At a time when e-commerce firms that need to raise cash are finding it difficult to do so, online furniture retailer Urban Ladder says it is not in the market to raise funds and that it has enough money in the bank to keep it going for another 18 months. Simultaneously, the company says it is taking steps to stretch the money it has by another six months.

“We are at a point where, at the current burn rate, we have cash for 17-18 months. And, we are doing stuff to get to a point where we have cash for 24 months,” says Ashish Goel, CEO & co-founder. “We have roughly 60 per cent of the cash we raised in the bank,” he adds.

Urban Ladder has raised a total of $77 million, from venture capital firms such as Kalaari Capital, SAIF Partners, Steadview Capital, Sequoia Capital and TR Capital, and former Tata group chairman Ratan Tata. Its last fund raise – of $50 million – was in April 2015.

Goel hopes the company will be cash breakeven by September 2017 and fully profitable a couple of quarters after that. It will need capital only then, that too to automate its warehouses and not for day-to-day running of the venture.

He adds that the company will start talking to investors between December and March, for a likely $10-15 million fund raise that the venture feels will be required to automate the warehouses. “There is a difference between needing cash to survive versus cash to move to the next level,” he adds.

Does this mean that Urban Ladder has got its unit economics right? “We have never been making a loss on any shipment. Never,” he asserts, and adds, however, that it is negative net of marketing. Even on this, Goel hopes, the company will turnaround in a few months from now.

How does it hope to reduce cash burn and stretch the money it has by another six months? Goel says Urban Ladder is looking at efficiency gains in the supply chain, which it controls, and in its warehouses, both of which will result in significant savings. For instance, the company has started automating delivery planning, which alone will result in 10-15 per cent efficiency gains on the delivery operations side. At the warehouses, Urban Ladder has started automating the picking of goods, which is removing the goods for delivery.

According to him, nearly 75 per cent of the picking was happening in the higher rows where the furniture was stacked. Now, the picking starts at the lower rows, resulting in substantial savings in time. Similarly, even while the goods are unloaded at the warehouses and stacked, they would be done in a manner that would save time and improve efficiencies. “We have just started working on these and the full benefits of all these measures will start accruing in a few months,” says Goel. The efficiency gains, which will result in reduced cash burn and help the company conserve money, all come from the not-so-glamorous part of the business, he points out.

The other measures include margin efficiencies in the raw materials it uses. For example, individual manufacturers used to purchase the foam used in sofa sets. The manufacturers were buying foam from different sources and hence were paying a higher price. Now, Urban Ladder is helping them get foam from a single source and is able to negotiate a better price. Likewise, with the number of shipments increasing, the company has been able to negotiate better rates and sign long-term contracts with transporters rather than doing it on a spot basis as was the case so far. Every month, Urban Ladder does 30,000-40,000 shipments.

Goel, who along with co-founder Rajiv Srivatsa, is in his late 30s, says Urban Ladder, now in its fourth year, is still investing on building the foundation. “We have built 30 per cent of the foundation and the remaining 70 per cent we have to build over the next five years and then the real business will start,” he adds.

 

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