OfBusiness Success Story: How This Startup Became a Billion-Dollar B2B Giant

Source: livemint

OfBusiness has positioned itself as a leading B2B force in India’s flourishing MSME and industrial sectors with its procurement, financing, and technology model aimed at small and medium enterprises (SMEs). Founded in 2015 with an idea, OfBusiness is a unicorn startup today with tens of thousands of crores in revenue and thousands of clients across India. This article shares the journey from startup aspiration to billion-dollar giant, its business model, challenges, and future state.

Founding & Early Challenges of OfBusiness

Origin Story and Concept of the Platform

• Launched in 2015, OfBusiness was co-founded by Asish Mohapatra (who at the time was a VC) along with Ruchi Kalra, Bhuvan Gupta, and others to “democratize access to raw materials and credit” for MSMEs. 
• The founders began to discover that small manufacturers and construction businesses struggled with opaque supply chains, delayed deliveries, and the lack of working capital, and they wanted to create a tech-enabled platform that would combine commerce and credit. 

Early Rejections and Tenacity

• The first year, Asish was rejected by 73 investors, and only after all these attempts did he finally receive the first capital injection. 
• The team travelled for months, meeting with SMEs, looking at balance sheets and earning their trust in an offline world.

Business Model & Revenue Streams

Source: inc42

Core Value Proposition: Commerce + Financing

The key services offered by OfBusiness include

• Raw Materials Procurement offers raw materials, such as steel, chemicals, cement, polymers, etc., with verified suppliers, transparent prices, and logistics enabled.
• Embedded Credit / Lending lends working capital to its buyers via either OfBusiness’s lending arm (Oxyzo) or partnerships that leverage other lenders, often with expedited underwriting and favorable terms.

Because OfBusiness enables credit and supplies the product, it can dictate high reuse, customer loyalty, and data-enabled underwriting. 

Other Verticals & Services

• BidAssist is a marketplace for public-sector contracts that helps small and medium enterprises (SMEs) discover additional contract opportunities.
• ProcureAssist, Analytics, and Advisory are an array of add-on services that help buyers optimize procurement, forecasting, and supply chain decisions.

Financial Performance & Scale

Strategies for Growth & Competitive Differentiators

Hyperlocal Business + Technology Backbone 

• Our sales force on the ground, along with our relationship networks, helps drive SME onboarding in smaller towns.
• Our technology stack provides capabilities such as real-time pricing, supplier verification, tracking logistics, and credit underwriting. This establishes trust and transparency in a traditionally opaque space. 

Using credit as a lever for distribution

Instead of creating a pure lending-based value proposition, we have embedded credit in the procurement flow from SMEs. That is, buyers can unlock material without the need to pay large cash flows up front. This model also builds repeat usage by locking in the customer as she unlocks material.

Lean margin + Volume strategy

OfBusiness does not target high margins per transaction; we are scaling with volume and efficient operations. As we scale, we will maintain margins through credit spreads, efficiencies in logistics, and data-led controls around risk. 

Risk Management and loan discipline

• Our lending division is disciplined around collections and underwriting in order to keep NPA (non-performing assets) low.
• Our lending division makes use of data analytics and its relative default rates in order to inform and price defaults.
• We have the backing of fundraising in order to absorb credit risk while we scale.

Obstacles and Distractions Along the Way 

Confidence and Prejudice Towards the Offline 

Persuading traditional SME owners in the offline world to convert to a digital B2B format has not gone well. Trust needs a human experience and is not just signing up. 

Risk of defaulting and Scaling Credit Challenge 

Risk of default, cash flows and notarized implications need to be measured for smaller businesses to work against. Risk controls need to be put in place. 

Capital Intensity and Cash Flow Management 

OfBusiness requires enough funding capital due to funding receivables, inventory and logistics. Growth and liquid working capital can be a delicate balance. 

Competition and Market Saturation 

There are some new large B2B marketplaces and fintech companies looking to provide monetary lending, saturating the market. Differentiating ourselves and our financing and operations before breaking into the new market is important.

Path to IPO & Future Vision 

Source: entrackr

IPO Plans & Valuation 

• By late 2024, OfBusiness plans to utilize Axis, JPMorgan, Citi, Bank of America and other banks for its 2025 IPO.  
• They are targeting an IPO valuation of around $750 million to $1 billion. This would be an Indian valuation of approx. 6-9 billion. 
• In FY24, OfBusiness reported earnings of $72.6 million on $2.3B in revenue (international equivalent) in public reports. 

Future Roadmap & Expansion 

• Expand its offerings in new raw materials, internationally, and into even deeper credit products.  
• Build out its intelligence, inventory financing, and embedded financial products. 
• Streamline subsidiaries and merge overlapping verticals/or subsidiaries before an IPO. 

Strengthening Moats 

• Continued investments in operational excellence, cost leadership, and customer stickiness. 
• Deeper integration of credit and commerce. 
• Developing relationships with governments, trade associations, and key suppliers.

Important Lessons for Founders

Source: inc42

1. Solve for Genuine Pain Not Just
2. Glamour: OfBusiness addressed a fundamental pain point for MSMEs, which was a lack of access to supply and credit.
3. Embed Financials with Core Platform: Integrating lending into commerce aligns incentives and locks in the customer.
4. Lean, Volume-Based Model Wins in B2B: In large markets, which are also very fragmented, just volume + efficiency > margin.
5. Trust is the Most Difficult Moat: In B2B, building reliability, transparency, and relationships with customers counts for much more than the technology.
6. Patience as a Virtue Instead of Chasing Valuation: Founders of OfBusiness both commented on making a profit and doing it regardless of the positive news/value-add debate.

Conclusion: The OfBusiness Guide to B2B Disruption

OfBusiness serves as an example of genuine, impact-focused innovation. It didn’t just benefit from speculation but actually built a sustainable, profitable model aimed at addressing a real problem for MSMEs in India. By integrating procurements and financing, data, and operations, it succeeded in maximizing the opportunity that lay in fragmented supply chains and built a billion-dollar B2B company.

For founders, the OfBusiness experience reminds them that viable growth, a focus on the customer, operational excellence, and discipline with capital are the underpinnings of any startup they hope to create that has a chance to last.

FAQs

Q1: How did OfBusiness lend to SME customers with limited credit history? 
OfBusiness used data from the platform it built, along with transaction history, supplier risk, and alternative credit signals, to underwrite a loan, often disbursing loans in under 72 hours.

Q2: What is Oxyzo, and how does it relate to OfBusiness? 
Oxyzo is the NBFC / lending arm of OfBusiness, managing credit and working capital for their clients. It is a central part of the platform.

Q3: Is OfBusiness a profitable business? 
Yes, OfBusiness disclosed a profit of approximately ₹603 crore with revenues of around ₹19,296 crore in FY24.

Q4: Why combine commerce and finance as a business? 
The combination of financing and procurement leads to customer retention, repeat use, and better management of pricing and risk mitigation.

Q5: What will OfBusiness find hard to do in the future? 
Scale credit risk, capital, and other deep-pocketed B2B & fintech competitors, and exhibit discipline around execution.