Last fortnight, OfBusiness raised $160M, joining the stampede of 26 unicorns this year.
Being born in a small city urges one to dream big and fly high
Prudence is when one remains grounded and works towards that dream, keeping those wings under check.
Born in Cuttack, Odisha, Asish Mohapatra very quickly realised the bounded similarity in the aspirations of his peers. The urge to chase big dreams developed during his childhood years spent in IIT Kharagpur, where his parents were pursuing their doctorate degrees.
He knew he had the hunger and the patience needed to build something big. All he needed was a dream big enough to be worth pursuing.
IIT Kharagpur played a pivotal role in shaping that. Both during the time he spent there as a child, as well as for his undergrad degree.
Before starting OfBusiness, Asish had spent a few years at a consulting firm and then at a VC firm in India. He quickly understood that he was good at what he was doing (he could dent a hole), but he was not “great” (not good enough to create a “crater”).
Asish’s desire to leave a crater of impact in the world, coupled with his “hands-on” nature of getting into the mud made him realise that his calling was in entrepreneurship.
Even though he and his cofounders – Ruchi Kalra, Bhuvan Gupta – were in their late thirties, they decided to take the plunge.
Convincing Ruchi to join OfBusiness was probably harder for Asish. Ruchi was not only Asish’s wife but was also a partner at the consulting firm they worked together
Bhuvan, back then head of Tech at Snapdeal, was a friend of Asish’s, and both of them were discussing starting up for quite some time. Asish was discussing the problem of finding a tech co-founder with Bhuvan, and he joined as a co-founder.
Nitin Jain, an IIT Delhi Silver medallist and investment banker, and Vasant Sridhar joined the journey a month into the journey. They brought in skill sets that were complementary, but necessary for the success of the venture.
You need to stand on the shoulders of a giant to look further. Asish did that just, by assembling a great team with complementary skill-sets.
In 2015, OfBusiness v1.0 was born.
Flip into Finance
OfBusiness started as a B2B e-commerce venture.
Its goal was to provide raw material procurement solutions to SMEs in sectors such as manufacturing and infrastructure.
In the first 3-4 months, OfBusiness had a GMV of INR 15-20 Cr ($2-3MM) every month. In 2016, investors and observers would have been ecstatic at this kind of growth.
The company was Net Contribution Margin 3 positive at 30-40 lakhs per month. NCM 3 is net contribution margin level 3, wherein just corporate salaries were to be taken out, and the group as a whole was burning just INR 50-60 lakhs per month.
OfBusiness was well on its way to reaching profitability. But Asish was not content.
As a firm believer that the greatest differentiator as a business entity was profitability, Asish thought that the sustainability of OfBusiness v1.0 profits was under a question mark.
Asish had realised that his customers were preferring OfBusiness neither because of the cost competitiveness nor because of quality advantage. Those parameters were trumped by the fact that OfBusiness allowed its customer’s favourable credit terms.
Easy financing was the differentiator for winning and retaining SMEs, whose 60-70% revenues were spent on purchases.
As OfBusiness scaled, unlike other ventures, a B2B commerce company had to solve for the financing needs of its clients.
That was an “aha” moment.
Left as it was, OfBusiness v1.0 might have been a profitable company. But this pivot to solve the financing needs unlocked a new growth orbit.
OfBusiness was no longer only a B2B commerce platform.
It was a fintech. OfBusiness provided a full-stack solution of raw material procurement as well as financing the working capital needs of SMEs.
The pivot into the finance orbit had begun, and the company began to look for financing in earnest.
Investor Blank to Full House
Investors did not love the idea at the initial stages.
In 2016, the OfBusiness pitch deck was rejected 73 times in a span of six months. For someone like Asish who spent 5 years in VC, this sounded incredulous
VCs would ask was about a prior established proof-of-concept, in the form of a precedent. OfBusiness did not have a rival in any developed country back then. It was the first of its kind, bringing together commerce and financing.
Since financing SMEs is a sub-industry in itself, the investors were not impressed with a lack of experience in any of the founders.
Ruchi, Asish’s wife, was a partner specialising in financial services. However, there was nobody who had prior experience in under-writing. For a lending business, that was a key skill set.
Asish eventually became the credit guy, going through at least three balance sheets every day for months to learn that skill.
