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The Journey to Building a Mobility Unicorn for Bharat | Nikhil Aggarwal (Chalo)
331 Plays2 years ago
How do you track an entire city’s bus fleet without any hardware? You pay the conductors to turn on their phone's GPS.
This was the scrappy, ingenious first step Chalo took to solve India's public transport problem. It perfectly captures the on-the-ground hustle required to build a business that now powers millions of journeys daily.
In this episode of Founder Thesis, your host Akshay Datt sits down with Nikhil Aggarwal, the co-founder of Chalo and the current founder & CEO of Grip Invest. A graduate of Delhi University and FMS, Nikhil left a high-flying career in investment banking at Morgan Stanley to co-found Chalo, a mobility platform that revolutionized public transport in India, scaling it to a system that enabled over $180 million in annual ticket sales. He has since founded Grip Invest, a fast-growing fintech platform for alternative investments.
Key Insights from the Conversation:
- Pivoting to the Core Problem: Chalo initially started as a broad multimodal journey planner but quickly realized that the most significant pain point for commuters was the unreliability of buses. They pivoted to focus on solving a single question: "When will my bus arrive?"
- The "Free" Wedge: To get buy-in from government transport agencies, Chalo provided GPS trackers and ticketing machines for free. The value of the data collected was far more significant than the hardware cost, giving them the leverage to build partnerships.
- Data First, Commerce Second: The primary function of Chalo's high-tech ticketing machines was initially to gather accurate route data to power their ETA algorithm. This data infrastructure became the foundation upon which they later built a massive commerce and payments ecosystem.
- Aligning Incentives: The platform was designed to change conductor behavior by shifting incentives from collection-based metrics to timeliness and schedule adherence, which could be tracked via Chalo's system.
Chapters:
[00:00] Introduction: Solving India's Public Transport Problem
[01:30] Nikhil's Background: From Economics at DU to FMS MBA
[03:12] The "Curse of Middle Management": Why He Left Investment Banking
[04:04] The Journey to Chalo: Meeting the Founder of Carwale
[08:01] "Meri Bus Kab Aayegi?": Finding the #1 Problem to Solve
[10:09] Using Data to Optimize Bus Routes & Operations
[12:12] The First Big Hurdle: Getting GPS Trackers into Buses
[12:42] The Hack: Paying Conductors to Use Their Phone's GPS
[15:28] The Zero-Cost Marketing Strategy that Led to Viral Growth
[16:01] Rolling Out Commerce: How Digital Ticketing Began
[19:48] The Genius Insight: Using Ticketing Machines for Data, Not Just Commerce
[20:32] Why Chalo is a Data Company at its Core
Hashtags:
#FounderThesis #AkshayDatt #NikhilAggarwal #Chalo #GripInvest #StartupIndia #MakeInIndia #Entrepreneurship #FounderStory #StartupJourney #ZeroToOne #Mobility #PublicTransport #SmartCity #GovTech #EV #Fintech #InvestmentBanking #AlternativeInvestments #VentureCapital
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Transcript
Nikhil Agarwal's Entrepreneurial Journey
00:00:00
Speaker
Hi, Akshay. Good to be on this podcast with you. My name is Nikhil Agarwal. I am currently the founder and CEO of Grip Invest.
00:00:18
Speaker
The most sustainable way for a country to develop its transportation infrastructure is by encouraging more use of public transport. Car ownership comes with a whole host of issues like traffic jams, pollution, etc. And some of the best places to live in the world actually have more usage of public transport than private vehicles. And in India, just like every other country, the solution to this problem has been found by start-ups.
00:00:43
Speaker
In this episode of the Founder Thesis Podcast, your host Akshay Dutt is talking with Nikhil Agarwal, who was one of the founders of Chalo. Chalo is on track to become one of the first unicorns in the space of public transportation and it helps make life easier for millions of people who use buses for intercity commuting. This is part one of a two-part conversation.
