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Using Bits and Bytes To Move People | Kapil Raizada @ IntrCity
297 Plays2 years ago
This episode is a fascinating story of the classic startup journey - you start with an idea, which works to an extent, and then you pivot and discover the much bigger idea. Disruptive mobility startup founder, Kapil shares insights about finding product market fit, building with a data-driven mindset, and scaling with capital efficiency.
Know about:-
- Building a product for train travelers
- Problems of the bus industry
- Branding buses and improving customer experience
- Scaling up supply
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Transcript
Introduction to Kapil Raizada and Relyakri
00:00:00
Speaker
Hi, I'm Kapil Nizada. I'm the co-founder of two consumer mobility brands called Relyakri and the Intercity Smart Bus.
00:00:20
Speaker
Here's a thought experiment. Imagine what you would get if you merged the efficiency of an airline with the convenience of a bus for intercity travel. Sounds like a dream? Not anymore, thanks to the disruptive mobility startup, Intercity. In this
Startup Journey and Learnings
00:00:35
Speaker
episode of the Founder Thesis Podcast, your host Akshay Dutt is talking with Kapil Raizada, the co-founder of Intercity Smart Bus and Relya 3.
00:00:43
Speaker
This episode is a fascinating story of the classic startup journey. You start with an idea which works to an extent and then you pivot and discover the much bigger idea. Kappel is an incredibly wise founder and shares insights about finding product-market fit, how to build with a data-driven mindset and how to scale with capital efficiency. 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.
Early Career and Tech Integration
00:01:19
Speaker
I felt that without tech, that consulting is not going to survive the way it is. So we were doing a lot of work on cost reduction exercises at companies, process improvements, manpower planning for different firms. And all that was pen and paper based. And I was thinking, this is not going to last too long because a lot of this recommendation that even we used to give at Madeline consulting required some tech platforms to be incorporated, right?
00:01:43
Speaker
I started to look around and think that, you know, I need to get into some enterprise ERP kind of products, which are anyways driving transformation in organizations. So that was the first thought that came to my mind after I spent a year and a half doing consulting. And then I was trying to look deeper into this entire emerging ERP space and then apply to a company called I2 Technologies.
00:02:03
Speaker
They were basically doing entire supply chain planning platform. That was kind of something that appealed to me because I had done some work in manufacturing operations and then so I joined Ido technology. That was my first full-time twist with tech. I did a consulting for a year and a half. I listed different clients and I look at their
00:02:20
Speaker
business processes, entire planning, purchase, et cetera, et cetera. And then we would then deploy tag and then automate a lot of processes. Did that for a year and a half. And then I joined the main product scheme for that line of business. So Bangalore was becoming the product center. And because I had done a lot of client facing work, it became a natural choice to somebody to build a product. And I do at that time was thinking of launching a product for Asia, a similar product for Asian customers.
00:02:50
Speaker
So I kind of naturally fit it in because I had work creation customers. So that's
Building Products at Global Logic
00:02:55
Speaker
what my break into products, building products. And this was far closer with the engineering teams in terms of what to build. So that gave me a fairly close-handed understanding of how you build the grounds of product and the entire array of use cases that one would need to think while building a product. That was my journey into the product space. And finally at Global Logic, I was then helping build products for startups.
00:03:19
Speaker
That was a global logic. Global logic was like a services company. Except that we were, I was part of a separate business unit that was focused on only startups. It was that unit was called version one. So version one was basically to go to a startup who's got funded and you say we've been the first version of the product.
00:03:37
Speaker
So a lot of entrepreneurs have ideas, but we can defer the setting up of your org, hiring, taking an office, setting up space, hiring developers, retaining them, all that. You can cut it out. We can be your startup engineering shop, product and engineering shop. You can build the MVP. Exactly. So we build a lot of MVPs in a year and a half, about 15 MVPs or so. Many of them went to the market and that was in like 2008 and nine.
00:04:02
Speaker
Which is why I also got the first favour of the start-up in Katchar. All the clients were in the US. There wasn't too much happening in India that way. Early story, relatively speaking. And that's when I also met Manish, who was the co-founder at the end. So he was at Global Logic, Manish? He was at Global Logic. We were working together in version one. From Global Logic to Relia 3, how did that transition to entrepreneurship happen? What was the triggers?
00:04:27
Speaker
Even Manish used to talk on and off. So I left Global Logic, actually, first of all, let me go and jump in. I left Global Logic and joined OnMobile at Bangalore. What do they do? OnMobile. OnMobile is basically, they build the mobile software for telecom companies. So all your ringback phones, caller tunes, SMS products, data products are built by OnMobile on a revenue share model. The biggest product that time was the ringback, the caller tunes that you hear. You will hear you when you kind of hear, you know, COVID messages or ring messages on the ringback phone.
00:04:55
Speaker
So I went into the mobile side. Manish continued in global logic for a couple of years. And then this conversation happened and then Manish left global logic and we started looking at travel and we started looking at intensity travel. At that time, we felt that train travel could be quite interesting because we could see obvious problems in the train's domain. We could see several things. We could see more passengers and same number of trains. Since we were born, like in the last 20-25 years, we had not seen new trains getting launched. We could see travel increasing. We could see economy improving.
00:05:25
Speaker
And we could see a bottleneck emerging where we could see weightless sink increasing and people struggling to find a seat, longer planning horizon, everything. So we thought we weren't really sure what was the time. We initially did a stint with one of the railway departments themselves to kind of understand how their platforms and how their products work.
00:05:46
Speaker
And as part of that product, we launched something called a rail radar, which where you could see live tracking of trains on maps and all. You could still do that, but click on a map and see it moving, et cetera, et cetera. And this was from data provided directly by the railways. The data provided by them.
00:06:02
Speaker
And we could see that it
Entering the Travel Industry
00:06:03
Speaker
did have gaps, it did have certain shortcomings, but it also gave us some data on the consumer side of the picture. What kind of questions travelers ask? What kind of queries are coming on the training query site? What is the split of mobile versus desktop, for example? How does the traffic look like?
00:06:20
Speaker
And it gave us some insight as to where consumers are heading, what are the channels that they use, what are the modes that they use, what questions do they ask, et cetera, et cetera. What is getting answered? What is not getting answered? So this was like a consumer-facing product you built for the railways, like you took this up as a project or an assignment. Yes, we took it as a project. So they already had a consumer-facing product. We kind of built on it. This was for IRCTC or like the railways? This is one of Chris has a separate training inquiry service.
00:06:49
Speaker
IRCT is for booking, train inquiry, Railways themselves does. What is Chris's? The inquiry handling platform. So gave us some idea and then I think we at one point we decided that we have a fair idea of the travel space and we should take the direct route now. So after a year or so, we basically went direct.
00:07:07
Speaker
Okay. You had already quit on mobile by this time. Even before that, I think that Chris assignment started, I had quit on mobile. And this Chris assignment would have given you some revenues to at least have the confidence that you can leave a salary job and sustain yourself. So that's important. That project was generating some revenues. And so that kind of got started, but it
00:07:27
Speaker
We also knew that this is not a long-term thing, it's not a sustainable thing. So there is a time this clock is ticking and we need to get going sooner or later. Then we decided to start off on our own. We also got an angel funding by that time to one of our connects in the US.
00:07:42
Speaker
What was your pitch? What did you want funding for? What did you want to build? Yeah. So at that
Launching Consumer Products for Train Travelers
00:07:47
Speaker
time, we were basically building a product for main travelers in India. And basically, the pitch at that time was that space has been unexplored. It's 100% government owned. There are no consumer and tech products out there. And given that it is the first choice of travel, and there's nothing else that competes at this price point, there is really no competition from a consumer perspective.
00:08:07
Speaker
Everybody has to catch a train sooner or later. And there is an opportunity, kind of a greenfield opportunity to build consumer products around because mobile adoption is going up, data adoption is going up, and the core telephone-based inquiries are going to go out of fashion pretty soon. So it was at that time a traffic story. It was not a revenue story. Okay. So like you were saying that you could monetize traffic through advertisements or on something simpler.
