Reading Time: 3 minutes

Udaan, a three-year-old business-to-business e-commerce platform in India, has raised more than half a billion dollars as it looks to bring more kirana stores, chemists, and other small businesses online through its marketplace.

The startup said today it has raised $585 million from Tencent, Altimeter, Footpath Ventures, Hillhouse, GGV Capital and Citi Ventures. Existing investors Lightspeed Venture Partners, which wrote its first check to the startup back in 2016, and DST Global also invested in the round.

The new round valued the startup between $2.3 billion to $2.7 billion, a person familiar with the matter told TechCrunch. Co-founders of Udaan, which reached the unicorn status in the shortest period of time among Indian startups, declined to comment on the valuation.

Udaan operates an eponymous B2B marketplace where it connects buyers and sellers. The platform supports a wide-range of categories from lifestyle, electronics, home and kitchen, staples, toys, to fruits and vegetables.

Udaan also offers a credit line to provide working capital to buyers and sellers on its platform, thereby addressing one of the biggest challenges faced by small and micro businesses and merchants in the nation, said Vaibhav Gupta, a co-founder of Udaan, in an interview with TechCrunch.

The startup has amassed more than 3 million retailers from 900 cities and towns in India. Today, a wide range of merchants, including farmers, shopkeeper owners, restaurants, chemists, and street vendors are connected to Udaan.

L R Amod Malviya Vaibhav Gupta Sujeet Kumar Co founders Udaan

From left-to-right: Amod-Malviya, Vaibhav Gupta, and Sujeet Kumar, co-founders of Udaan

Sujeet Kumar, another co-founder of Udaan, said the startup will use the fresh capital to expand its footprint in the nation and focus on growing the marketplace in both existing and new categories.

Even as more than half a billion people in India are online today, most businesses in the nation remain offline. But a growing cohort of startups in the nation is beginning to help merchants make use of technology.

Amazon and Walmart have invested billions of dollars to create business-to-commerce marketplaces in India, but e-commerce still accounts for just 3% of the overall retail market in the country.

Their mightiest rivals remain mom and pop stores that dot tens of thousands of villages, cities, towns, and slums of India. In recent years, many Silicon Valley companies have also started to address these businesses. Google has launched tools to help these mom and pop stores set up their online presence, and last month, it launched a business app of Google Pay to help these merchants accept online payments.

That’s the opportunity that drove Vaibhav, Sujeet, and Amod Malviya — the third co-founder — to leave their jobs at e-commerce platform Flipkart and build a platform to serve small businesses in the nation.

“The market opportunity is turning out to be much deeper than we envisioned when Lightspeed led the company’s Series A financing in 2016 and we’re excited to continue supporting the company while welcoming a strong syndicate of new investors,” said Bejul Somaia, a partner at Lightspeed Venture Partners .

In a statement, Martin Lau, President of Tencent, said, “Udaan’s unique approach can enhance the capabilities of millions of retail stores across India. It represents a powerful example of how technology can empower the business of small merchants, improve the efficiency of industries and bring benefits to consumers.”

More to follow…