Introduction
Urban Company, founded by Abhiraj Singh Bhal, Varun Khaitan, and Raghav Chandra, has become a prominent player in the home services market. Since its inception, the company has seen significant growth and transformation, including rebranding and international expansion. This paper provides a comprehensive overview of Urban Company’s ESOP schemes and buybacks, which have been instrumental in fostering employee loyalty and enhancing the company’s attractiveness as an employer.
Abstract
Urban Company, previously known as UrbanClap, is a leading online platform for home services in India. Founded in 2014, the company has rapidly expanded its operations both domestically and internationally, offering a variety of services such as beauty treatments, home cleaning, repairs, and fitness coaching. This research paper delves into the company’s financial trajectory, highlighting its revenue growth, valuation milestones, and profitability. A significant emphasis is placed on Urban Company’s Employee Stock Option Plan (ESOP) schemes, which have played a crucial role in employee retention and wealth creation. The paper also examines the company’s ESOP buybacks, their impact on employees, and the innovative features that set Urban Company’s ESOPs apart from those of other startups.
Financial Growth and Performance
Early Growth and Funding
Urban Company was established with the vision of simplifying the process of finding reliable home service professionals. Over the years, the company has secured substantial funding from prominent investors such as Tiger Global, Steadview Capital, Vy Capital, and Prosus Ventures. By June 2021, Urban Company was valued at $2.1 billion, reflecting its robust business model and growth potential. This valuation increased to $2.8 billion following the ESOP sale in December 2021.
Revenue and Profitability
๐ ๐จ๐ซ ๐ญ๐ก๐ ๐๐ข๐ฌ๐๐๐ฅ ๐ฒ๐๐๐ซ 2021, ๐๐ซ๐๐๐ง ๐๐จ๐ฆ๐ฉ๐๐ง๐ฒ ๐ซ๐๐ฉ๐จ๐ซ๐ญ๐๐ ๐ญ๐จ๐ญ๐๐ฅ ๐ซ๐๐ฏ๐๐ง๐ฎ๐ ๐จ๐ โน289 ๐๐ซ๐จ๐ซ๐, ๐ฐ๐ก๐ข๐๐ก ๐ข๐ง๐๐ซ๐๐๐ฌ๐๐ ๐ญ๐จ โน637 ๐๐ซ๐จ๐ซ๐ ๐ข๐ง ๐ ๐23โ๐ 45% ๐ฒ๐๐๐ซ-๐จ๐ฏ๐๐ซ-๐ฒ๐๐๐ซ ๐ ๐ซ๐จ๐ฐ๐ญ๐ก. ๐๐ก๐ ๐๐จ๐ฆ๐ฉ๐๐ง๐ฒ ๐๐ฅ๐ฌ๐จ ๐ฆ๐๐๐ ๐ฌ๐ข๐ ๐ง๐ข๐๐ข๐๐๐ง๐ญ ๐ฌ๐ญ๐ซ๐ข๐๐๐ฌ ๐ข๐ง ๐ซ๐๐๐ฎ๐๐ข๐ง๐ ๐ข๐ญ๐ฌ ๐ฅ๐จ๐ฌ๐ฌ๐๐ฌ, ๐๐ฎ๐ญ๐ญ๐ข๐ง๐ ๐ญ๐ก๐๐ฆ ๐๐ฒ 40% ๐ญ๐จ โน308 ๐๐ซ๐จ๐ซ๐. By April 2024, Urban Company achieved profitability at the profit before tax (PBT) level, marking a significant milestone in its financial journey.
Employee Stock Option Plans (ESOPs)
Overview of ESOP Schemes
Urban Company has implemented several ESOP schemes since its inception, aiming to reward and retain its employees. The company’s ESOPs are designed to be employee-friendly, featuring a nominal exercise price of โน1, a flat four-year vesting schedule, and an infinite hold period for exercising the options post-employment. These features make Urban Company’s ESOPs stand out in the competitive Indian startup landscape.
Timeline of ESOP Buybacks
- First ESOP Buyback (June 2017): Urban Company’s initial ESOP buyback coincided with its Series C funding round, valuing each ESOP at INR 24,500. Approximately 25 employees were eligible to participate.
- Second ESOP Buyback (December 2018): This buyback occurred alongside the Series D funding round, with each ESOP valued at INR 61,864. Around 100 employees were eligible.
- Third ESOP Buyback (August 2020): The third buyback, valued at USD 5 million (INR 37.5 crore), saw each ESOP priced at INR 110,000, with 180 employees eligible.
- Fourth ESOP Buyback (December 2021): Valued at INR 55 crore (USD 7.3 million), this buyback was significant due to a 33.33% premium over the company’s previous valuation six months earlier. It was conducted at a valuation of USD 2.8 billion, with 550 employees eligible.
- Fifth ESOP Buyback (May 2024): Announced at INR 203 crore (approximately USD 25 million), this buyback included participation from 446 employees and was supported by investors such as Dharana Capital, Vy Capital, and Prosus.
Impact of ESOP Schemes on Employees
Urban Company’s ESOP schemes have provided significant economic rewards to employees, enhancing retention and attracting top talent. By maintaining employee-friendly terms, Urban Company has ensured that its ESOPs serve as a powerful tool for wealth creation and employee satisfaction.
Conclusion
Urban Company’s strategic implementation of ESOP schemes and buybacks has played a crucial role in its growth and success. By offering attractive and flexible ESOP terms, the company has managed to retain key talent and incentivize its workforce effectively.ย
As Urban Company continues to expand and evolve, its commitment to employee wealth creation and satisfaction remains a cornerstone of its business strategy. This focus not only fosters a motivated and loyal workforce but also positions Urban Company as a leading example in the startup ecosystem for innovative and employee-centric practices.