People were also sceptical whether two parallel businesses could be merged into one, that too by a team of first-time founders who had no prior experience.
Eventually, the VC fund where Asish had spent five years, came in as the first institutional investor. At the time of investing, the VC had known Mohapatra for 10 years.
At the seed stage, the fund was not even sure of what they were investing in, it was a founder bet.
Everyone was aware of the huge scope that SME commerce and industrial space in India presented. What clicked for OfBusiness to get the first round of funding, was the collective pedigree of the team and their people-first attitude.
To all the earlier investors who would have rejected Asish’s idea, time would tell if it would sit in their anti-portfolio lists or be the right decision.
The market they were playing in, though, was massive
The Strong Hand of the Market
The B2B opportunity in India is worth more than $100 billion, which started becoming clear in 2017.
OfBusiness realised that a major chunk of the B2B puzzle that needed a solution was financing. This is a segment where digital was not mainstream for transactions. OfBusiness identified this opportunity to capitalise on B2B commerce.
At the same time, the space was also going digital, presenting a tremendous opportunity.
The global B2B e-commerce market size was expected to be at USD $6.64 trillion in 2020. and It was expected to expand at a compound annual growth rate (CAGR) of 18.7% from 2021 to 2028.
Of the $1 trillion market of Indian Retail, B2C e-commerce constituted 1%, i.e ~ $10 billion, while B2B e-commerce offered a $60 billion revenue opportunity. This was poised to grow by 84% to $111 billion by 2024 on the back of the widespread adoption of digital technologies.
The B2B commerce sector was also more profitable compared to the B2C sector.
B2C logistics costs of the latter were roughly 8% of GMV, making orders below ₹1000 loss-making to fulfil. On the other hand, B2B warehousing and logistic costs are roughly 3% of GMV contributing to an average gross profit of Rs. 700 per order.
Thus, the market size of B2B was 6X that of B2C and the projected profit, nearly 5X that of B2C.
In the massive raw material market, where OfBusiness played, SMEs were expected to consume around 30-40% of these materials.
Any B2B transaction is layered with credit, cash flow and capital requirements, making finance a major part of it. In India, when large MNCs or small SMBs procure something, the transactions happen on credit. The founders aimed to establish a moat of customer stickiness with the end consumer.
The way to do this was via lending. OfBusiness layered credit on top of commerce with Oxyzo – operated through their own non-banking financial company (NBFC) license.
Competitors like Infra.Market catered to a similar clientele with their construction marketplace. Here, the combination of finance and commerce contributed to OfBusiness’ competitive edge.
Their marketplace model for supplying raw materials to SMEs with an option to the SMEs to avail loans for their purchases set them apart as the leading service player in the industry.
While other major fintech players in the market are focused on diversifying their offering by adding new loan categories, OfBusiness planned to stick to its current 3 tier business model for the next 3 years.
Identifying the core pain points and diligently solving for them would be a superpower. Despite a clear path, OfBusiness would take time to get investor love.
The company did not raise VC money in 2017, going for debt financing. As it entered 2018, it was clear that the value proposition had to be clear.
The market was big, but OfBusiness’ complex model and intense competition had to be addressed.
Playing the Lending Trump Card
In early 2018, the business started taking off.
The flywheel of commerce and finance reinforced each other and helped build a compelling moat. Buy from OfBusiness, then take credit from OfBusiness, and finally, stay with OfBusiness. The lending platform was called Oxyzo.
Having two different revenue streams also allowed OfBusiness’ customers to take one or both of the services.
OfBusiness allowed their SMEs the option to procure raw materials from the open market at better prices. Around 20% of the time, customers found better prices in the market. In those situations, they could avail the credit line offered by OfBusiness. This was done by keeping them in the loop with an exhaustive KYC and onboarding process for the seller.
The verification took half a day but if the seller refused, no transaction could go through. OfBusiness operated within a strict 200 km radius across all its 14 offices, beyond which the service is not available.
With this stringent KYC policy and strict control over transactions, the company saw a 6% return on assets (ROA) which is the best in the industry.
The company ended up raising a $30M Series C by the end of 2018. Accelerated by capital, OFB also started re-evaluating its financing model.
