At the start of second decade of twenty first century, riding on the booming economy which was left unfazed by the last decade’s slowdown, Indian consumer habits got shifted toward convenience and on demand services. Transport infrastructure in the country paved way for “Not so costly and ultrafast” solution providers for transportation problem. Private commuting took the driver’s seat in driving the growth of previously nonexistent domain of Ecommerce – Taxi on Demand.
Though “Savaari” and “Mega Cabs” were already there, they didn’t have much impact on intra city point to point travel. In 2011 Ola and TaxiForSure entered the market and changed the landscape of the taxi service industry. Taxi rides as cheap as auto rickshaw ride turned the customer’s interest toward these taxi service providers. Though the sustenance of such a model which is being driven on heavy funding is debatable, yet there is no doubt about the potential this industry brings with itself – currently pegged at $10 billion.
[A] Taxi For Sure – Rise
TaxiForSure was one such initiative started in by Raghunandan G and Aprameya Radhakrishnan. Both of them have same Alma matter behind them – IIM Ahemdabad and NIT Surathkal.
Problem which they tried to solve was the classic one – providing radio taxi on demand to solve point to point travel problem. This segment was earlier held by auto rickshaw and rickshaw etc.
Along with problem solving what was more important was the way they solved it – TaxiForSure changed the belief that to run a cab service one needs to own a fleet! Through market research Raghu & Aprameya were able to find the untapped service of local fleet owners. These fleet owners were small players and were struggling mainly because of lack of backend support, such as getting the exact location of taxi and then ensuring punctuality in picks & drops. What these two did was to connect the customer and service provider by using simple technology. They contacted fleet owners and brought them onboard and in return they made a generous cut of 10-12% per order.
Platforms on which TFS worked – Calling, Mobile App and website based platforms.
Different from other Players –All other major market players like Ola, Uber, Meru, Easycabs had different model as compared to TFS. These giants believed in connecting the Taxi Driver directly to the customer. This hyper local business model hence became funding intensive.
Taxi For Sure – Typical Timeline
2011 – TFS started its radio taxi service in Bangalore. Founders invested INR 5 Lakh in the company which at the end of year generated revenue of INR 10 Lakh. Since company did not own any fleet, it was less costly to expand its base to other cities. It focussed on Point to Point travel which generated 90% of its business.
2012 – Secured series ‘A’ funding of $5 million from Accel Partners, Hellon Venture Partners and Blume Ventures. Revenue of INR 3.8 Crore was generated.
2013 – Expanded to Delhi and Chennai. It generated positive revenue in Bangalore. It tied up with GoIbibo and offered Airport picks and drop service. It launched its mobile App for android and iOS platforms. It also stared booking through twitter. Revenue of 4.3 Crore was generated. Cash burn due to expansion to new cities and rising competition was huge – It stood at 17 Crore.
2014 – In May 2014, TFS received Series ‘B’ funding of $10 million from Bessemer Venture Partners with participation from existing investors and in August 2014 TFS again raised Series ‘C’ funding of $30 million from existing investors. It then expanded its operation to Ahmadabad, Hyderabad, Baroda, Pune, Mysore, Surat, Udaipur and Rajkot.
2015 – In March, TFS got sold to Ola Cabs for $200 million suggesting sector consolidation. Incidentally the acquirer – Ola cabs, had received a funding of $210 millions in Oct’2014 from Japanese major investor Softbank which was involved in similar segment consolidation in China where Softbank backed Taxi service provider – Kuaidi Dache acquired Didi Dache.
[B] Taxi For Sure – Lost Ground
Ola Aggressiveness – During June’14 in Bengaluru where the competition was intense, Ola started changing the game of cab service by introducing various schemes. In July it received a funding of INR 250 Crore and started aggressively hunting for drivers and customers. Schemes which Ola introduced were –
- Ola reduced prices of its Cab & Sedan services by 3 Rs each.
- It introduced driver incentive scheme – Drivers would be able t get 8000 INR as incentive if they competed 40 trips.
- It further changed the driver incentive scheme from weekly to daily wherein drivers would be able to get incentive as – 500 for five, 800 for seven and 1000 INR for 10 trips.
- Ola introduced Ola wallet and promise of 100% cash back on first recharge till Oct’14.