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00:01:04
Speaker
And in this conversation, Nikhil talks about his journey of setting up Chalo.
00:01:08
Speaker
Nikhil eventually exited Chalo and founded Grip Invest, which is covered in the next part. Listen on, and if you like such insightful conversations with disruptive startup founders, then do subscribe to the Founder Thesis Podcast on any audio streaming app.
Educational and Career Background
00:01:30
Speaker
I went to Delhi University, studied economics honors. This was 2004. I finished my MBA in Delhi at Faculty of Management Studies, FMS. I was a bachelor of 2009. Okay. FMS is like really hard to get into because they are such a small intake. So that's pretty amazing. How was that FMS experience like?
00:01:47
Speaker
I would say it was very interesting. FMS, you're right, it has a very small batch, and hence, unlike most MBA schools where you may not necessarily know who your classmates are, I think in FMS, just because of the size of the batch, you have a much more deeper connect with your classmates. I joined HSBC as a management trainee. My first role was as a consumer watt gauge banker, so home loads.
00:02:08
Speaker
This was immediately after the financial crisis, 2009. And I think HSBC at that point of time had basically said no more home loan lending. So I was part of a team that actually was helping rebuild that mortgage book. So there were five people in this strategy team and we started rebuilding it again. There were also things like how do you create the right perception within the larger bank that this is going well, because you need to buy support for anything that new that you're doing.
00:02:31
Speaker
And I did that for about seven months before getting an opportunity to move to an investment banking role with Morgan Stanley.
Transition to Entrepreneurship
00:02:37
Speaker
And I think that had its own set of challenges and learnings, but that is how I started my career. Okay. Okay. Like essentially they gave you an open playing field. They'll set up the home loan business for them one more time, which they had discontinued.
00:02:48
Speaker
And what about Morgan Stanley? What were you doing there? I was an investment banker looking at a bunch of sectors like auto, tech, real estate, and doing both capital markets and M&A. For people who are not familiar with investment banking, we help companies either raise money or acquire other companies or sell themselves as part of a transaction. And the process of discovery of who that transacting party may be and the process is what an investment banker does. So what made you move on?
00:03:14
Speaker
I call it the curse of middle management. That's what I've started calling it. People are in the 30 to 40 age bracket and they've spent anywhere between six to 10 years working in a role. They typically start seeing the next three or four years being similar to the last three years.
00:03:29
Speaker
At that point of time, you're young, you don't have that many responsibilities, health is still good, you may have one kid, and you've built a good savings base. And that's when that kujili starts happening to say, if I want to do something different, this
Joining Chalo
00:03:41
Speaker
is the time. And I think I went to the same experience where entrepreneurship was something that always excited me. I had started a venture in undergrad, I had started a venture in post-grad, and I just couldn't find a better time to do this. At the same time, that experience at Morgan Stanley had given me a certain learning.
00:03:56
Speaker
The next three years were going to be a lot of the same and that's when that switch sort of came out. So like what exactly did you do then? Tell me that journey. I would say in my fifth or sixth year of Morgan Stanley, we were advising a client company called Carvali, which is one of India's largest classified companies for cars, second and used cars.
00:04:14
Speaker
And we were advising them on a fundraise or an M&A transaction, which in that process, I ended up spending a lot of time with the founder, you know, on slides, on meetings, et cetera. And we started talking about what he's going to do first, Karwale. And he had intubated a business, which is called Chalo, C-H-A-L-O, which is a mobility business.
00:04:33
Speaker
Which is almost a unicorn now, I believe. I hope that the current fundraise gets them to that point, but it's obviously doing very exciting stuff in a lot of cities. And so I happened to get really excited by it. And he offered me a role to join that business as a co-founder. It was a year old when we started speaking.
Chalo's Mission and Impact
00:04:49
Speaker
So I moved from Morgan Stanley to join this company as a chief operating officer. And then was part of the organization for four years, helping just build the business.
