A sneak peek at the biz models of the new crop of online cab booking startups

20 Jul, 2012

If there is one vertical within e-commerce business besides lifestyle & apparel which has attracted huge interest from angel and venture capital investors, it is the online cab booking startups. Almost half a dozen (sixth funding is on the cards, read here) such firms have raised funding in the past 3-4 months.

But unlike the more established cab service companies like Meru, Easy Cabs and Mega Cabs who are essentially cab operators but also provide online booking options, the new crop of taxi booking service startups only provide online booking platforms. These are essentially aggregators with an asset-light business model where they don't own the cars (unlike the older cab brands who have their own fleets although some follow a hybrid model, a mix of own cars and aggregation) but focus on the technology and backend to link cabbies with customers.

The market opportunity is huge, given the lack of comfortable public transportation in urban India. But with so many players operating in the same space (and with almost identical business models), the question that pops up is whether they can sustain.

Here's an investors perspective from Sunil K Goyal, CEO and fund manager at YourNest Angel Fund. According to him, "The modern consumer's need for 'instant fulfilment' is one of the prime reasons for the online car rental space gaining momentum. No one wants to wait for a cab today. Also, the fact remains that not one player can meet the demands of customers (so many times when you most need a cab, it is not available). So, new players are required to service this unfulfilled demand."

However, there isn't room for many more players or the market could get over-crowded, he added.

Techcircle.in takes a look at each of these taxi-booking startups who have received funding.

TaxiForSure: Set up by Raghunandan G and Aprameya Radhakrishna, both engineering graduates from NITK Surathkal and got their management degrees from IIM-Ahmedabad. Before co-founding TaxiForSure in 2011, Radhakrishna headed business development for PDS at Jones Lang LaSalle (India) and also worked with Infosys. Raghunandan had earlier worked with Feedback Ventures as a consultant and with Texas Instruments as senior design engineer.

The Bangalore-based startup works as an aggregator and for each successful booking, charges around 10-15 per cent as commission. But unlike other players who prefer exclusive partnerships, most of the cabs offered by the company are not branded. Hence, they are also free to generate business elsewhere.

Although TaxiForSure offers cars for outstation trips, point-to-point travel generates most of its business (almost 90 per cent). The average cost of a point-to-point travel is Rs 250. The company is currently operational in Bangalore and plans to expand to Mumbai and Delhi by the end of 2012.

Olacabs: The Mumbai-based startup was co-founded by IIT-Mumbai alumni Bhavish Aggarwal (CEO) and Ankit Bhati (CTO). Prior to Olacabs, Aggarwal was working as assistant researcher at Microsoft Research, India, while Bhati was working as system administrator at Wilcom.

The company follows the aggregation model and generates revenues by charging commissions from vendors for every booking done via its website/call centre. The cabs sport the Olacabs branding.

The startup receives more than 2,000 bookings a day, and these are split into 70:30 ratio between point-to-point trips and time-bound hires (half-day/full-day hires, as well as outstation trips). On an average, a point-to-point trip costs around Rs 400 while outstation rental costs up to Rs 4,000. The company is currently operating in Mumbai, Bangalore and Delhi. It claims to have around 2,500 cars in its network and plans to double its reach to 6-8 cities by the end of this year.

YourCabs: The Bangalore-based startup was founded by Rajath Kedilaya and Shishira Rudrappa. Kedilaya is an IIT-Mumbai alumnus and earlier worked with Wipro EcoEnergy, Wipro Newlogic Technologies, Integrant Inc. and Pixelchips. Rudrappa had previously co-founded JuriMatrix (presently Clutch Group), a legal process outsourcing company, and Bar & Bench, a portal dedicated to news about law firms.

YourCabs follows a hybrid aggregation model, which means not all cars are into exclusive partnerships with Your Cabs and some of them are free to service others. The company generates revenues from commissions taken from vendors for each booking, which happen to be in the standard 10-15 per cent range. Majority of the bookings are for point-to-point travel (it makes up for around 60 per cent of the local bookings) and the average trip cost for local travel is around Rs 700.

Currently operating in Bangalore, this angels-funded company will soon start looking for a Series A round and is also planning to expand to Mumbai, Delhi and Hyderabad by the end of the year.

TaxiGUIDE: The Bangalore-based startup was founded by Ashok Ananthakrishnan, Subash Bidare and Shashibushan Venkatasubbaiah. Prior to TaxiGUIDE, Ananthakrishnan worked with companies like DBS Bank, ICICI Bank, Vertebrand Management Consulting and S.B. Billimoria and Co. Bidare had earlier worked with East West Ethnic Foods, MTI Consulting, Vertebrand Management Consulting and Quality Research Group. Venkatasubbaiah had worked with companies like Ness Technologies, Phoenix Technologies, McAfee Inc. and Honeywall Technology Solutions.

The company does not operate in the point-to-point segment and only focuses on half day/full day bookings within cities and also on outstation bookings. On outstation travel, the average booking value is Rs 6,000 and within the city, it is around Rs 2,500. It offers booking across 75 cities and towns, and plans to expand to 100 locations by the end of this year. The startup is currently looking to raise between $2-5 million.

According to Ananthakrishnan, the car rental market is very large (at least $3-4 billion) and is growing at a fast pace. He also mentioned that unlike other e-commerce businesses in India where the margins are lower, the online car rental business has good gross margins. Finally, he took a dig at the competitors and said, "Unlike those whose businesses evolved over a drink or on account of failing in their initial ideas, our business was on firm ground."

Savaari: Headquartered in Bangalore, this startup was founded by Gaurav Aggarwal, who previously worked at Cisco Systems and Tata Consultancy Services. He holds a master's degree in Computer Science from Georgia Institute of Technology and a Bachelor's degree in Electronics from KJ Somaiya College of Engineering.

The company claims to have a network of 3000-plus cars across 60 cities. Although it offers point-to-point cab services, the core focus is on outstation trips and half-day/full-day bookings. Between local hires and outstation trips, the split is 60 and 40 per cent, respectively. Also, most of the company's customers are corporates (70 per cent) while the remaining are retail customers. Savaari follows a quotation system of billing where vendors quote a price for a trip requested by a customer and the company adds a mark-up in absolute terms while billing.

(Edited by Sanghamitra Mandal)