00:08:33
Speaker
Right. But at that point, we thought that if we get enough traffic, we can monetize through hotels, buses, cabs, travelers do a lot of spend, industry travelers anyway do a lot of spend. So that was the thing. And then we got started and we had. And why would the travelers come to the product? What was their problem that you saw? So basically we created a platform which had a lot of content, which was not existing at the point in time.
00:08:58
Speaker
For example, at that time we launched the first waitlist prediction listing. What does waitlist 25 mean? Will it get confirmed or not? Waitlist 100 is just too bad. Why are you buying a waitlist 100 ticket? It has never got confirmed in the last like six months. You just lock your money. So we started giving meaning to some of the data that was traditionally thrown out. But how did you get to predict you need historical data, right? How did you get historical data?
00:09:24
Speaker
So we had to save a lot of data ourselves initially. So we were saving, like, in work really. Let's say all the destruction that happened during the day. So Railways does make announcements, for example. So trains are going to get delayed because of all this maintenance work happening across the country. So we created a master list of all the connections in the country. That was a time consuming effort.
00:09:44
Speaker
If you tell me that some section between Lona Vela and Pune is under maintenance, we can tell you all the trains that are likely to get affected. Fast through it may not necessarily end or terminate to one of those points. If you have a ticket and we can tell you that your train is likely to be affected. We started telling platform number of trains, what platform does your train arrive. That may change the way you approach the railway station.
00:10:05
Speaker
Old Delhi, you want to go side from Ajmeri gate or Paragran side, Bombay, which side you want to go. And this was all manually collected. A lot of data was seeded manually and then you build crowdsourcing on top of it. So basically what we realized is that if I ask customer for data, then I go to Delhi. People are too busy in their own things.
00:10:25
Speaker
If I tell you actually the platform number is 7 and someday it might be 8 and I ask you to update it if today didn't go on 7 and you will update it. So editing is easier than entering or flagging it off if you disagree is easier. But in the content space one used to see the content to get the engagement going. So a lot of content was initially seeded in this case.
00:10:47
Speaker
And once the data starts to flow in, then the algorithms kick in. So the classic cases, the waitlisted number, for example, right? It does take time for, and one may not have data for all the trends, for all the classes, all the combinations. So we, the users to give us PNR numbers, for example, or some journey details. So our, our system where I would say, we'll tell you if your journey is going to be delayed or not. People will tell us where they are going or give some free information for the trip.
00:11:12
Speaker
get the drip ID and then see what happens on that this thing and then build the data on top of it. So the first six months would usually be a slow growth, but then one can expect the multiplier effect to start kicking in after the first year onwards. So pretty much the same happened with us. I think first week six months was slow. And by the time we did the first year, we had almost like a million users on our system. This was a mobile app. I guess at that time mobile apps were not dominant, right?
00:11:38
Speaker
No, actually, we started this in 2013 late with a mobile website. 2014, we started the mobile app and the mobile app started picking up pretty, I would say, reasonably well. Data adoption, if I were to think back from 2014 onwards, has been fairly strong. And then fares, then the data costs were dropping all the way. Then geo came in. So all those other accelerated adoption of data and mobile. So that's how it started.
00:12:04
Speaker
There's no commerce layer yet. Exactly. There was no commerce layer yet. So we started seeing traffic and then the next thing we realized we had two ways to go either build more traffic or build a revenue layer on top of it. And that's where we decided to put a revenue layer on top of it.
00:12:21
Speaker
And so we had to take a call. Is it going to be like a Facebook kind of a product with a hundred million billion users, or is it going to be a traffic led revenue product? We kind of felt that it's not going to be a Facebook kind of a product. It's going to reach out to a certain level and then it's going to start to plateau off. So revenue products made more sense because traffic products will not fetch high value issues unless one really crosses that hundred million kind of half a billion, a billion user kind of a base.
00:12:46
Speaker
So those are like inherently more risky, like only one out of a hundred products which are aiming for large user base will actually cross that chasm to become highly valued. Exactly. Exactly. So when we look in the market, we find 1 million is fine. 10 million points are 10 to 20 to 50 to 100. And after 100 is when you start thinking it is going to be the product that 500 million people will ever use.
00:13:10
Speaker
What's the use case? How frequently will not be used? Intercity travel, will people use daily? And no unlikely is going to be once a quarter, which means uninstalls will also happen, etc, etc. So it kind of was obvious that it's going to go the revenue way. When was this, when you took this decision to focus on? 2015. Okay. And which is when you had a million users? Yeah, we were between like, I would say 5 million there about 2 to 5 million there about since where we would be. And so at that time, we initially launched starting this concept of ordering food on train.
00:13:38
Speaker
There was a small company in Kochi called Yatra Chef. We did it on our own and initially then we hired a company called Yatra Chef which was also trying to do food on train except that they didn't have train traveler access. They had the product. What is the product here? Is it a cloud kitchen product or aggregators? No, they were a marketplace tying up with kitchens
Challenges of the OTA Model
00:13:59
Speaker
close to railway stations and delivering food on train. Was it like Zomato? You choose the kitchen or was it like standard menu?
00:14:05
Speaker
So at that time, it was you choose the kitchen. So if there were like restaurants were listed, you can choose the menu to the kitchen and it comes to you. Later on, we standardized, we removed the kitchen. We just said choose the menu. Yeah. So they were doing a certain runway and we felt that with our user base, we could easily do 20X, 10X, 20X.
00:14:23
Speaker
They probably wouldn't have so much data also, like which platform will the train stop at? Exactly, right? You need the data for yourself, you need the data for the restaurant also to deliver, and you need the data as a consumer to tell them that the food is on the way and it's going to come, etc. So everybody wanted that information on train, platform, location, etc.
00:14:42
Speaker
That was the first step that we took. We added food on train. And this was like a, how much operational control was it? Was it like you're essentially passing on the order and then the restaurant is responsible for logistics delivery or connecting payment? Correct. Connecting payment and modules. That's how it started off.
00:15:00
Speaker
And then we added a few more. Then we said, let's add some more products for the train travelers. So we added photos around railway stations. We added a bus ticketing, taxi booking, et cetera, et cetera. Pretty much other things that travelers need. So like each of these are like.
00:15:15
Speaker
Massive companies in itself, like bus ticketing, taxi booking, hotel booking. How did you do it? Did you have collaborations with platforms? Did you build your own supply? Building supply is the challenge here. For bus ticketing, we didn't build supply. We basically plugged in supply onto a platform.
00:15:33
Speaker
like through an existing travel portal. Yeah, we're trying to make it a full-fledged travel portal for the travelers. And that's when we realized that putting an offspring to the travelers is not enough. It's not a question of supply or demand. And we experimented with a set of products. So we launched the photos by the hour. We could see people coming early morning at five o'clock, six o'clock from stations. They have the work all day. And three hours, four hours is what we need.
00:16:00
Speaker
So we had put in 2-hour, 4-hour hotel booking space, etc. Some inventory we added on our own. But if I were to sum it all up, getting traffic is one part of the story. And it's a tough part of the story for sure, but it's one part of the story. But a high travel traffic does not necessarily mean high transactions. Because to get them to transact requires a lot more things to be done.
00:16:21
Speaker
And there are, I think, again, two separate aspects of it. One is just the buying experience itself in terms of how smooth it is, how well-defined it is, the unambiguous payments, et cetera, et cetera. And then the second element is the aspect of choice and competition and pricing. So especially for a portal which is selling a product that is also available elsewhere, price tends to be a very significant factor.
00:16:49
Speaker
If I'm selling a hotel room, let's take a 3-star hotel in Delhi, and the hotel is being sold on cleared, Hooking.com, Make My Trip, Goibee, Go, etc. Many users are going to check the price of the same hotel, one of the five portals, and then pick the one that's the cheapest, with the same hotel at the end of the day. So, while a lot of platform refinements do go in, price competitiveness is pretty much a necessity, I would say, to scale up because the end product is the same.
