss.

BlackBuck would thus be at a revenue multiple of 7.5x compared to Rivigo at 10x, assuming a billion-dollar valuation which seems like an inevitability for both companies.

The difference in revenue multiple could be attributed to the defensibility that comes with Rivigo’s ownership over a fleet of trucks while also operating a marketplace similar to BlackBuck’s.

The counter is that BlackBuck has the potential to scale faster, and it showed in the company’s continuous growth.

By 2019, it was managing 300,000 trucks, 60,000 fleet owners, and transaction value in excess of $1Bn.

Feline Good

BlackBuck has recently made strides to move beyond a marketplace for trucking services.

In addition to continual improvements in bringing India’s logistics industry onto an online infrastructure, BlackBuck’s founders see their goal as expanding the $150B trucking market into a $300B market by facilitating value where it didn’t exist before.

The company continues to take steps to improve the day-to-day operations of the 300,000+ truckers on their network by providing insurance, financial security through fin-tech partners, and increased daily value from operations.

BlackBuck sees its next frontier is to “allocate orders in negative time” by predicting the routes a trucker will take.

This is not unprecedented, given the amount of data they have been able to collect in their 5 years of operations. Interestingly, Uber began doing this in 2014 as well.

An increasingly streamlined load acquisition process for truckers cuts down on ‘down time’ and returns higher value to BlackBuck’s trucking partners.

The future will involve getting deeper into expansion opportunities. There are horizontal and vertical areas that BlackBuck can take advantage of, from warehousing automation to IoT implementation.

Further, the CEO, Mr Yabaji, has been direct about his intention to deeply ingrain BlackBuck into the Indian logistics ecosystem but does see a future of international expansion in the company’s cards.

The company’s strong progress in a disorganized but massive market has made it a business school case study. There is a lot to learn from the speed of scale in a market that was hard to crack from the get-go.

BlackBuck is on the road to stick around for the long haul.

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Manu Jindal
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One of the best analysis I have ever read!!

Vineet
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Vineet

Raising $350 million and doing $150 million topline with 10% loss is no tall claim to fame.