15 April 2012

Redbus - Success Story

Redbus - Success Story

·         redBus is India’s first, largest and favorite bus tickets booking site. It got voted by Forbes among the top 5 hottest start ups in India. It is one of the most loved travel websites with some of the rarest features and has offices in Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Hyderabad, Mumbai, Pune, Vijayawada and Vishakhapatnam.

·   redBus.in was founded by three engineers -- Phanindra Sama, Charan Padmaraju and Sudhakar Pasupunuri They were friends from BITS Pilani, one of India's finest engineering colleges.All with top IT MNCs - IBM, Texas Instruments and Honeywell.

  In an interview with Rediff.com, Phanindra speaks about his journey from an engineer working for a company to an accidental entrepreneur, My ambition was to be an electronics engineer and I was happy working for Texas Instruments in Bengaluru after passing out from BITS, Pilani.

·    The seed was sown when I couldn't get a bus ticket to go back to Hyderabad during the long Diwali weekend in 2005.   As I had no other work, I went to a bus ticket agent and asked how the whole process worked. I felt there might have been a bus which went vacant and he didn't know about it.

·   When he explained how bus ticket booking worked, I figured out that there were many inefficiencies in the system.   Suppose there are hundreds of buses from 30 operators running from Bengaluru to Hyderabad, the agents do not have access to all the operators.

·   When an agent gets a customer, he calls a bus operator to find out whether there are tickets available. The operator looks at the chart and tells him the number of vacant seats. The number of agents a bus operator can have is limited as he needs to identify all by phone. The agents also have only limited number of operators to work with. Then, the customers cannot always choose the seats as there is no transparency.

·   Another problem is, as the fares are not published, there is no fixed fare for the customer.  But the major problem was booking return tickets. Every time you went home, you had to call someone and ask them to book the return tickets from there.  At that time, travelling from Bengaluru to Hyderabad was like travelling between two countries.   Being an engineer, when you see a problem, you start thinking about solutions. I felt computers could solve these problems easily.

·   That weekend itself, I wrote a mail to my room mates telling them about the problem, and why I had to stay back. I also wrote, 'I see a solution to this problem and could we work on this?'.   What I planned was, create a software, sell it to bus operators and give the money to some NGO. It was not a business proposition at all at that time.

At that time, it was very exciting for us to find a solution for such a problem that involved thousands of people.  In January, 2006, we -- the seven of us -- divided the work among st us and started working on weekends on the project. When the prototype was ready, we went to the bus operators and tried selling it to them, but they were not even willing to take it for free. It was like, we were trying to disturb the status quo. We didn't know what to do.

·   That was when we heard of TiE, Bengaluru, and we went to them with the business plan. They gave us three mentors to advise on what to do.

    We collected the below information:

·   The number of buses, the number of routes, the average price of a ticket, how people buy tickets, the profile of customers, how much commission a bus operator pays to an agent, etc.  It may not be comprehensive, but it gave us a general idea of the industry. Even today, we continue to study the industry and we cannot stop.

·   We started in August 2006 with Rs 500,000 which was the savings of the three of us. One room of the house where we stayed was our office. In the morning we would keep the other parts closed so that the room looked like an office.By now, three more people who were young relatives of ours had joined us to help out

·   We used to go to the IT companies, stand outside when the employees came out for lunch and then we gave our redBus cards. For the first time, we were on the other side of the fence.  A few weeks back, we were inside a campus and we used to ignore such sales people or brush them aside. Now, we had to kill our egos. It was a big moment of truth for us. In entrepreneurial life, you have many such humbling experiences.

How was the first day when you opened your web site for booking?

·   That is another story. After several visits and many requests, one operator agreed to give us five seats. It was on the August 18. He said, if you sell 5 seats in one week, its fine. If you don't, don't bother me again. We had one week to prove ourselves.

·   We put the seats up! We told all our friends and colleagues and asked them to buy from us. We also requested one of our friends to write about us on their discussion board at Infosys.
·   On the 22nd of August, we sold our first seat. A lady working at Infosys booked a ticket to go to Tirupati. We were so tense that we went to the bus station and waited till she boarded the bus. We didn't tell her that we were from redBus. We sold all the seats in five days and went back to him. Slowly, we could add more operators to our inventory.

·   When did you scale up your operations?

·   When TiE selected ours as one of the three ideas out of 300 for mentoring, it became news. It was followed by venture capitalists contacting us as they found our idea interesting.Before we went to TiE, we didn't know anything about VCs (venture capitalists)! That was the time there were many VCs and very few ideas. So, people were willing to put up money for our idea.

·   We asked our mentors and they told us to take the money and begin developing the idea.
·   The VCs asked us how much money we needed, we said Rs 30 lakh (Rs 3 million) as that was a big amount for us then.Then one of the VCs spent several hours with us and we revised the plan seven times. At last, we found that we needed Rs 3 crore (Rs 30 milion) to scale up the business. The agreement was that money would be invested in three years.

·   That was in February 2007 and the money was supposed to last till February 2010. We spent all the Rs 3 crore in one-and-a-half years.
·   The VCs also asked us to change from an online bus ticketing company to just bus ticketing company, and that is what redBus is now.
·   Once you take money from someone, it becomes a business and you have to return profits on that money.
    The first year was not a full year and we did Rs 50 lakh (Rs 5 million) worth of business in the first financial year. There were no profits.Today you can book a redBus ticket at over 75,000+ outlets!

    Today, RedBus has 230 employees, offices in nine cities, and tie-ups with over 700 bus operators across the country.
F   From a turnover of 50 lakh in the first year of operations, redBus expects revenues of about 150 crore this year. redBus posted revenues of 60 crore in the previous year.

redBus has the largest network of bus operators in their list (350+ and growing) and very satisfied customersOn offer are over 4500+ (and growing) routes across the Indian map.



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