00:17:16
Speaker
And we saw that fairly consistently across multiple products that we were selling, that even if it was a bus ticket, for example, or a taxi, for example, right, people will basically go and try and see where can I get the same bus or the same taxi at the lowest price. This taxi must have been through like an Uber or an Ola type, right? No. Okay. So these were intercity taxis, by the way. So it will be like, aha, cab, Savari, or some of these, Gozo cab. There were like three or four cab aggregators who were doing intercity taxis.
00:17:45
Speaker
And for hotels, how did you plug in the supply? Hotels, we had an inventory from Yatra at that point in time. What about buses inventory, like for booking bus? Buses was coming from the usual aggregators, Pitla, Redbus. What's the aggregator were giving us the inventory. Abhi bus, they were giving inventory.
00:18:02
Speaker
And it kind of, we noticed that we could ramp up the volumes if we were willing to offer better pricing than other portals based on the discount coupons or codes or marketing plan, et cetera, et cetera, the deals that you offer, volumes could go up or go down. And while we were doing, we could see business scaling up, it was always a function of birth. So if somebody is selling 5,000 tickets a day, you don't have 10,000 tickets a day, then you probably have to be more aggressive on your, on the coupon that you give out.
00:18:32
Speaker
practically between, I would say, 2016, 2017 and 2018, the entire commission that the platforms were earning, all that and a little bit more used to be given out as onboarding incentive of booking discounts. And we also saw through a phase of fairly heavy discounting. PATM had just entered travel at that point of time. Make my trip was there, Amazon. And as we were kind of building it up, felt that this is not going in the way of being sustainable over a period of time.
00:19:00
Speaker
By 2018, what was your user base from that 5 million? By that time, about 15-20 million, if I remember right. What kind of transactions were happening or number of transactions or top line or GMV? We would be doing about 6-7 thousand transactions a day, what we would be doing by that time.
00:19:22
Speaker
Okay, okay. In this food, food is the one business which was totally like more integrated and owned by you. The others were through other platforms. Yes, it owned by us. Yes, yes, exactly. It was integrated. In food business, you were directly acquiring restaurants near stations and... These are the stations, yes.
00:19:40
Speaker
Food business was profitable for us, but we felt that it is not so easy to scale across all the stations. And the reason was that food is consumed typically during two slots of the day, let's say between one to three and seven to nine. And then we were looking at combinations of trains stopping at reasonably decent stoppages.
00:20:02
Speaker
During those meal hours, it is possible that at one to three, the train doesn't stop, for example, it is possible. Train schedules are not designed to coincide with meal hours. Second, trains may land after 10 PM when the restaurants get closed. Early morning, restaurants won't open before 7, 8 PM, 9 AM. Then also other things in the sense that sometimes the stoppage time may be less, five minutes, and train stoppage times have been declining.
00:20:29
Speaker
And if I go to factor on top of it, for a person to order food, it needs to be more than an overnight journey. If you are starting in the evening and reaching early morning, then you probably had food already. You will have food once you reach home. Right. It's really the prime use case was coming down to people with more than 10, 12 hours of journey. Right.
00:20:49
Speaker
And some premium trains had their kitchens like Rajdani, where you had to pay for the food anyways. So all that was eating into the potential market. The total addressable market by itself was not very big here. And then the entire operational thing, the last piece was that the on-time performance of trains has never been too good, by the way.
00:21:09
Speaker
So, from a passenger perspective, what it means is two things. One is, they don't know if, let's say scheduled time at 9 PM, that is one. And second, I think food by nature is something that you only think of when you are angry. You don't think in advance.
00:21:25
Speaker
Yeah, that's true. Bookings for lunch will actually kick in from 11 a.m. or 12 noon. You can tell people, you know, you can tell a book every day. But you know, at that time, there were other things on their mind. They're thinking how to take a cab. And the next important thing is typically how people will kind of think about it. So this was not that on demand types, like how says a battle can deliver within 30 minutes.
00:21:45
Speaker
So, our time was about 45 minutes, 30-45 minutes. However, station, the thing is when Vomito comes to your home, he knows where to catch you. He knows the home address. But when Vomito goes to a train coach, we are saying S3 on this train is today coming in platform number 10 and hold on, it's going to be there only for seven minutes. You have an added layer of complexity in the delivery process. And if you're not controlling delivery, delivery staff, then it's very, very difficult to ensure consistent quality.
00:22:13
Speaker
Exactly. So even if you were to do that, just coordinating the moving train, coming to a stop and the guy coming on place and there's a time things to be managed, there is a complexity that has to be done. So while the business has, this business by the way, has survived a lot of ups and downs and it makes business sense to do it, but it is not a venture fundable business from that perspective is what my take is. Time is not big enough, right? Correct.
00:22:35
Speaker
And the second realization that I mean, we had when we went deeper is that we started to actually internally question the OTA model itself, the entire OTA model. What is OTA? Like the marketplace model, online travel aggregators. Okay. Online travel aggregators. Where a marketplace is, every marketplace is selling exactly the same product to the customers. So let's take a case of flight together. You can book a flight from six platforms, let's say.
00:23:03
Speaker
But everybody is finally selling an indigo or a vista or flight. Same airline. So that model itself, we internally debated quite a bit that how do I create a differentiation? Can I charge one rupee more than the next guy or not? That's what the question came down to. And I think the answer that we kind of felt that the guy who's willing to sell for one rupee less
00:23:26
Speaker
will always have an advantage. There may be some stickiness that can be generated, but it is going to be a tough ask because the differentiation is very low. So the deepest pocket will win and the shallowest pocket will be the first to lose. How deep was your pocket, incidentally, in the sense that how much did you raise?
00:23:43
Speaker
So, we had raised about 15 million by that time, 1.5, which is not enough considering the size of, which is not enough at all. It is not enough to get into the deep burn business. And we also felt that if we were to kind of getting into the business where people are ready to burn 100 million, 200 million to finally be the last man standing and then make profits, we kind of felt that is not the direction we should run for.
00:24:08
Speaker
Their conversation started that it is important for us to have products that are different. We should be the brand owner if we have to build a travel product. People should ask, this is the product I want. It doesn't matter who sells it. So we should not be the channels because channels by definition and online channels, even more so will struggle to justify margins at any time in the future is what basically we said. It doesn't take much to set up an online distribution channel. You set up a portal and bring the APA's all there and then you go get going.
00:24:38
Speaker
So with that perspective, so this is not 2018, right? We have a business, we have traffic, we have products selling, growing, but margins are not showing up. So we have two options here, either to raise more capital to support these products, or think of a line of business which generates margins. A lot of travel companies had already raised large amounts of money by that time.
00:25:00
Speaker
So make my trip was there, clear trip was there, working. And we felt that again, we have a choice. Either we continue from a traffic perspective and sell leads, sell users basically, right? Or we marry this traffic to a product, travel product of our own that we own. That's where better value will come. But that's when we chose the latter part again. So when we looked at the landscape again, we said train ticket to train tickets. It's like the government is doing train tickets. We can do some part of it. The food we know is current, not a high time, right?
00:25:28
Speaker
And we can't run our own trains, despite what the problem in the train system is. So basically, taxis, we eliminated. We were doing a long business taxi. We said, Nish marketer is not large enough. It's what we felt, intercity travel market. Ola and Uber, we were never into it. It's an intra-city market. And these guys are already, two big players already defined the market and matured very rapidly with Ola and Uber.
00:25:49
Speaker
Flight has been done for a long time. So we started to focus more on the buses side. So we said, let's look at buses. Now, we had been selling bus tickets for a while and we had an old laundry list of complaints. The bus industry, incidentally, was giving the maximum complaints across all the products we were selling.
00:26:04
Speaker
What kind of complaints? All kinds of complaints. The bus that was sold didn't exist. There was no bus. You told me it didn't turn out to be that bus. You said it's going to be a world war turned out to be something else. Then it didn't go the route. You said it will go. It didn't even go to the destination that was told to me.