00:04:57
Speaker
Tell me about this founder of Carvale who incubated cello and what was his thesis behind starting cello? In my entire life, the founders that I have found most fascinating are people who basically have two things. One, they have an insight about an industry or consumer behavior that no one else has. And number two, they are able to act on that insight. A lot of us, when you think about even simple things like slipkart or zomanto, those are also our problem statements as consumers.
00:05:26
Speaker
But for whatever reason, we did not have the insight that this could be a business opportunity. And even if we did, we did not act on it. This is what differentiates founders in my view. Mohit Dube, who was the gentleman I'm talking about, when he was building Carveli, he had the insight that cars can only be owned by so many people. And the more dominant form of transportation is always going to be public transportation.
00:05:47
Speaker
So if you're truly going to impact the lives of hundreds of millions of people in this country, it is not by selling cards, but it is by providing a better public transport or mobility solution, which is the premise of Chalo. So his insight came from his own business. And obviously, as a one-time founder, he also always had the knack of being able to act on it, which is what he did to set up Chalo.
Innovations in Public Transport
00:06:07
Speaker
So this is a pretty broad problem statement to improve public transport. What exactly was Chalo's focus on? What were they working on?
00:06:14
Speaker
We started off actually as a multimodal journey planner for public transportation. Just break this term, multimodal journey plan. If you think about your journey using public transport, not a private car or a private bike, you will typically take auto rickshaw from your house to the railway station. Then you will take a train and then you will use another form, either a bus or another auto rickshaw for the last mile. So the first mile and the last mile and the trunk are going to be three different modes of transportation. Very typical.
00:06:42
Speaker
It could also include walking. This is multimodal, right? So different modes of transportation to complete the same trip. Chalo basically built an algorithm to allow people to plan multimodal journeys using different forms of public transportation in a most time effective or cost effective manner. What we realized is that the biggest part of the journey is going to be buses.
00:07:00
Speaker
especially in a country like India. In fact, even in London today, which is one of the most developed public transport networks, trips on buses far outsized the number of trips on metros. So buses by themselves are very dominant and will be a major form of transportation. The experience on these buses is very poor in India. You're talking about like local transport or like million cities?
00:07:19
Speaker
Local transport, so if you're listening in from Bangalore, it's BMTC, if it's Delhi, it's DTC, in Bombay, it's best. Absolute local transport. And if we have to focus all of our limited energy and time, it should be on solving buses. And making that experience better, it will have the most significant impact to travel. So, Chanu's proposition within public transport came down to how do we make a bus journey, an intra-city bus journey, better. And how did they fix that?
00:07:43
Speaker
The most important problem within that, and saying this point again and again, because ultimately you can only start to solve one problem at a time. You can solve more problems over a period of time, but at the beginning of a startup, you solve one problem and you want to make sure you go after the largest problem to solve first. You need a wedge to establish yourself.
00:08:00
Speaker
Absolutely. You need a hook, right, to go after it. So the biggest problem within buses was, that was the question. Okay. When did my bus arrive? If you think about the Ola and Uber experience of the world, you know exactly when your cab is going to come. Why couldn't you know when your buses were going to come? And that's how we started cello's journey in public transport by trying to solve that question. The way we did it is to install GPS devices and buses and then provide a mobile solution, mobile app.
00:08:26
Speaker
to users where they could search for buses and know when it will arrive at a bus stop, at a particular bus stop. Did this include commerce, like ticketing? You can buy your ticket, pay for it and all that, or was it just tracking? So again, down to focus, right? So the first problem to solve was arrival time. The second problem that we then start to solve was commerce.
00:08:46
Speaker
Because ticketing when you're on a bus is not that big a challenge. There is a conductor who will provide you a ticket and hence you can purchase it. It is a problem still and we realized the magnitude and the, I would say, the dimension of the problem over a period of time. When we got into commerce, we realized that because tickets are entirely paper-based, cash-based, there are two things that happen. Number one, there's a lot of privilege in the system. Cash gets leaked out. And number two, what in traditional economics is called menu cost. You can't keep changing the menu. It's a cost to change the menu.