Ola was losing around 200 INR/order courtesy its cash burn strategy to capture drivers and customers. Incentives scheme for drivers was a instant hit and drivers who were having both devices (dedicated to Ola as well as TFS), were attracted more toward Ola.
TFS waited and watched for Ola to stop the cash burn tactics. But in Oct’14 Ola secured $210 million in funding and was unstoppable.
Taxi For Sure Joined Cash Burn Tactics – Once knowing that Ola is not going to stop the cash burn game, TFS with all its resources jumped into the game. Owing to the customers who generally took TFS taxi for a minimum of 4 kmtrs, TFS were able to revive its rate to INR 49 for 4 kmtrs and 15 INR/Km thereafter. It kept the driver’s incentive at INR 200/10 kmtrs. SO logically TFS too started burning cash at rate 150 INR/Trip. TFS engagement with customers rose and reached 8000 trips per day which accounted for a loss of $1.8 million in Nov’14.
Softbank’s Investment in Ola – Throughout the 2014, people have challenged the longevity of Indian taxi service business. Softbank’s investment changed the sentiments of industry watchers and it validated that investors have trust in this business. Huge investment was now only a matter of time.
TFS All Out attack to gain market – Hoping to raise new funds soon, TFS looked to expand its bases to other cities. Though it was low on cash – only $8 million, it started expanding to new cities like Hubli, Ahmedabad, Mysuru, Kolkata and Chandigarh. As per Aprameya, the co-founder of TFS, “but once you get aggressive, then you go for the kill. Maximum growth, maximum cities, all positive signs.” Most of the investors were considering this opportunity of investing in India Taxi market as a billion dollar game. TFS in mean time started looking for raising funds – $200 million. Initial rounds with investors went smoothly and TFS was sure to raise big funds.
Unthinkable happened, Uber Incident- While TFS founder was in USA for next round of talks with investors, an event in India changed the direction of Indian taxi service industry. Rape of a woman customer by one of Uber’s driver raised the question about the safety and security aspect of the service. Its future became grim with state governments putting a ban on such services. That incident changed the mindset of investors and TFS got a big no from everyone to whom they approached.
[C] Taxi For Sure Sale – Ola Vs Uber
In January’2015 TFS got an offer from the market leaders – Uber and Ola for acquisition. With No investor ready to fund them, TFS decided to start talks with these two market leaders for “Taxi For Sure Sale”.
Equity stock option (ESOP) acceleration (for TFS stockholders) and two months’ bonus for about 1,800 people became the centre of the conversation and negotiation with Uber and Ola.
Uber Option – Though Talks with Uber went ahead nicely, there were certain points which worked against the deal.
- Uber globally has 848 people on its rolls. TFS had 1,800 people in India. If the deal was to go through, it would lead to a massive bloodbath.
- Uber has its own backup for product, engineering, marketing, analytics, and tech division. And also Uber believed only in a driver-led model, so our operators (people who own and run a fleet of cabs) would also go. So basically it would have led to a blood bath for TFS employees.
- TFS investors had a view that Uber has reached near to peak of its growth and it has potential of at maximum doubling its share value – which was not a lucrative as Ola option.
Ola Option – TFS investor Accel partners were very much enthusiastic about merger of TFS with Ola. And it was a better bet, reason Being –
- Ola ensured TFS founders that it will take all the 1800 employees on board and would continue to work with operators.
- Ola was on rising trend of growth with a potential of almost 4-5 times growth. It was a better value for investment.
[D] Learning from Taxi For Sure Stint
As per Aprameya, learning from Taxi For Sure Sale were,
- Keep the consumers ahead of everything else. Investing in the first few hires will go a long way because you personally are not going to hire all the employees when the company becomes big. Being responsive to the market and thinking differently. If you don’t, your growth will slow down.
- As an entrepreneur, you are always passionate about what you have started. It’s like your own child. And you wouldn’t want to ever give it up. But you also need to be cognisant that there are other people who have helped you bring up that child. That’s where you start thinking across the board and take a call. You learn how to be a pragmatic businessman and not be very emotional about things.
- Accepting suggestions from Phanindra Sama (Red Bus Fame) regarding giving benefit to employees from TFS sale – Founders provided two month salary as a bonus to all employees. It ensured a smooth transition of leadership without any major clash between staff and management.
Stay tuned with FS for more updates.