00:26:22
Speaker
the drivers were behaved that way, people may abuse me, this, that, all sorts of challenges were there. And because we were selling the product, just as a channel, we still ended up getting a lot of complaints because people say, I booked a ticket at Relya 3, then you solved my problem. And we could say, but I'm not the operator and we'll pass it the problem back, but they will still come to us.
00:26:43
Speaker
So the volume of problems being so severe, we started to go deeper into this domain. And that's when we realized that this sector probably had the maximum problems compared to trains, flights, and buses and taxis. Bus is probably the most fragmented and unregulated private industry compared to the other modes that are available. And then literally there are like dozens of operators on every route that you want to go.
00:27:09
Speaker
I didn't ask you, by the way, where you from, where you based. I grew up in Delhi. Currently, I'm not there. Currently, I'm in Japan, but grew up in Delhi. So, Delhi, if you want to go to Lucknow, to catch a bus to Hombre, there will be many buses. There will be like 50-60 operators running 2-3 buses each and the experience could be dramatically different depending on who you end up with.
00:27:31
Speaker
What were these players like Redpus doing? They were doing just a ticket sales outlet, say what Make My Trip is doing. Yeah, they are the channels. Okay, just tickets. There's no branding, quality control, none of that. It's not like what say OYO is doing, like say OYO does branding, quality control.
00:27:47
Speaker
No, OO is a model. Exactly. They would raid the bus, but they would not control it. And we could also see from a train data on a route that on the same day, a train is waitlisted like 200. Totally sold out all trains. Buses are still going as available. And we had built a crossover product that would allow these waitlisted train travelers to take a bus.
00:28:08
Speaker
Okay. Now imagine these people have paid the full price of the ticket, of a train ticket, two, three days in advance. On the day of the journey, they are denied boarding because train is sold out. And we tell them, will you take this bus instead? And most people say, no, we'll come back some other day. So obviously there's something to do with bus travel that people were not ready to sign up for. So when we did our entire ground research, we went through a lot of feedback, bus operators, et cetera, we realized there's a scope for OO and buses. If I were to use that word.
00:28:37
Speaker
There is a standardization required. And we felt that the bus industry is far more amenable to standardization than hotels actually. So Oyo is trying it for hotels, but actually hotels cannot be standardized. See, you can't say every hotel will face a park. Hotel is where it is, where it is. Location is given.
00:28:55
Speaker
I can say all buses will be the same because they are an OIA manufactured product. Some will be in front of a drain, some will be in front of a park, some maybe wherever there are. Your location is already given. Second, your plot size in the hotel is already given, which means your building is already constructed. Entrance, lobby, everything is fixed. You can't change anything, right?
00:29:12
Speaker
Not so much buses, buses are all built to one spec. I can have 5000 buses, all exactly the same. So the product is far more amenable to standardization than hotels, what these guys have been doing, which we never felt really was a standardizable product. A big room, banjuka hit by hit. What are you going to do about it? You can put an amenity inside the room for sure, but you can't do much about the property. The second thing is, a bus is a mobile product. I can get it where I want it to be to do inspection, quality enforcement, checks, etc.
00:29:42
Speaker
I can't get all hotels in the one place for me to do a check, right? We have to, people have to go all over the town to kind of really see what's happening. But a mobile asset is far more amenable to not just standardization, it is far more amenable to control and monitoring of what's really happening out there.
00:29:58
Speaker
When we do the route planning or the parking stop planning, etc, etc, we can do a lot of the efficiencies of scale are far more possible on something like a bus than they're on something like a real estate product. So it did offer a lot of advantage. And we said that there is a lot of data tells us that this is a large opportunity, probably the largest that we strike in this way that we have overlooked so
Inception of Intercity Smart Bus
00:30:21
Speaker
far. And it marries very well to our train traveler traffic, because we know trains are in short supply.
00:30:27
Speaker
And buses are the only other mode of travel, which can take a person at the same cost as the train and yet make healthy margins. So when we mapped it all together, we felt that we should have done this earlier. And that's where the Intercity Smart Bus got born. Connecting buses with telematics platform inside them, entire full stack enterprise platforms, standard operating processes.
00:30:51
Speaker
There were a lot of challenges in the bus space too, for example. You really don't know where to catch a bus. It's usually by Sambaracharaa or Gulcharaa or someplace, etc, etc, right? Some landmark, right? Some landmark, flower can eat, there's like mamaya flower can eat a bus loop.
00:31:07
Speaker
It might be raining, it might be whatever, whatever. It may not be safe. People hesitate standing with their families late night, carrying their valuables by the roadside standing. We tied up with a lot of boarding partners, created boarding zones, introduced a host inside the bus, which we call the bus captain. No fighting with the driver.
00:31:25
Speaker
Before we come to this, tell me about the first prototype bus. You must have worked on one prototype bus, fitted it out. Tell me about that journey of finding, building something which you said, I am happy with this kind of a bus. What all did you go through that journey? We signed up for the first partner for Delhi Lucknow. We were based in Delhi and we thought tier 1 to tier 2 is where basically we signed the market walls.
00:31:49
Speaker
Initially, we thought that we could get the bus operators to do on their own. What did you promise to the partners that you tied up with? So it also went through iteration. Initially, we suggested that why don't you do these things and we will support you on it. But after a few conversations, we realized that things are not going to happen. And you would guarantee revenue. Initially, we didn't, but later we said to launch it, we should guarantee some minimum revenue to them.
00:32:10
Speaker
The first operator, we said that it cost us 25,000 rupees per trip. This is the bus we want. This is where we start. This is where we land. You only pay 25,000 rupees if you do this. That's how it started. So it is irrespective of number of tickets. So it is irrespective of number of tickets. Just free revenue for the operator. VR is free revenue for the operator. And we branded the bus in a certain way. And we started to advertise the bus on our platforms. And we started to apply the bus.
00:32:35
Speaker
And you must have fitted it out with some sensors and stuff like that. What all did you do there? Yeah, so I think our initial focus was standard vehicle, clean and hygienic, punctual timing, maintenance checked, and a drain captain inside the bus. And you had a GPS in it so that real-time information. Punctuality and departures can be tracked. So those three promises I think are still relevant. People want safe travel, reliable, no surprises.
00:33:00
Speaker
and Panchul. We added a couple of, just having a professional staff crew, what we felt was important because for various seasons, one was to ensure and enforce that what we wanted to happen was happening. So this one's captain was your, on your payroll? It was our guy. Yes. So
00:33:15
Speaker
Passengers would not talk to the driver at all. There's no need. This person would be our eyes and ears and also give us direct consumer feedback because it's like an impartial person on the bus on complaints, whatever that don't get in the system, go to the captain. He has no reason to hide any complaint.
00:33:31
Speaker
Correct. The other thing that we later on did was we added a toilet inside the bus. Is it easy to do that? Or do you need like this Volvo buses? Actually, even Volvo buses don't have toilets and we know very few buses in India have toilets. And it's not because they can't get fitted. It is just that I think we haven't heard the consumers enough fighting on that. For a seven, eight hour journey overnight, I don't think we'll get into a train if it doesn't have a toilet overnight train. I don't think we'll even take a three hour flight if there isn't a toilet in the on the flight.
00:33:59
Speaker
But here we want people to take a 10-12 hour journey without a urinal. I still think it has been a deal breaker for a very large segment of our society. Our highways have improved quite a bit. They are wider and faster. But what that also means is that relieving yourself in the middle of the night is not so safe anymore by the roadside I meant. Most highways now have those rails. Exactly. They also have rails. Yeah, they are lighted.
00:34:23
Speaker
And when you think of, you know, people in the middle-aged women, children, families, it's a deal breaker. And what we believe then and we still have enough data to support that is I don't think it's that those two seats, the cost of the two seat is not the real reason. I think it's just lack of consumer centricity in the way the operations are being run. Those two or four seats is equally true for a flight and equally true for a bus or a train or whatever. Right.
00:34:50
Speaker
For a 34 sneaker, 32 sneaker bus, adding two, removing two seats is like 3% or 5% or whatever revenue it is. I think a 5% can be more than compensated. You can charge more. Absolutely. It's a feature a lot of consumers will pay for.