00:09:15
Speaker
If you have said changes, if you want to add a new dish, it changes, right? Because those are printed receipts of tickets. So you have to print those stubs once a while. If we could make that experience digital, where you could use a smart card on mobile, we would suddenly be able to address both these problems. So it was not a convenience problem. It was, there was a economic problem associated with offering better services through more variations of tickets. And second is better connection of tickets.
00:09:40
Speaker
So Chalo built a mobile app and a smart card. For example, in Hong Kong, there's an Octopus card and in London, they have an Oyster card. Similarly, in India, we launched the Chalo card, which is a smart card solution for people to use on ticketing. And on top of it, we could actually start building different ticketing products. We launched a weekend pass, a weekday pass, three times a week pass, return journey pass. So we solved the menu problem and we solved the cash collection problem. So that is how Chalo then moved from purely journey discovery to real-time information to commerce.
Marketing and Data Utilization
00:10:10
Speaker
And I think the last leg of the journey today, at least, is using all of that data to actually help plan bus operations better. If you know where users are searching from, what they're searching for, and you know where buses are and where they're going, you can start suggesting what may be a better way to design public transport systems. Should the bus leave at 9 or 905? Should it travel on A to B route or A to B to C route? And that starts when impacting occupancy, better ride experience. So that's the journey that we saw at Chalo.
00:10:38
Speaker
Yeah, so I live in Japan and we have this suika pass here, which is the same thing. You can use it across bus, metro rail, Shinkansen and everything. Tell me the journey of like actually building it. So first that multimodal journey planner would have needed a lot of data, right? And Google maps probably took a decade to build a multimodal journey planner. How did cello build it?
00:11:01
Speaker
I would say that was actually when I look back the easier part of the business to build because we were inherently using Google map locations to then put together the map or the trip for the person and then using data from public records of a transport agency or a train schedule to create it.
00:11:20
Speaker
Like DTC would have a published schedule. However, we realized that and why the trip planner was not a successful product is that information was not real. It was not real time. And hence the accuracy of what we were telling people was fairly poor. We were not fulfilling the promise of our product and hence the learning to move to real time information as against move to schedule information.
00:11:40
Speaker
with all credit to Google Maps. But if you use Google Maps today for public transportation, there will be bus stops that don't exist anymore. Because ultimately, no one is collecting the data by going and physically verifying it's all based on an algorithm. And hence, while we were able to create it as a pure tech solution, it never served its true purpose. And hence, the need to move to real time. Because I think these public transport agencies anyway don't publish stop by stop time. They just publish the start time, like the bus starts at this time. Then this depends on traffic.
00:12:09
Speaker
That's correct. They publish a start time and of sequencing. They don't find. Okay. The GPS tracker part of it. How did you, I'm guessing the challenge there would have been who will pay for it. I'm assuming that it was a service that you were selling to the transport agencies. Like how did you actually get that off the ground?
00:12:26
Speaker
Sure, there are actually some very interesting problems which we never anticipated there. The first one was convincing government bus operators to actually put the GPS in the bus. Forget the cost of it. But actually, how do you convince them to do this? Because governments run on tenders and there was a protocol towards doing things. The way we did it as a pilot was we went to bus conductors and we installed a tracking app on their phone and paid them money to activate the tracking app when they were on the bus.
00:12:53
Speaker
So we found sort of a private market solution to a public market problem. And when the data started working, we were able to convince governments to say, okay, fine, here's data for why you should allow us to put a GPS. What data were you able to show them? Ridership increase or what? Ridership increase was difficult to measure, but we had a number of... Yeah, you didn't have the pre.
00:13:09
Speaker
We had a number of people using the app and saying, here's data to say that this is how your network is moving. You can even see problems like three buses back to back. And here's the number of people who are now logging in to see this data. So clearly we are solving a pain point. And then we got permission to put GPS. I think getting.
