Redbus

No loud advertisements but still people know the name redBus. The company clocked revenue of close to Rs 50 crore last year, the third year after inception. In the business of bus ticketing, redBus.in sees an average of 50,000 unique hits a day and has a presence in 15 States, covering 2,500 cities and 700 bus operators (including Konduskar Travels in Mumbai, Sharma Travels in Bangalore and KPN Travels, a leading bus operator in the South that runs 15,000 schedules a day).



So how did all this start? After all entering the highly fragmented bus transport industry and establishing a foothold wouldn't have been easy. Read on to know how Phanindra Sama and his two friends made redBus a success story.

The initial hiccup

Working in Texas Instruments at Bangalore, Phanindra Sama had to travel quite a distance by bus to reach his home in Hyderabad. Hunting for tickets and frequenting travel agents' offices every time he needed to travel set Phanindra thinking. Why wasn't there any centralised database of bus operators, similar to what existed for railways and airlines? He did a small market study and found that bus operators were ready to buy a solution that would let travellers book tickets online. With the help of his two friends, ‘Phani' soon designed such software.

But that was the easy part. Soon after, the bus tour operators, who had earlier showed interest in the software, turned hostile and weren't as keen on buying it. Not knowing what to do next, Phani and his team approached TiE (The Indus Entrepreneurs), a global network of entrepreneurs and professionals.

They received mentorship of Sanjay Anandaram of TiE, who is also a founding partner of JumpStartUp Venture Fund and has helped many entrepreneurs make a successful business. “Thanks to our mentor,” says Phani, “we were told that unless we demonstrated that the new software would add to their revenues, the bus operators will not buy it. And for that it was suggested that we sell ticket ourselves.”

Business proposition

While redBus.in addressed many problems of bus travellers, the key was that of booking tickets for the return journey. But for a few big operators, who had services in both the start point and the destination, it was almost impossible to book a return journey ticket.

By linking most bus operators across big and small cities online, redBus helped travellers book their return journey before-hand. Option to select seats (position), standardised fares and facilitation of rate comparison between operators were among the other popular facilities that redBus offered.

redBus links all bus operators in its network online, such that one can look at inventories of these bus operators by visiting their Web site. It also caters to operators who are not computerised but want to link with redBus. They just need to give redBus a specific number of seats and redBus uploads them on its Web site. What's more, redBus doesn't charge any fee for the tickets sold through its site.

Revenue model

For the tickets sold through its site, redBus takes commission from bus operators. However, the company's business proposition doesn't stop with that. It also sells software solutions to bus operators and travel agents and gets paid subscription fees for that. The software sold to bus operators, named BOSS, helps them look at their seat inventory on a real-time basis and computerises their complete operation. The software that is sold to travel agents, called ‘Seat Seller', helps them use a single log-in to look up seat inventories with different bus operators.

It being a business where the entry barrier is low, how do Phani and his team plan to handle it? “We manage about 10,000 departures every day and have 70,000 travel agents in our loop. For someone who enters this business, now, it will be a very tough play”, says Phani.

What it took

Phani and his friends had put Rs 5 lakh into the business initially, which they were able to take out in five months (operational break-even). Over last three years, the business has received two rounds of investment from Venture Capitalists to the tune of Rs 5 crore. Much of that went into Web site development and maintenance of servers and data centres.

But it was winning the first few customers that was the most difficult part, say the co-founders. Phani's team went distributing pamphlets of redBus in bus terminals, not to mention dealing with the many questions that everyone had for them.

“It was a very good learning experience. We were able to sense that it was going to be a tough job, but then the experience helped us become ready for it,” says Phani. However, once the site started getting hits, the word of mouth spread very fast and the growth was surprising.