Exclusive interview with redBus.in – India’s first vertical for online bus tickets

Written by: Madhur

On Oct 18th, 2006

Online ticketing is big. It’s clearly leading the ecommerce industry in India. IRCTC (online railway ticketing) is the biggest player followed by air tickets. Not surprising that there are so many travel portals funded by the biggest VC’s in India. A quick look on Google Trends proves that search volume for tickets is quite significant in India (relative to other countries)

Search volume for railway tickets
Search volume for air tickets
Search volume for bus tickets

redbus logoWe had a chat with the three co-founders (Phanindra Sama, Charan Padmaraju and Sudhakar Pasupunuri) of India’s first vertical for online bus tickets called redBus.in. They launched the site just a couple of months back in August 2006 and have already partnered with 30 bus operators in India and are doing great in terms of sales. Below we share their experiences, insights and our thoughts on their business, industry and consumer trends.

1. What inspired you to start this venture?
This venture has come out as a result of a necessity. Last Diwali one of the co-founders was looking for bus tickets to travel home and missed the bus because of getting too late in buying the ticket. Thats when the idea struck that it would be really useful to have a service where people can buy bus tickets online.

iLeher: May sound clichéd but is still very true: “Necessity is the mother of invention”

2. Overview about how the company evolved from idea to “live” state?
Started off with talking to travel operators to understand how the industry works. Surveyed the bus operators and travel agents to figure out the logistics. Convinced the bus operators about advantages of online tickets sales. Provided the software needed to maintain their tickets inventory. While some operators signed up for real time tickets inventory update to redBus, most of them agreed for providing tickets to redBus on a quota basis.

iLeher: Market research, partnerships, logistics. Most important factors in ecommerce.

3. How does your team look like?
3 business dev and marketing people, 2 software people and 3 customer support agents. All currently based in Bangalore.

iLeher: Proves that writing code is easy, but evangelizing, selling and keeping customers happy is more challenging, especially in emerging markets. Makes sense to invest in resources that will help in changing the mentality of the people about ecommerce in India.

4. How is your company funded so for? Any plans of raise more funding?
Pitched the idea at a TIE Bangalore event and got $25,000 seed funding and mentoring from 3 TIE members.

iLeher: Just as important as money is networking and good mentoring to stay focused in the right direction.

5. What is your business model?
Commission from booking tickets and ads on the site.

iLeher: Easy question for an ecommerce site. Try asking this to the latest Web2.0 Social media startup.

6. How is redBus doing so far? Any feedback from customers?
There has been a growth rate of 100% every month since inception. Ticket sales for this month as of today (Oct 17) is already more than double the sales from the complete month of September. Customers have given very positive feedback and they have questions mostly around security of credit card payments over the web.

iLeher: Reassures the fact that people in India are really getting more and more comfortable with doing online transactions.

7. What are some of the key challenges in your business?
Making sure that assigned seat (during e-booking) remains when passengers board the bus. There is a lot of travel on weekends, but on other days occupancy is less.

iLeher: Shows that tech savvy are buying more tickets (since they tend to travel more on weekends). Need for more distribution channels for the people without Internet access?

8. What are the marketing strategies that you have been using?
Email distribution lists, pamphlets on bus stations, posters inside the busses. Google adwords (surprisingly number of clicks resulting from that is not very significant)

iLeher: Although Search Engine Marketing is small right now, its coming.

9. What do you have to say about competitors like Yatra Bus ticket service?
redBus has a big early mover advantage. Yatra started their bus ticketing service only recently. redBus already has partnership with 30 bus operators and are expanding fast. Yatra has very less partners compared to redBus.

iLeher: Big player doesn’t necessarily has big advantage. I don’t particularly like comparisons, but still just to illustrate: Google video v/s YouTube.

10. What is the payment method most used by users?
There is a 50-50 split between credit and debit card. Plan to introduce mobile payment soon.

iLeher: Good to see more usage of credit cards. Mobile interface can work wonders in India, considering the subscriber base.

11. What are the challenges of running a business in India?
Other than the obvious issues of Internet penetration and customers being hesitant of doing credit card transactions online, evangelizing and educating the customers is a big task. Working with different service providers such as lawyers, CA’s is not always a breeze. Things do not always get done as fast as you would like. Coding gets done fast, but there are lot of other variables and things can get delayed to them.

iLeher: We hope that as the markets become mature, other processes to support online business will start getting more and more streamlined in India.

12. How has TIE-EAP program helped you?
TIE was really helpful from day one. It was a source of continuous mentorship and direction. It provides a great network of relevant and useful people in the industry.

iLeher: Network, network, network

Sphere: Related Content

Entry Filed under: ecommerce,infrastructure,news,online travel

16 Responses

  1. 1. Aravind Ramarathinam said on October 18th, 2006 at 9:32 pm

    Congratulations! I think you are the first from our 2002 Bits Batch to start a new company!!! Great innovative idea!

  2. 2. Shankar Karanth said on October 19th, 2006 at 3:59 am

    I am seeing a great future for redBus

  3. 3. Phani said on October 20th, 2006 at 5:28 am

    Thanks Aravind,
    We are not the first from our batch to start a company. Bridleit (http://www.bridleit.com/) was started by Ramki. One of the founders of Corpus labs is also from our batch.
    -Phani.

  4. 4. Vaibhav Domkundwar - india 2.0 said on October 21st, 2006 at 9:58 pm

    Good stuff – a definite need especially for the IT folks who are online and can save time. However, I am fundamentally now sure how this model scales in terms of revenues and profitability.