00:35:05
Speaker
Yeah, instead of 1000 rupees, I'm saying I'm only 1000 rupees. So basically, I think it's a question of listening to the customers and putting more product that basically meets the basics. And somewhere in the way we think about it, Akshay is that bus travel should be equal to a greater than train travel experience. If that can be done, then the entire country is ours all along.
00:35:28
Speaker
It has been, buses have been a lesser cousin to trains. That's the mindset, Indian mindset. Trains are better than buses. And there's a reason for that. You have the government backing and you think there's far more trust. But that's where the opportunity is. If a brand can build convenience and trust at par with trains, then the demand is endless. So tell me the journey of making that customer experience better. So your first decision was
00:35:53
Speaker
clean, well-maintained bus and put your own captain and put GPS so that you can ensure punctuality. Then the next decision was putting the toilet. The toilet was pretty much part of the original conversation. Yeah. And this is like a unisex toilet. Yeah, it's a unisex toilet. Correct. Yeah. And basically then a lot of improvements went into the entire telematics
00:36:15
Speaker
data collection, punctuality, defining standard operating processes. If you look at the way we finally built the old crew app where a lot of vehicle data gets captured into the app and displayed. The entire consumer information is given to the captain. So you would know that Akshay is traveling today. You're a third time traveler. And last time we had complained about a rattling window.
00:36:37
Speaker
Okay. So it's literally the kind of stuff, which a five cell hotel would be doing in terms of tracking consumers. And yes, for that to work, you need to have strong customer verification processes. So when you're bored, you will be required to give an OTP like what you would do on an overall Uber.
00:36:53
Speaker
So we know Akshay was boarding the bus and the captain has pretty much data of all the people, all the passengers, the roaster is on the captain's mobile along with their history and some key information about the traveler. And if someone doesn't show up, the captain can even call them and tell them that we are waiting for you.
00:37:11
Speaker
He does. And even if you let's say, I want to make change your trip, let's say, right. You could do that from your phone. You can also call the crew inside the bus from your phone. Like you would call your Uber driver in case he doesn't show up. We marked all the locations accurately on Google maps. So you know exactly what are the landmarks where to wait. Outlet sporting zones were identified and told to travelers.
00:37:34
Speaker
instructions on do's and don'ts were told to travelers. Luggage policy was defined. What kind of do's and don'ts? So essentially like the airline SOPs, which are their luggage. Exactly. Exactly. Yeah, exactly. Right. Yeah. Do's and don't would be, you know, what kind of luggage you can carry. Where can you put certain kind of luggage?
00:37:52
Speaker
where the buses will stop, where it won't stop, usage of toilet, how it can be done, etc. There are a number of those things that we kind of started to define for the industry. Amazing, amazing. I can just imagine how that experience would might be similar to when you're sitting in a flight before takeoff and you get all those instructions. Yeah, correct. And maybe I didn't mention it, but a last part of our fleet is our flatbed sleeper buses. It's like your AC two-tier compartment.
00:38:20
Speaker
I've seen these from outside. I've never personally been on one. But yeah, I've... No, but you would have seen the train, the two AC two-tier train. Yes. It's very much like the AC two-tier train. They're like two layers of butts. You can climb up to the upper one or you can sleep on the lower one. And those kind of buses are actually catching up a lot in India.
00:38:37
Speaker
Hc sleeper buses are increasing pretty rapidly for various reasons. One is vehicle quality is getting better and better. These buses are more comfortable, less noisy, faster. Second is the roads are becoming so much better. So it's possible to sleep there.
00:38:55
Speaker
It's possible to sleep and it's possible for buses to overnight. 10 years back, if they could do 400 kilometers, they can do 600 kilometers overnight. Bangalore Hyderabad is a typical 5, 60, 5, 70 kilometers overnight. The other reason why buses are being preferred is, I see a train is like a thousand people sit in a train.
00:39:11
Speaker
It stops at 15 places before it reaches the destination. A bus doesn't need to do that. It's a 30-seater. It just goes point to point pretty much non-stop. It's a far more efficient way of travel. No detours or divergence or intermediate stoppages are required. And lastly, because the lot size is small, you can book it on the day of travel as to our one or two day before travel. So more and more travelers would like to take a travel decision closer to the date of journey.
00:39:36
Speaker
Yeah, we are living in an on-demand world now. Exactly. And you can see very clearly, you know, that the number of passengers who want to book 30 days is like always dropping down to zero. Unless somebody is retired or those kinds of folks may do that, but you and I don't know what's happening 10 days down the line, 30 days just too far. So people do want a travel option to be available pretty much 24 to 48 hours per timeframe. Buses allow that. And because they are themselves a mobile vehicle, buses usually have pickup points closer to one's home.
00:40:05
Speaker
So everybody doesn't have to go to that one station to board. And that often cuts down the commute cost of travel. You can have multiple drops like in Hyderabad when the bus reaches Hyderabad, then it can have three, four drop of points. Yeah. So we would typically have like a dozen plus drops inside the city. So that would cover practically most of the areas that one would want to go. So hopefully people then need to spend additional like 50, 100 rupees in your home. And that's another convenience why I think this medium scores over train.
00:40:35
Speaker
What did you do on telematics? And like you said, you retooled the data around that. So initially what we did was there were two partners who were offering telematics for buzzers. A lot of vendors who offered telematics for buzzers. Just to define telematics also once for the listeners.
00:40:51
Speaker
But telematics basically perceives a box which ideally should contain multiple sims, at least two sim cards for data connectivity. And there should be
Tech Integration in Bus Services
00:41:02
Speaker
some redundancy built into it. Like a fault tolerance connectivity is the first piece. Then there are some devices that are fitted in the bus. There will be a GPS, there will be a CCTV, more than one, typically two cameras. There should also be a Wi-Fi device inside the bus because now the sim is there, we can offer Wi-Fi to travelers.
00:41:19
Speaker
Then, usually there's a display board inside the bus, which will throw out the current location. You can see where the bus is right now. If you get up, you can look at the display board. Next stop, then things like that. Next stop, speed, things like that. This data is also streamed to our cloud server, so we can find out what happened in the bus three days back, what was happening. We can track the punctuality. We can track which route did the bus take, why did it stop, where, etc., etc., the entire thing. What was the speed and things like that.
00:41:46
Speaker
There are some more things that are being added in terms of how much water levels are in the toilet, how much the temperature is inside the bus. Actually, there's no, and now the number of sensors is like amazing. You can pretty much plug in as much as you want. Vibrations inside the bus can also be monitored. For example, you get a sense of the state.
00:42:03
Speaker
how comfortable the ride is, how comfortable the ride is, the bus requiring some maintenance, et cetera, et cetera. So more and more sensors. So what we did was we initially had two or three partners who were giving us this price. And then we narrowed down a couple of companies who were basically building this telematics solution.
00:42:19
Speaker
And now the challenge with multiple vendors is that every guy will, the box will throw up its data in their own format, which means we need to build interfaces and everybody will not give the same data in the same way. In 2020, we again acquired the technology, the telematics technology, which we standardized across the entire platform.
00:42:39
Speaker
As in you bought a company, is it actually higher? Yeah, we bought a tech platform, the entire technology, a company called Goldseat. And we acquired that tech platform entirely. And we said, this will be the, this will be the intercity platform going forward. Every bus, every box, standard box gets fitted. So there is no custom software development required. We can now build our entire analytics platform, assuming that data will come in a certain format.
00:43:03
Speaker
Well, this box is now your own box in a way, like you probably, you assemble it, you probably import the components and assemble. Correct, we build the entire component. So we have like these boxes ready every time a bus comes on with the same box, and it just starts to stream exactly what we want from day one.
00:43:20
Speaker
It's far easier to train this crew, the train, the operating staff. It just works seamlessly. That's part of the stack now. So, the Terramatics is part of our own electricity stack. So, we perhaps have the only first integrated platform that has everything right down from Akshay, who travelled last day between Bangalore to Hyderabad. I know when did you travel, your travel history, which vehicle you have travelled, right down to the registration number, which seat you sat in or where you slept in.