Initially, with the aim of staying capital-light, OFB started out as a raw material fulfilment platform with credit-as-a-service on a marketplace. Credit providers were third party banks and non-banks.
While they started well, they realised they were not meeting customer demand directly.
Customers wanted to finance first and on the supply side, third party financiers were moving at a slow pace, at odds with the exhilarating pace the founding team wanted the startup to move at.
This end-to-end customer experience was subpar at best and a change was needed. OFB switched lanes to become a full-fledged lending entity without any co-lending and marketplace, providing fulfilment as a service.
By early 2019, they were calling themselves “Lender++”, a full-stack financing provider for its SMBs.
Bidding for Growth
By September 2019, the company was flying, raising a $40M Series D.
Realizing that the credit hungry market was capital-starved, OFBdecided to accelerate their lending vertical while building superior underwriting and credit collection capabilities.
Capital efficiency was maintained by raising debt. OFB established a diversified lender base spread across 40 institutional lenders including the likes of IDFC First Bank Ltd., Kotak Mahindra Bank Ltd., ICICI Bank Ltd. and HDFC Bank Ltd.
The customer repeat rates were maintained at an incredible 90% of their customer base.
These contributed to staying focussed on profitability while creating a high-engagement and unique business model.
OFB was one of the few companies to get A ratings by Crisil in both their commerce and financing business.
The core of this kind of performance was the profitability focused DNA.
OFB had a cautious lending approach where customers with less than ₹5 Cr annual turnovers were ineligible for loans. Loans are offered only to manufacturers or infrastructure service companies with a minimum of 10-year vintage.
Startups, retailers and traders strictly belong to the no-man’s land for them. All this allowed NPAs to remain <1%.
By early 2020, Oxyzo was OFB’s second-largest business vertical with a loan book of $220M+ which was growing 80% annually.
But a storm was coming.
Building a Stack of Businesses
Hit by the lockdowns of 2020, OfBusiness and its customers collapsed.
Driven to almost zero from March to May, the company’s incredible growth had hit an immovable object. Its customers were clearly struggling, cut off from both commerce and finance.
As things started to slowly open up, the companies two-pronged offering that was entirely digital started to become a huge advantage.
OFB was one of the first companies to bring two sets of business engines together: Commerce and Financing.
Bringing both sides together was extremely tough to execute on paper, but once done gave an unbeatable moat.
Startups have been able to disrupt industries by focusing on a niche. Living by the mantra if you try to be everything for everyone one you’ll be nothing for no one.
OfBusiness took a radically different approach with commerce being just one of their 3 pillars. Their commerce platform helped businesses find cheaper raw materials while ensuring quality and reliability.
The second pillar of financing provides loans to businesses based on their past financial performance. SMEs can quickly apply for unsecured loans up to 2 crores with minimal paperwork and expect a turnaround in just 3 days.
On the finance side too, OfBusiness competes with traditional banks and fintechs like BharatPe venturing into the SME lending space. As well as tech companies like, Lendingkart focused on unsecured business loans and Progcap specialized on working capital loans.
The third pillar is a unique combination of digital services they offer via two different products Bidassist and Procure & Sales Assist
Bidassist makes it easy for SMEs to search for and bid on government tenders. It aggregated thousands of government and private tenders across the country. Procure assist integrates with suppliers, distributors and vendors to simplify the procurement and sales flows.
Helping SMEs win contracts, purchase raw materials and manage everything else in between from loans to digitizing business processes OfBusiness and its suite of products have one common thread: Data.
The results were clear.
While typical SME financing companies have an NPA (non-performing assets) of 4-5%, OfBusiness is at around 0.5%.
OfBusiness’ suite of products are offered to under-banked, profitable, high vintage and sizable SMEs engaged in delivering products and services for large anchor customers in core sectors of the economy.
Away from the limelight and with a ‘Hum dhanda banayenge’ (we will make business) mindset of the founders, OFB focused on critical components crucial to business building.
As the company entered 2021, it had recovered from the pandemic to hit 1,600 Cr and an incredible 400Cr+ of profit.
Building the Full Pack
In early 2021, the company raised a $110M round, signalling accelerating expectations. It also planned expansions and acquisitions.
For a company that had raised almost nothing in its first few years, it was raising at an incredibly fast clip.
The crux would be the company’s non-standard approach to almost everything.