    From your other post on the Indian internet market, I really liked that fact that you stressed on this — “it is not surprising that eight consumer-travel Internet websites have already been funded in India, and given that this sector only accounted for approximately $152 million worth of booking transactions in 2005, and given that this number is likely to grow to only to $1.2 billion by 2010, the actual revenue and profits earned by this sector even in 2010 are likely to be $75 million and $9 million respectively, which is miniscule by any standards!”

    $9 million in profits (say its even $90 million by gods grace) – how do you split that across 5-6 existing players and the new wannabes?

    If above are the numbers in air travel, I think bus travel numbers would suck a lot more. No? Not to mention all the call center, customer support and related costs and hassle, which cannot be underestimated. It can really be a tough business, I believe.

  5. 5. Vivek Garg said on October 23rd, 2006 at 1:26 am

    All good points Vaibhav. I would like to add one thing that could seem like silver lining to these figures. Ad supported revenue. Redbus wants 50%+ revenue coming from ads on their site. They did not disclose the exact amount but this looks like their answer to the number game.

  6. 6. Vaibhav Domkundwar - india 2.0 said on October 23rd, 2006 at 7:55 pm

    Vivek: Good point, but won’t that become more of a eyeballs and pageviews game rather than a transactions one?

  7. 7. Vivek Garg said on October 30th, 2006 at 5:53 am

    It will be a combination of both and its a better play than just the ad based revenue.

    Also if Redbus pulls it, and I hope they do, they might start charging bus operators as well. Once they reach the critical mass on demand side, supply side economy will improve and interesting revenue models will show up.

  8. 8. Ajay Sarma said on November 8th, 2006 at 7:21 am

    They should market more. I am working in bangalore for nearly 4 years and have not heard about redbus. I was searching for top startups in india to find new opportunities and came across these sites. I have not heard redbus until reading here. They should advertise on local channels to get more publicity.

  9. 9. Ajay Sarma said on November 8th, 2006 at 7:25 am

    for got to tell if other people are searching for top startups in india also take a look at the site http://www.startups.in/india and http://www.startups.in/dex .many startups to find jobs

  10. 10. iLeher » No money for early stage ?- All about Internet industry in India said on November 30th, 2006 at 8:13 am

    […] We have asked if India is ready for web2.0 here. Also we raised our concerns about our booming internet industry here. Although we have our doubts about the industry, we are seeing a lot of money flowing into India recently. We saw guruji.com grabbing $7 million and then we saw sulekha getting $10 million and more recently we see that travelguru, the leading travel portal got $15 million. See a comprehensive list of investments here. We have stats and reports of VC firms raising billions of dollars to invest in India. New funds are coming into existence every day raising even more money. But the point to note here is that most of the investments we have seen till date are either late stage in nature or in the companies that mimic proven business models elsewhere. Some of the companies we recently interviewed like redbus here, onyomo hereand picsquare here are all still working on angel funding. These companies are more or less in early stage now. The feeling we got after talking to them was that the VCs are queued up on the sidelines. VCs don’t want to miss the opportunity when the time comes but they don’t want to move in unless they see some traction in these markets. Is it the traction or is the risk of investing in early stage Indian startups way too high? There is a lot of buzz about a maturing investment ecosystem in India with impressive exits. We saw that with the Info Edge IPO recently that is trading at 85% premium. This article here states how early stage funding has grown YOY in India listing some good examples. Still it’s not scratching the surface of billions of dollars already waiting to be invested. In the report “Is the Venture Capital Market in India getting overheated” – Evalueserve reports that over 44 VC firms are now seeking to invest more than 4.4 billion dollars in India over next 4 to 5 years but cautions that there will be a glut of VC money. It also highlights that it is not possible to invest in 150+ startups if the VCs are going to be sticking to their favorite sectors and just the late stage investments for that matter. Well, we are not saying that they should start throwing money at every startup out there. What we are trying to understand that if the VCs will be at ease with the risk levels associated with early stage funding in India, compared to rest of the world. While looking for an answer, we found a paper on “Accessing Early-Stage Risk Capital in India” by Rafiq Dossani, a senior research scholar at Shorenstein APARC. Some of the points in the paper resonate with our thinking about web 2.0 companies in India. Following points might be the reasons why a lot of early stage ventures are not getting funded. We have read similar arguments earlier in the blogosphere in some form or the other and this paper actually goes in much more depth. For the sake of discussion we will reiterate some of them1. Lack of confidence on early stage entrepreneurs. 2. Lack of weak ties network like the one in Silicon Valley. 3. IP creation and protection not clearly defined. 4. Domestic consumption and market not easily identified. 5. Govt. hurdles – redbus founder confirms this sentiment after spending a day in offices to register their company. 6. Poor internet penetration and computer illiteracy. […]

  11. 11. Aparna said on January 15th, 2007 at 3:57 pm

    Congrats Phani…..very impressive:)……would be a good idea to invest some shares in ur company:)…..all the best:)
    -Aparna(dopy ’00)

  12. 12. Phani said on February 8th, 2007 at 7:13 am

    Hey Aparna, thanks!!

  13. 13. a said on February 8th, 2007 at 7:32 am

    dopy ‘ 00 .. i like that.

  14. 14. venkat said on March 8th, 2007 at 6:52 am

    They have done good work. But many other also doing the same work. Like customerneeds and easyticket( http://www.easyticket.in)

    cheers

  15. 15. Vivek Krishna said on July 30th, 2007 at 10:09 am

    Good luck..If someone like redbus.in gets into this seemingly unorganized bus booking sector and establishes partner relationships and business models,it can be a leader in this segment. Lots of opportunity + lots of work too 😉

  16. 16. Indiancareerclub said on May 6th, 2009 at 10:55 am

    New things are always welcomed, so excepting a new era of redbus.

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