Why Go Long on Urban Company ESOPs

• Skin In The Game
• The Road Less Travelled
• Problem Solving & People: What I Love About Urban Company  

I have now been at Urban Company for two and a half years. In this period, the value of my ESOPs has almost quadrupled.

The ESOP plan of UC is unparalleled to any other Indian startup- flat vesting, indefinite holding period and the strike price of Re.1. I have seen 2 ESOP buybacks happen since I joined confirming every bit of the employee-friendly promise made to me.

Here, though, I want to talk about what makes me confident of UC stock value and why I would go long on it. I am not an investment banker or a financial expert. I am an employee observing the company’s trajectory from inside and directly contributing to it.

1. People

The people of UC, not just the founders but the entire team, are crazy. They are sharp, frugal hustlers. If the people are right, they will figure out a way to build the business. This, in my opinion, is the single most important element of a promising startup. If the idea is not good enough, the people will pivot – UC pivoted from a lead generation model to a fulfillment model. If the market is wrong, they will rethink the space – UC went from about 200 categories to less than 10 categories – constantly reworking the portfolio balance. If the execution is tough, they will work harder.

2. Width of business

The at-home service industry is massive and unorganised and we have just started scratching the surface. We are present in only 20 cities of India and a few cities internationally. We are not even at 10% penetration in the markets that we operate in currently. So the market potential of this business is not going to cap out for years which means our growth rate will not plateau anytime soon.

3. The moat

There are other players in this industry, but they either specialise in one particular vertical, such as salon, or they are not into fulfillment. Our fulfillment model has created a deep moat for us. Our supply pool is very selective and highly trained. With a portfolio of about 10 categories, this translates to heavy technical expertise and a complex supply chain. This cannot be replicated overnight by others despite their willingness to burn cash.

4. Survival during COVID crisis

There is nothing nice about this crisis and the economic impact it has had on many businesses. However, UC didn’t just survive this blow but survived with dignity. Our partner community is stronger than ever having gone through the crisis together. Our users trust us more than ever for the speed of implementation and quality of our hygiene and safety practices. If a company can stand tall through something like this, there is really very little that could rattle it.

As long as my liquidity needs are low, I would not worry about mitigating my risk and diversifying my financial portfolio. I would go big and bold.

I look at the Urban Company ESOP plan and our vesting policy as a way to reward the employees, and to directly make them a part of this wealth creation journey. I would stick with Urban Company not to draw more value from the stock but to create more value.