When Khushnud Khan and Rishi Raj Rathore quit e-commerce giant Flipkart in 2017 to set up Arzooo, they were following in the footsteps of three of their former colleagues who had founded Udaan in 2016. 

But the fortunes of the two business-to-business (B2B) e-commerce startups couldn’t be more different. Arzooo, which started in 2018 and deals exclusively in consumer electronics, saw its revenue grow over 4X to Rs 1,117 crore (~$135 million) in the year ended March 2022, according to filings made by the company in December December Entrackr Arzooo’s gross revenue goes past Rs 1,100 Cr in FY22 Read more

But more importantly, its losses–though up 3.5X from the previous year–were just Rs 63 crore ($7.5 million).

On the other hand, Udaan–which sells everything from grocery to electronics to apparel–posted losses of Rs 3,000 crore ($362 million) on revenue of Rs 10,000 crore ($1.2 billion) in the same period. 

So, in hindsight, it wasn’t all that surprising Arzooo managed to raise $70 million in its Series B round in July, when most other startups were struggling to convince investors to write them much smaller cheques. The fundraise–which saw the participation of Japan’s financial-services firm SBI Holdings and US food-delivery company Doordash’s founder Tony Xu–helped take Arzooo’s valuation to $400 million. That was a cool 13X surge from its previous round, in ~24 months. 

If its financials are any indication, profitability is definitely not a distant dream for Arzooo. All it would need is a few tweaks to the expense structure to break even and beyond. And even for investors quite comfortable with bankrolling companies deep in the red for years, the allure of Arzooo’s ability to turn a profit without affecting the scale of business cannot be overstated.

Arzooo has built its business helping small electronics dealers keep up with large retail chains, such as the Tata Group-owned Croma and billionaire Mukesh Ambani’s Reliance Digital, and the likes of Amazon and Flipkart.

Independent retailers are at a disadvantage thanks to their limited product range and their inability to offer competitive pricing. It partners with major brands to acquire large quantities of products at lower prices, and then sell and deliver them to small retail stores at prices lower than the original.

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All of this—growth, funding, and a good bottom line—has much to do with Arzooo’s expansion into verticals that can be considered ‘critical’ for a B2B company in India.