Start-up Success Story
It is human tendency to find solutions as and when the problems crop up, a sort of freewheeling opportunism rather than foreseeing problems and prefixing solutions. But, it is not the case with new gen entrepreneurs.
Once upon a time, there was no internet and dotcom was ruling the roost.
With the advent of technology, dotcom entrepreneurs vanished into thin air in no time just as PCO operators.
It was at this time, a young man from Bangalore struck with an idea to revolutionize bus industry.
Before launching redBus in 2005, Phanindra was working as a Sr. Design Engineer with Texas Instruments in Bangalore. He had just completed B.Tech. in electronics from BITS – Pilani. From the very childhood he was interested in electronics and was just wondering how the electrons flowing through a wire could automate many of our daily chores like washing of clothes.
He wanted to be at his home town Hyderabad for Diwali celebrations in 2005. But, as he could not plan his trip till eleventh hour, he was left with the only alternative of going by bus. He roamed around the town here and there only to find that all tickets had been booked before he approached travel agents. Bangalore traffic is not so popular and nobody knows when it will catch you unawares. That was exactly what happened on that day and he realized the problems of prevailing model and found internet as the edifice for solving these issues by collecting and collating plethora of information on a single platform where customers could access it easily and take better informed decisions and for facilitating e commerce to fetch return bus tickets.
Travel agents did not have sufficient information regarding all the bus operators thereby caused communication gap and commuters had to decide relying on half-baked information available.
Most of the agents were not able to book return bus tickets.
Phanindra, Charan and Sudharkar were classmates at BITS- Pilani. In Bangalore they were sharing common accommodation. Before starting redBus, Charan was working for Honeywell and Sudhakar for IBM. Sudhakar also had some technology patents in his name.
He shared his experience and his idea with his friends, poised co-founders charan padmaraju and Sudhkar pasupunuri through email and they pooled Rs.5 lacs from their savings and began develpoing a portal. This was the beginning of epoch-making redBus’s journey. They earmarked one of their rooms for their office. Once it was ready, they called on various travel agents for tie up of seats in buses and after confronting rejections umpteen times, on August 18 2006 they got their 5 seats from a travel agent who insisted on at least 5 seats a week or else to forget about him.
They felt depressed and made their way to market and called on companies to
distribute redbus card to the employees during luncheon hours. On 22 august 2006 they managed to sell their first seat for Titupathi to a woman, en employee of Infosys and also managed to sell remaining four tickets within five days span. Their sincere all out efforts did not go in vain. They heaved a sigh of relief. Their business took off from there.
The initial reluctance was to come out of their comfort zone. They were in their own world of work. When they decided to stand alone, they faced lot of problems like waiting in lobbies of companies, understanding commuters’ problems, convincing bus operators about their idea that it could help them to avoid whiling away precious time etc. Convincing them was really a herculean task. They were enthused to have competent team of co – founders and they could move on sharing their burden hand in hand in the hour of crisis.
Co-founders need to be not only diligent but also proactive, industrious and matured enough. Maturity matters much as opinions and viewpoints differ, once they get into startups and if promoters resort to blaming one another and they would reach nowhere and everything would collapse in no time just as it bloomed.
In the year 2006 jobs were so easily available specifically for experienced job seekers which elevated their confidence. They thought it was the right time to embark on entrepreneurship. Their selection to TiE just a month before they launched their service boosted their confidence.
Soon after it’s launch Phanindra and his team could cross the benchmark turnover of $12 millions.
It was considered to be one of the fast growing indian web startups committed to ease travelling by bus.
Their aim was to attain the turnover of $100M by 2012.
redBus is being mentored by the TiE Entrepreneurship Association Program. TiE accepts rolling nominations for the program. One can apply for the program at one’s own will and pleasure. Once they get adequate number of nominations, they will call for a face to face presentation before TiE Charter members. If selected by them, entrepreneurs will be allotted two or three mentors. These mentors depending on their wave length help them in mundane operations of start-up.
Unless entrepreneurs like the mentors, they can request for replacement. All this is done for free by TiE .If they like, they can offer some shares in their company to their mentors and TiE if they so wish.
redBus had had two rounds of funding. They raised their maiden funds just after six months of commencement of startup. Once they were selected by TiE, they started getting calls from Venture Capitalists. They went ahead with a pioneer investor as they would be keen in mentoring and grooming the company which was need of the hour at that time.
The second round of funding was raised in 2013. Inventus and helion were investors to expand their business horizon.
redBus operates in multiple cities in India. One of the biggest challenge was to inculcate the same culture and value system in multiple locations. Phanindra and team did this by travelling far and wide frequently and resonate with one and all via e mails at least once in a week.
redBus recorded steady growth and never looked back as regards growth. It is customary for start-ups to review their progress on a day to day basis. The only constraint was their understanding of how to build and organize a company. They introspect daily and gradual successes led to telling, substantial scenario changes.
Even though the startup scene in India seemed to be flourishing, there was a lot that remained desired to be done.