00:13:25
Speaker
Someone to pay for it was almost impossible because you also needed to go through a tender system etc to do it. So we actually gave it for free. We used to install GPS for free in buses because the data was just so valuable that it didn't make a difference and our GPS is a commodity in that sense. So it's not a very expensive proposition. Then the other problem we used to have was that conductors started using the data to decide how to run buses.
00:13:46
Speaker
Because if your bus is too close to the next bus, then you're going to lose passengers. And if the next bus is quite behind you, then they would just wait at bus stops and board more passengers, and increase connections. So the data started getting used for those purposes. So that became a different problem to solve. But yeah, these were some of the things that we had as an experience in doing it. How did you solve this problem? It was actually come down to incentive structures. OK.
00:14:11
Speaker
So if you incentivize a conductor to run as per schedule and say there's going to be an incentive for you to meet the schedule rather than worry about collection, it then starts making sense. So one of my favorite learnings from MBA school is about incentive structures. We all work on incentives, different kinds of incentives, not necessarily money. And creating a successful business is about finding the right incentive structure for everyone in that ecosystem. And that's what we were maybe able to do at least partially at Chalo in this problem.
00:14:37
Speaker
You were able to convince the authorities that your conductor's performance parameters
Advanced Tech Integration and Growth
00:14:42
Speaker
or KPIs should be timeliness, and you can track timeliness through cellos product, which made it easy for them to really do performance evaluation of every bus.
00:14:51
Speaker
And at the same time, we were able to give this data to the transport agency for them also to track their buses. They had no idea where their buses were during the day. They were relying on just the kilometer count in the bus, but they had no other idea. And when we started providing them that information, we started solving their problem, which then started giving us more permission to do more GPS and more experiments with how the buses were done.
00:15:13
Speaker
So this GPS was essentially like a top of the final cost. It was your cost to acquire users. If you are able to give users that arrival information, then they will download the app. So it's just the cost of downloads basically. Absolutely. I think Chalo has never spent anything on marketing. You would not need to. If you have something this powerful, then the word of mouth.
00:15:33
Speaker
Yeah, lots of very interesting things we did on the marketing side, which I give credit to. We have a co-founder called Dhruv Chopra and we used to put stickers inside buses about the cello app because all of your customers are in the bus. So while I go outside the bus, we started realizing that there are places and cities where there is no bus stop. We basically incurred the cost of creating a bus stop there, but then branding it cello. We started building city maps and branding them cello. So we realized that given it's an infrastructure, we're building an infrastructure, we can think of marketing very differently and create awareness about the product.
00:16:01
Speaker
And how did the commerce kickstart, like the ticketing? Was it about replacing paper tickets altogether? Or did authorities say, okay, people can either buy a ticket or they can show the conductor the ticket on their phone? What were the modalities of getting it off the ground? You can't eliminate paper tickets because ultimately you have to make the assumption that everyone is happy to do this. And in a society like India, that's not possible. So it was an additional mode of payment that was available to people. And that's something that we started providing.
00:16:28
Speaker
So as in, once you board the bus, you go in front of the conductor and you tap something on your app and the conductor gets a notification that you've paid. Is that something like that? So basically very much like how all of us use our PTM today. Okay. Where on the merchant's post machine, there's a QR code and you scan the QR code. Same way we used to generate a QR code on the customer's mobile and the conductor's ticketing machine could scan that.
00:16:52
Speaker
and validate that the payments had happened. On the card, very simply, the way we do our tap today, if your spend is less than 5,000 rupees, RDA allows you to tap your credit card on a post machine. Same way we built a card solution, which you could just tap on the conductor's ticketing machine to pay for the payments.
00:17:07
Speaker
One of the things I'm proud of is that we were the first to introduce very high-tech ticketing devices for conductors. Today, if you go to a merchant shop in India, the machine that a merchant uses for payments, car payments, is the same device that is inside the mess in the conductor's hands.