00:43:50
Speaker
over the crew who greeted you and treated you during the journey, the driver, the route it took, the path it went through, the punctuality of this thing, your satisfaction, and it's integrated to an operator portal where complaints are visible to them pretty much in near real time. So today we are able to calculate the system automatically, calculate customer satisfaction scores, consumer NPS on a per day, per trip level, on a per bus level.
00:44:16
Speaker
And this data gets fed back to everybody who's required to take action on to it. Like every morning you have data coming in what happened overnight and brings in a lot of velocity and speed to the entire business. And some of it goes towards the bus operators. Some of it goes towards strengthening the SOP, the processes itself. Some of it goes through building better reports and better intelligence.
00:44:37
Speaker
What is the process of bus onboarding? Does the bus get a fresh paint with your colors and logo and all of that? So the buses usually have standard buses. There's not much customization required on the bus itself, but they have to go through the branding process and the telematics box.
00:44:55
Speaker
So, you only onboard brand new buses. Like, you would not work with operators. We onboard existing buses also. See, Akshay, we are not in the business of... How should I put it? We are not selling customer new buses or fancy buses. Our customers are still middle class, upper middle class folks.
00:45:12
Speaker
going about their business or work, salesman, trader, businessman, government employee, student, family, striving for personal distancing. And we are not saying, hey, we have a different kind of a bus. All that we are saying is that buses on our platform will give you a standard level of quality, safe travel, and punctual operations. So basically maintain bus sales, travel, punctual distancing, courteous staff, staff is supposed to be courteous, and they are your favorite, so that is much more in your control.
00:45:40
Speaker
Only the one person is on our payroll, which is the person who these consumers are supposed to interact with. The traditional driver and the cleaner continue to be and do their jobs. So what is your pitch to the bus operators now? What is your arrangement with them? Is it still the same? Per trip payment or is it a revenue share? There have been some, I would say, refinements in the model, but largely we do cover a certain part of the cost. That model is remaining the same.
00:46:04
Speaker
What has improved over time is our consumer attention, demand side, pricing, revenue per bus, those things have improved. That's where we've expanded to new rules. How did you improve pricing? Pricing is more of a science, actually, in terms of it's a function of your demand forecast.
00:46:22
Speaker
It's a combination of technology recommending a price and then some other competitive parameters coming in and maybe required to be tweaked by some pricing experts. So it's a combination of basically how we foresee demand on a particular date and it will change. It's like a flight. Okay. So it's like dynamic pricing the closer. If you book something two hours before you'll end up paying more as compared to... Yeah. So the pricing will change pretty much based on what's the forecast in the function of forecast, how much inventory you have, what's the market selling at, et cetera, et cetera.
00:46:52
Speaker
Or if you see that there is a lot of waitlists happening for one particular route on trades, then you can predict that there will be more demand. Absolutely. So that we typically get to know 24 hours earlier. So our dashboard will show that trains are sold out, not sold out, whatever this thing is, what's the market rate on what are the other players offering, what's their inventory, what's our inventory. So all that people check up and then they may tweak the pricing based on that.
00:47:15
Speaker
Amazing. This is sounding more and more like running an airline now. Even your pricing works the way airline pricing works. Amazing. Okay. And so how are you increasing your route coverage? How are you scaling up supply? Because then I guess a very big chasm to clear is to build strong supply, right? If you build supply fast. Supply is what people normally expect to be a challenge. My take is that supply is not a challenge. You asked about what are the pitch to the operators.
00:47:43
Speaker
But take a case on any route, right? Where there are, let's say, 17 operators running a bus, running their own buses. And that's, and this is not an exaggerated route. Any route will get 50 plus operators running a bus. And you look at the view from, you look at the operator's view of the world, 50 players
00:47:58
Speaker
competing on a route, all of them having marginally differentiated product, or I could say practically there's no differentiation in most of the products, trying to sell seats to travelers and not having direct demand, control over direct demand. So the biggest question a bus operator faces is, will my bus get sold? How do I sell my tickets on my bus?
00:48:17
Speaker
And finally, everybody depends on an agent. It could be an online agent, it could be an offline agent. If you look at the trends, more and more travelers are moving to online, right? And if you look at online, more and more travelers will look at rating, review, and reputation before doing an online purchase. What do travel look for? They will basically sort by price and sort by rating. That's what they do. What that means is if they're sorting by ratings and then looking at price, they will probably, and that's happening already, the top 5-10 entries will get pretty much 80% of the demand.
00:48:46
Speaker
So the question for a bus operator is that there are like 50 of you out there and let's take the top 10 entries will get 80% of the demand. What's going to happen to the bottom 50, 60, bottom 80% of the market? And our conversation to the operators is that how sure are you?
00:49:03
Speaker
that given the way you are running service today, will you be in the top 10 or bottom 90? Because now you are struggling for demand. And the demand is expensive anyways, by the way. The channel commissions in the bus industry are the highest. How high do they go? So, OTS typically charge 12% of the ticket value.
00:49:19
Speaker
offline agent will charge anywhere between 15 to 20%. So that's about on an average and you are already lost like once for one fifth of your revenue is already gone in commissions. And on top of that, you're not getting demand in the first place. So for a bus operator, if you are, if you decide to run a bus from Delhi to Lucknow, let's say, and let's say it costs 25,000 to run the bus from Delhi to Lucknow.
00:49:41
Speaker
If you decide to run a Delhi to Lucknow, then you have to run Lucknow to Delhi the day after also. That's also a foregone conclusion. It must come back. What that means is you should be very sure that your return revenue on the bus on two consecutive days should be at least $50,000 or more. Otherwise, you are better off just keeping the vehicle parked.
00:50:02
Speaker
So our pitch to the bus operator is that unless you have increasingly where we are heading is you would need to have a far more reliable and sophisticated system for managing demand, forecasting demand, pricing based on the forecasted demand and taking fleet scheduling decisions based on revenue maximization and not simply because you've done it every day so far.
00:50:25
Speaker
Yeah, most traditional traders would have fixed route, fixed price, which would mean that they would give a lot of money on the table because they are not taking advantage of spikes in demand as much. They would often not have full occupancy also. Correct, correct. And so what they would do is, and that's where the disaster session comes in. Say, and now what happens, my bus is 60% full, so let me delay the departure by two more hours. Get more Savaris.
00:50:49
Speaker
Let me do one thing. I'm going to let me take a detour of Agra. Maybe I can get five more people over there. I didn't plan to enter Agra, but today I will. So now you are taking runtime decisions on something that was probably likely there was data a day earlier to tell you that this is not going to work out.
00:51:07
Speaker
And at least to the second question, Akshay, let's say I have six buses. Must I run six buses every seven days of the week? If I can make more money running five, some days of the week. Schedules don't have to be exactly same every day of the week. Trains don't run seven days of the week. Flies don't run exactly the same schedule seven days of the week. You anyways need maintenance time off for some vehicles some day of the month. Can we plan it around those lean days? Or we run this on a lean day and tomorrow on a high day of buses down for maintenance.
00:51:34
Speaker
data and analytics and consumer patterns will give insights that may change the way we have done business so far. You are going with an asset light approach though you still need to spend something every time you onboard a bus because of the box that you install in a bus and you said you also spend on the fitting of the bathroom or you subsidize that.
00:51:54
Speaker
No, so we don't spend, think that the box is an inexpensive box, hardware is very cheap, actually, it's probably like something like 15-20,000 rupees there about. We do spend on branding because we think that's part of our marketing, brand building expense. We've got to do it. That's how you build trust.
00:52:12
Speaker
It helps us in customer acquisition. People see the bus, it goes around the town during day times, during evenings. It's a free asset which I can use for advertising. Instead of hiring billboards inside the city, I can paint my own buses. Yes, absolutely.
00:52:27
Speaker
I've actually chosen a fairly eye-catching combination and I don't know if you've seen some of our buses on the road, but the entire positioning is around high-tech connected buses, visible color, the big pin, that location pin, the moving location pin in the green and blue. We do consciously take a call to make that visible because that's where people see it. They may be standing at a destination, they see three buses pass by and they say, let me check this bus out tomorrow.