Entrepreneurship in India seemed to be on the right track. Recently there has been tremendous progress. A few successes now will give a fillip to this pace and will pave the way for new entrepreneurs venturing to establish companies.
Payment gateways posed a great challenge for catering an internet based service to Indian consumers. It is pathetic to see that 25% transactions resulting in failures due to PG issues. They prioritized customer satisfaction rather than just e services, for an off line phone based business could also offer a better service than by just an e service.
Now that their whole idea shifted to developing a software and sell it to bus operators and allocate funds to some NGO, but they were excited as that none of the bus operators were ready to accept without strings attached. They were blowing their own trumpets.
But, in the year 2006, they got major breakthrough when they got selected for the TiE.Entrepreneurship acceleration program. They gave them three mentors to advise them on how to proceed and how to launch business of their own.
These mentors helped them to establish their business. They gave them weekly assignments for a market survey of the number of buses available, number of lucrative routes, average price of a ticket, mode of buying tickets, how frequently commuters travel, profile of customers, how much commission a bus operator pays to an agent, room for season tickets etc. As a whole, they helped them to get a bird’s eye view of the industry.
That was the time they suddenly became popular and VCs started approaching them. But, as students, they sought advice from mentors, but VCs provided funding and let them develop and implement their own ideas.
Initially they asked for Rs.3 million and when one of the investors debated with them revising the figure to Rs.30 million and ultimately agreed on funding. And in February 2007 they got their fund from seed fund for investing within a span of three years .They used the funds judiciously to form the company, for hiring efficient staffing and owning business premises.
Gradually, they managed to grab the whole market and they have 500 tie ups with bus and tour operators for 5000 routes covering 15 states predominantly in south and across India and they also offered lucrative economical packages.
Now, they have 75000 franchises offering ticket booking services from mobile via sms and phone. They also deliver tickets home and earn a gross revenue of Rs.30 crores per annum. At the same time unfortunately the 30 million they had raised which was supposed to last for three years exhausted within one and half years. This was when they felt the pinch and decided to raise some more funds.
But, now the situation was different. There was a global recession. All the funding agencies who were interested earlier backed out. But, fortunately in July 2009 with a consortium funding from seed fund, Inventus capital partners and anonymous investors they managed to raise USD 2.5 million.
Now they have 250 employees working for them in 10 offices in Bangalore, Hyderabad, Chennai , Coimbatore, Pune, Delhi ,Vizag, Ahmedabad , Mumbai and Vijayawada in addition to seven physical call centers, three satellite call centers and tickets are home delivered in all these locations.
Commensurate with increase in their range and quality of services, their revenue also increased. The company had grown 6 % initially but at the same time due to global crisis the valuation of the company plummeted.
But, that did not affect them as the figures spoke for themselves. Their revenue graph went on skyrocketed. They started off with a mere Rs.5 million revenue in FY 2007 with break even and directly leaped forward to Rs.50 million in FY 2008 followed by Rs.300 million in FY 09 and finally a gigantic sum of Rs.600 million in FY 2010.
In May 2011, they raised yet another round of funding worth USD 6.5 million with the help of Helion Venture partners, Inventus Capital and seed fund. But, what was more exciting was that, that year they managed to book 3.5 million tickets
Now that, they had sufficient working capital to run the business. They tied up with state government road transport services of Goa and Rajasthan and sold more than 10 million seats at a growth rate of two and half times aiming multinational operations in Singapore and Malaysia.
With such tremendous growth and popularity, redBus had managed to tick USD 120 million in gross merchandise value in February 2013. This gave a big boost to their networth, but, it did not deter them from marching ahead. As a matter of fact, redBus in partnership with ”your bus” and “Asset tracker” launched real time tracking on their portal.
With steady growth, their craving for more financial backing increased. As per the reports from business standard in March 2013, they were on their final stages to raise USD 20 million worth funds at an aggressive valuation of as much as their net revenue of approximately Rs.55 crore thus valuing the company at USD 110 million.
They also acquired a tie up with Karnataka State Road Transport Corporation to sell tickets to both state owned and private bus operators in Karnataka. Their exposure had broken all time records and was making their way to peerless progress but what followed rocked everyone to the hilt.
In June 2013 redbus announced acquisition of company by south African media giant naspers through it’s indian subsidiary ibibo group for around USD 120 million (approx. Rs. 790 crores) at a gross merchandise value (GMV) of around Rs.600 crore. This was the largest ever overseas strategic acquisition of an Indian internet asset.
A company that was listed amongst the world’s 50 top most innovative companies like apple facebook and google by business magazine, started with a boom and ended with a boom.
In April 2014 it was reported that redBus diversified in to hotel booking managed by Ibibo group’s back end infrastructure on it’s website followed by redBus tying up with Uber (A call cab aggregator application) to offer free rides to bus stops in August 2014.
The End
Author : C.P.Hariharan
e mail id. : cphari_04@yahoo.co.in