00:17:22
Speaker
So same pass machine, same handheld pass machine is what the conductor uses. This is effectively an Android device, and hence you can program the shit out of it. You have a camera to scan QR codes, you have an NFT, you have a swipe machine, even RUPE cards or a Visa MasterCard can be accepted by the system. So it's Wi-Fi connected, Bluetooth enabled, it's as high tech as it gets. And that's the machine that Chalo for the first time introduced in India for buses and then bid the solution on top of it.
00:17:50
Speaker
So your path to roll out ticketing would have been to first get the authority to equip conductors with this ticketing machine, right? Without that, none of the next steps would have been possible. That's true. Okay. And the relationships with the transport agencies was already built because you were giving them at no cost data about location and like the telemetrics of the vehicle was going to them at no
Chalo as a Tech Partner
00:18:13
Speaker
cost. So that builds the relationship, which could be then leveraged to get them to adopt ticketing device.
00:18:19
Speaker
Yeah, it all started from that simple GPS device. Amazing. Okay. And this was again, like a paid solution. What was the monetization for this? So the machine was free of cost. Okay. We always give it free of cost because it's so much easier and it's like building a road. You can put the toll later, but you build the road for free and you can find other ways to monetize it. So the machine was given for free and we initially used to charge on
00:18:47
Speaker
people who bought mobile tickets or smart cards. And we used to not charge anyone who used the paper ticket, continued using the paper ticket. So only people who transitioned were what we used to monetize on. Chalo has now moved to a different model where we started seeing that as a combination of the data and the ticketing, there was an increase in ridership, also a reduction in pilfage. And what we started seeing is, or started seeing an opportunity for us to take a revenue share of the total earnings of the bus because we were playing a role in increasing those.
00:19:17
Speaker
And hence the model is now about revenue shared rather than simply about providing this as a service. Got it, got it. So now Jello is a tech partner for transport agencies basically.
00:19:27
Speaker
Yeah. It's everything from a tech partner to getting involved in bus operations. So everything I like to think of it as the largest private bus service in the country, which is using technology, but without owning any buses. Amazing. Okay. Okay. And the smart card, when was that last? Like at the same time, only when you launched the ticketing device for conductors or what was the evolution? The ticketing machine came first. We launched a ticketing machine for a very different purpose.
00:19:52
Speaker
The funny thing is that there are two things about a bus. There's a bus number and there's a route on which the bus operates. Like you said green line, but green line doesn't mean that the same bus comes on the green line. It could be any bus, which means even if you have a GPS on board, they have no way of telling whether it's going to operate on the green line or some other route. But the ticketing system knows.
00:20:11
Speaker
because that's the only way to issue tickets. So the reason we put the ticketing machine in the bus was to find out the route number and that married with the GPS data gave us the ability to predict ETA. Once we started putting the machine and seeing the data, we realized that, okay, there's another opportunity here to build commerce on Docker.
00:20:27
Speaker
And that's when we introduced the smart card and mobile ticketing. So that's the full evolution of the tech stack. Amazing. The foresight to have this process, this way of thinking that let me get the data first and I will monetize later. That is simply visionary, I would say, to have that kind of foresight. Amazing. Okay.
00:20:46
Speaker
So essentially I would say like cello is like a data company then at its core, like everything that built cello to where it is today was in pursuit of better quality data. That's how it got built to where it is today.
00:20:59
Speaker
And what kind of, so once the monetization started, then what kind of numbers did it do? Like what is the revenue numbers like? Are you at liberty to share some, something about the growth in numbers? The last number that I saw in the public domain was about $180 million of ticket sales in a year on various parts of Chalo system. So that was a total gross value of transaction that Chalo was enabling. And that's something that Mohit has recently spoken about. So I'm just quoting him.
00:21:23
Speaker
We hope you enjoyed listening to part one of this two-part episode. Just search for founder thesis on any audio streaming app for part two of this amazing conversation.