00:52:53
Speaker
But do you need funds to scale this up? Have you already raised funds? Tell me about that. You raised 15 million by about 2018, you told me. So we raised roughly another 15 million since then. And I didn't tell you the Covid story, by the way. Two years, we were battling a different process altogether.
00:53:10
Speaker
Yeah. That next track of 15 million was pre-COVID or post-COVID? Pre-COVID. Okay. So you got your timing right. Okay. Yeah. We got the timing that way. Yeah. You can say that, but I think what it also highlights is that our business has been extremely capital efficient and
00:53:25
Speaker
I think intuitively or maybe consciously, that's where we wanted our business to be. In my mind, the ideal business is one that feeds off an organic traffic base, which is Relya 3, which is Relya 3, gives me a high margin product that integrates with my strength, which is my traveler traffic and gives me a differentiated product, which I don't have a discount for selling now. My OTA is those channel guys must have just to discount it. This is their call.
00:53:51
Speaker
So if Payteam and Redbus wants to give a 10% discount to fight amongst themselves is perfectly fine with me. But the traveler should say, I want to travel by an intensity smart bus. So this model allows us to benefit to a point where, you know, even if a person doesn't buy a bus ticket, they choose to go by train, we still make money. So at least from our perspective, we are giving traveler all the choices. You can either travel by train or by bus. Now that's what 95% of the market is really speaking. Right.
00:54:18
Speaker
We are giving you the choice of train. By all means, Relyatri helps you book the best train tickets. We've done that always. We know often you wouldn't get the train of your choice. We have a bus service that is as good or better than trains. We want to try that. And the business model is, should you choose to travel by industry today? That's great. We want to do that.
00:54:38
Speaker
You want to try tomorrow, we are happy again too, right? So in some sense, we have built a fairly powerful self-traveler requiring platform and a compelling product out there that meets the need of the travelers. Two things I want to understand. Let me start first with, so your top of the funnel is really at three, right? That's if you get, that is one of my top of the funnel.
00:55:01
Speaker
Okay. What else is there? So we do sell on OTA platform. So we do sell on Redbus, ABIBUS, PTM. We sell on all those places too. They are our channel partners. What is the split? How much are through your own, like how much is the D2C? About a third of it is B2C and two-thirds split between offline and online partners. Okay. You sell offline also, like the traditional travel agency, you give them a way to also book.
00:55:25
Speaker
So we have a network of registered travel partners who have a booking platform, the user industry booking platform. So everybody books online, by the way, there's no offline, but the customer is an offline experience. But they've been acquired offline. Yeah. For the customer is offline. Yeah. Okay. Okay. Okay. And what do you want this ratio to be?
00:55:44
Speaker
See, I expect the way if I look at the trends, I expect offline to continue to decline. By see, I expect this 33% to probably reach to like a 45, 50%. I think 45, 55 is something I can see around the corner. And it'll probably happen through offline getting contracted over time. You would obviously earn better margin when it's sold through really at the funnel. Yes, we run very much.
00:56:12
Speaker
So are you spending to increase that funnel size or you're letting that grow organically? We are not spending aggressively to grow that funnel size. If I look at it, our whole idea is to reach out to travelers. So we do advertise and we do reach out to all the travelers who are out there. But I believe our ecosystem is large enough for us to advertise. We don't have to go out and spend further on it. Okay. So you don't need like Facebook and Google ads. That's not really.
00:56:38
Speaker
Our own platform is free advertising. So I get 15 million travelers every month. That advertising is free for me. And then my partners are anyway getting us more customers who are anyway going out and talking about it. So our strategy is more of incremental strategy. We may acquire more if we believe that our current three legs are going to underperform. And that could be a route wise, DIY is kind of a call that needs to be taken.
00:57:02
Speaker
But we wouldn't do a blanket spend to acquire more customers because it has to be a function of the gap that my current organic is able to provide and my supply side plans. What is your inventory as on date? How many buses have we seized? So I've given you a sense of we are currently in about 220-230 schedules a day. 230 buses running a day. That's what it means. Some buses may do more than one, but we measure schedules. We don't measure buses by themselves.
00:57:31
Speaker
And about journeys less per that, like 230 journeys. Yeah. And that will basically mean about 6-7,000 seats a day. It will come to about little under 2 lakh seats a month. And what's your average selling price? Our average selling price is roughly around 1300 rupees. That will come to between 27, 28, 25, 27 CR a month.
00:57:52
Speaker
Currently, Intricity would be your biggest revenue item, right? It would be our biggest revenue. And I think what is also important is that our business from that perspective, with scale, with demand, we are, I think on the largest, we are the largest single branded fleet now in the country. And the business is also probably the only, I would say in two years, the business is almost close to a break even stage. So tell me about that two years COVID period and how you survived?
00:58:17
Speaker
Yeah, the COVID period for us was the time when we invested in terms of upgrading the entire platform in the infrastructure.
Platform Revamp During COVID-19
00:58:25
Speaker
That was the ideal time to do disruptive changes into the system. So when we had started off, the entire platform was not an intercity platform. It was a mix mass of something that we had built and something that we were using market products out of the shell products.
00:58:39
Speaker
partly because those products were there and partly because we ourselves had not gotten enough first-hand experience of also the requirements to build a technology product to help operate a fleet of that scale. It took us almost a year to get the entire requirement soaked in as to what is needed. When was the first bus journey? It happened in February or March, February 2019. So you had that year of experience before COVID hit?
00:59:05
Speaker
So it took us an year to soak in all the requirements, translate them into engineering because there is no products in the market. There are only ticket selling products. There's no integrated product that maps customer happiness to a vehicle, to a driver, to a crew, to an operator, to a trip and target which issues and ticket creations and people to be kind of working on them was a crew app integrated to all this common centralized platform. The pieces weren't there, right? Yeah. It's like building an operating system for running a fleet. Exactly. Right. So.
00:59:34
Speaker
Actually, by the end of the first year, we had created our integrated platform. And it sounds a bit funny when I think about it, we were having a lot of debates as to when to replace that with the legacy product that we had in place. That had been a year. And I remember me and Manish arguing about it. Manish was saying, let's
00:59:51
Speaker
putting the platform, the current mismatch that we have, it's just taking too much time, it's limiting this, that, and I was saying, what about the business, the running business, you can't replace the entire heart of the system, it's going to cause disruptions, and, you know, customer will do it mad, and, you know, who's going to look at it?
01:00:08
Speaker
And the debate was like, you know, couldn't find the right answer time to, can we do it in parts? Let's do it in the best zone first and then load it out in patches. And then suddenly out of nowhere, everything came to a stop. COVID settled that debate for you. And then first few days it didn't.
01:00:25
Speaker
occurred to me that this is going to be so long, really. Yeah, and nobody thought it would be so long. Yeah, so first 24 hours, we were just watching TV, I would say, and then the do best started to flicker on the second day or third day that this isn't going away so fast. And then I think even before the week was out, we said,
01:00:44
Speaker
This is the time to do all the work that we've been debating for so long. Let's get engineering cracking. Let's just completely replace all the legacy patchwork components. And here is a brand new integrated solution is going to come in and push everything out. It's so happened. We got far more time that we had anticipated. I think the first lockdown lasted almost three months.
01:01:06
Speaker
But when we started working in it, at the end of March, we thought, realistically, April, things want to be like that. April, and then came May, and then May went by, and then came June. But we also realized that in the process, when the testing had all happened, we realized there were still gaps to be plugged and bugs to be fixed. So actually, it did take a little over two, two and a half months. But the great thing is that when it all started in June,
01:01:33
Speaker
And again, it started very small, trickle, the travel started the trickle. It kind of gave us the right platform to ramp up and keep fixing and improving as travel picked. Yeah, and Einstein turned out to be for all the good, but it could have been a different story for somebody else. Universe conspired to like... You could almost say that, yeah.