The contrarian approach to going wide rather than scaling niches like most of their competitors needed a unique people-first approach.
When the startup ecosystem was brimming with 20-something-year olds disrupting the norms, OFB’s founding team was in their late 30s. Their aim then was to IPO in 7 years.
This was the ambition that led them to give little value to a unicorn tag while being laser-sharp focused to build a profitable business.
Around 70-80% of the staff are freshers. There’s nobody senior from the industry, except the 4-5 people who they started with. The simple reason being that it is easier to make a person learn than to make him unlearn. Except for technical functions like engineering and underwriting, all functions in the company are filled with freshers or people with less than a year of experience.
The modus operandi to hunt talent is equally distinctive.
In a world of BMW bikes as compensation incentives, OFB only hires freshers from tier 2 and tier 3 colleges. Their pitch on college campuses is: “ ‘boss char saal main business head banna hai to aaa (if you want to become business head in four years then join us),”.
Another unique aspect of the company that helped them maintain profitability was their frugality whileat hiring. BidAssist, their lead-sourcing platform was managed by just three engineers. OFB doesn’t have a customer support team and any lead that comes through is handed over to the sales team who meets customer requirements and pitches the lending product.
ESOPs are leveraged to motivate and retain this young talent. But what is unique is just how much value OFB’s ESOPs have created for its employees.
Every 12-18 months, OfBusiness undertakes a funding round so that employees can get a bit of ESOP exit. They have close to 500 people, 270 of them have ESOP and around 130 have already made some secondary exits.
All of this is strongly reflected in terrific financials any startup would envy.
While commerce contributes 55% of its total net revenue, lending and SaaS have a pie of 43% and 2%, respectively. In terms of profits, lending is its biggest contributor followed by commerce.
With these two pillars, Ofbusiness serves over 9,000 businesses. But perhaps more importantly it laid the foundation for unique digital services that allows SMEs to tap the global market.
Bidassist gives their customers access to government and private tenders across the globe from North America to Russia to the Philippines.
Over 6 lakhs business had used bidassist for government and global tenders. OfBusiness has issued loans of 10,000 Cr+, supports more than 5,000 clients and 2,000 suppliers across their suite of products.
They have built a profitable business with a large and engaged user base that they are uniquely positioned to serve better than any other bank, fintech or e-commerce platform can stand alone.
After years of patient, profitability focussed building, OfBusiness was raising.
From Wildcard to Facecard
Within 4 months of their Series D, OfBusiness raised $160M and became a unicorn.
OfBusiness’ revenue grew at 4x year-over-year for the last 3 years, the company appears to be on track to go public in the next 2-3 years.
Buoyed by success in its existing verticals in the infrastructure and construction industries, OFB now plans to expand and offer the same value in other categories. These are heavy machinery, consumer goods, and agri processing.
OfBusiness has already demonstrated their ability to do cross-border by giving their business access to international tenders. It’s almost inevitable that they will continue to find new geographies and markets where they can deploy their model.
The company certainly has a bright future ahead of it, if it can continue to innovate and scale its people-first approach.
OfBusiness has all the right ingredients in place. They have a well trained and highly motivated sales force. OFB has proven that it can leverage data to assess risk effectively and steadily growing collections.
The founders’ focus on profitability and building something that is immensely valuable has rippled throughout the organization. With a Chief Profit Officer in place, rather than focusing on GMV, OFB employees measure their success in terms of yield, collections and return on assets.
A goal of 5% return on assets has been a sort of calling for the organization. Resulting in everyone at every level thinking about transaction-level profitability.
Commerce and finance pillars have laid a solid foundation that OFB can leverage to continue to innovate and create immense value by giving small businesses the tools and capital they need to turn into large ones.
With the huge Indian market in sight, OfB has significant global growth avenues. What the company has demonstrated in India is that you don’t need to follow everyone, and failures are par for course.
OFB is a polished diamond.
It is a profitable unicorn that’s growing at 4x, a combination that is as rare as their commerce + finance offering. Unlike many of the other startups in India that have regularly lost money, it stands out as different.
OFB will blitzscale to help SME’s get supply and financing smarter.
Story: Manshi, Mazin, Raj, Keshav, Aviral Design: Omkar, Mehak, Saumya