01:01:53
Speaker
Do you cross-sell stuff to customers once they are on the bus? You have that captive audience on the bus and there is an opportunity like in food or whatever. Yes,
Post-COVID Opportunities and Revenue Streams
01:02:03
Speaker
so yes. OTT subscriptions and stuff like that. We do limited cross-selling, not a lot. We do cross-sell food and it can be done either in the bus or you can also order pre-booked food for a pit stop. Usually the trips do have a pit stop. It's the 8-9 hour journey, so after 5 hours or so there's small 15-day pit stop.
01:02:22
Speaker
That pitstop is integrated with you, so whatever orders are placed in the bus, the pitstop people will have that ready for. Correct. Yeah, the pitstop is integrated already and people can look at what's there and then what they can do not to do. That's one. We also have some clients who want to offer their products to the customers either for free distribution or customer consumer awareness. Okay, sampling. A sampling kind of thing. Some products are sold along with the ticket like
01:02:50
Speaker
reinsurance or maybe some coupons that could be sold. And I know that there are just revenue line items for us. The way it happens on flights, like you can do add-ons. Correct, correct. You can do an add-on. So that happens. And do you also sell the excess baggage add-ons? Oh yeah, we do have an excess baggage.
01:03:08
Speaker
to see the biggest source of revenue for a lot of airlines. You know, people are traveling lighter and lighter. XS Bank is not a main use case. And I would say it's an edge case. Is it mandatory to download an app when you get on the bus? No, no, it's not mandatory, but it helps. How do you make people download? That would be one of your key goals, right? To have more people download the app.
01:03:32
Speaker
See, the way we work is the app has been designed for the traveler to get maximum out of the bus, right? In terms of features, information inside the bus, data, even some stuff like, you know, upgrading a seat or talking to a car and stuff like that. A lot of features are out there in the bus. Reposition is more as something that, how do I say it? If the travelers interest to carry out, they'll get the full value from the ticket that they booked. It's more, I like to say you are entitled to get all the benefits that you've paid for.
01:04:02
Speaker
I wouldn't say that it's mandatory for you. If you choose to travel with lesser value, that's fine with us. But we built it so that you get the most out of it. That's the whole idea. So we do communicate in the bus that there are several other things that you should use for your own comfort and convenience. But we don't make it mandatory. So what's your expansion plan now? Do you want to increase the fleet size? Do you want to spend more on generating demand? Or do you want to raise funds? Talk to me a bit about the roadmap.
01:04:30
Speaker
So the way we are thinking about it now is we do want to increase the scale and our preference currently is to go, we'll go deeper onto the routes where we already present. We are presenting about 45 routes and we believe that instead of adding more, we've got in coverage. It kind of makes sense to spread out a bit, at least cover all the spokes from a particular hub because it makes customer acquisition efficient.
01:04:51
Speaker
So let's say I'm doing some camping in Bangalore. It helps if I had all the exits going out of Bangalore covered by my service. So then anybody would want to say, I think for my bus on our route, at least doesn't say no residents found that doesn't happen. Once that is covered, we want more options to be available on our route. That's again, an efficient form of scaling. It doesn't require more manpower. It doesn't require a new market. It does require us to build on repeats and experience.
01:05:17
Speaker
My plan is that for the next, I would say six months if I were to look in, we will go deeper on the routes where we are already in, expand our market share, have more operators sign up on it. And basically what it means is of course more demand. So the area where we may want to spend a little bit more is to see whether the demand increase keeps pace with supply or vice versa. And that's the balance that this business has to strike.
01:05:41
Speaker
How do you strike that balance to make sure that you don't end up with oversupply and not enough demand? So that's what it kind of comes to. See, because we add capacity in lots of a bus, right? 30 seats at a time. And let's say we're already running, let's say 10 buses on a particular route. We would have a sense on the demand for those 10. Usually for an 11th and a 12th to come in, the 10 should be running at a certain occupancy level. Is there already like 80-90% occupancy levels? Exactly. Exactly.
01:06:08
Speaker
So when we started in 85, 90% and it gets sold out on high days, on five days of the month, you know that you don't have headroom for increasing your beats or increasing your customer base. So actually, if you do a good job, our root will automatically tell you when it is ready for an upgrade, for a capacity increase.
01:06:28
Speaker
Now, the only question there is, do we wait for the routes to tell us when it's ready or do we want to creep on that artificially? That's the only call. Do you want to spend on increasing demand? That's what I'm saying. We do spend on increasing demand and it's a decision taken at a route level. See, the thing is that, especially in mobility with perishable inventory, it's important that a lot of perishable inventory doesn't get wasted. That's one.
01:06:51
Speaker
But second, it's also important that there is no point in me Arabdising in Nagpur when I don't have a bus between, let's say, Nagpur to Indore. So, it has to be a very targeted spend, marketing, running on cities, on routes where we have travellers. It's very easy to have high leakage on Arabdising where people will know about you, but they're never going to consume. You would only want to target high-end, like someone who's going from Bangalore to Hyderabad, would be the kind of person you would want to be. Exactly, exactly, exactly.
01:07:18
Speaker
Yeah.
Travel Route Advertising
01:07:19
Speaker
And which is why I said it's important to have my Bangalore coverage because what you realize is this is why you are advertising to Bangalore, to Hyderabad. You will also reach people who are travelling from Bangalore to Belgao, for example. Now, if you don't have a service to Bangalore to Belgao, that's wasted impressions. So then it makes sense to at least cover, let's say, the top seven destinations that, let's say, comprise 80% of all outgoing traffic. Let's say Tirupati, Goa, Bangalore, and then you can say, let me advertise Bangalore, Hyderabad.
01:07:46
Speaker
Okay. So you've been extremely capital efficient till date. So you want to plan to continue that and do you want to raise more funds? What's the plan there?
Fundraising and Growth Plans
01:07:55
Speaker
We will be raising more funds. The capital efficiency is inherent in the business that's there. It's not something that we are enforcing on the business.
01:08:03
Speaker
And I think the way we are looking at it is that we will raise capital now to scale up the business, not to subsidize an inefficient part of the business. So there are two reasons, right? You want to scale because the business is losing money. Every customer is losing money. That's one reason, right? You want for sustainable. We are essentially trying to now raise capital for growth. And I think we've also gotten comfort that we have taken the business to a state where we want it to be, to make it scale-friendly.
01:08:30
Speaker
And I think even the mood in the industry is like that. People want to, I think, invest more in businesses, which are proven to be a little bit more scale-friendly. That's a nice term. It's the first time I'm hearing this term, but it's very scale-friendly. You made it scale-friendly by putting in place all of those processes, the workflow automation, the apps for each stakeholder, so that now it's like reads and repeats kind of. And what is the size that you want to raise now, the next round?
01:08:59
Speaker
We're looking for about 30 million thereabouts, what we think is adequate for us. And our expectation is that we should be reaching close to $100 million in revenue in the next 12 months or so. And then we want to do a 2X increase year on year of the next two years. What you're building is so unique.
Airline Model in Bus Services
01:09:17
Speaker
Is there anyone else who's taking this approach of bringing the airline operating model to buses?
01:09:23
Speaker
Oh, yeah. So now I think there are about, I would say, a good four or five guys who are trying to do it in their own way. Yeah. So look at globally, you know, fixed buses has been trying, has shown that the tech bus, bus market in Europe and the U.S., they've done quite a lot of other countries. If I look at India, I think the earliest was maybe a hail trip, which is a Ford company, Ford mobility company. They run some bus services in South. Then other players, Zingbus is doing one, the Bigo bus in Jaipur. I know it's interesting.
01:09:53
Speaker
It's not intercity. Chalo is doing intercity for these state owned buses. From what I know, they are primarily doing a ticketing and a tracking platform, but I may be a bit out of date if there's something new happening there. But compared to these players, which you've talked about, they seem to be like regional players. So you are probably like the only pan India player with the kind of skill.
01:10:16
Speaker
Yes, I think we are the only truly pan-india player with a proven product market straight. I think that way, I think the stock results quite well so far.
Conclusion and Listener Engagement
01:10:27
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.