Weekly Startup Profiles > redBus.in

Pilani Soft Labs Pvt Ltd.
Three young BITSians decided enough was enough: no more missing Diwali at home because buying a bus ticket was such a hassle. And they turned their ingenuity to organizing the enormous and messy bus travel industry.

Quick Facts
Entrepreneur : Phanindra Sama
Age : 26
Company : redBus.in
Based in : Bangalore
Founded in : 2005
Industry : Hospitality/ Service / Travel

Business Summary

 

A service to book bus tickets online or via telephone


The Idea


Diwali 2005, Phanindra Sama struggled through Bangalore traffic, desperate to buy a bus ticket to his hometown to spend the holiday with his family. Bus agent after agent was sold out before he reached them. He never made it home. That was the beginning of redBus.

The sheer inconvenience, the loss of time, the frustration - not being able to see all the bus schedules and availability; not being able to book a seat in advance; and not being able to purchase a return ticket from another state until you reached your destination - all of a sudden this chaos seemed crazy. And unnecessary.

Phani decided to bring to those traveling by bus the same convenience that consumers enjoy while booking air-travel online.

An excited Phani went to his close college friends and outlined his idea. Several of them volunteered to help out with market research. They wanted to thoroughly check out the idea - with bus operators, consumers and potential investors. And the more they learned, the more they saw the value in streamlining a very complicated and disconnected system.

Phani explains, "Your travel agent may say that the last bus for Cochin today is at 8pm, because that's the last bus of the operator he works with. That doesn't mean there isn't a bus for 10 or 11 pm from another operator. Also, the return ticket is something you'll get only from the place where you visit."

RedBus solves these problems by allowing consumers to look at availability across all the operators and book in advance, even across state lines. "We even give a layout of the bus seating, and if you want a return ticket from the present destination, we update our inventory online at the final destination and you can get your ticket," says Phani.



The Opportunity


Every day, between 50,000 and 60,000 people, on average, leave the metros by bus. In South India plus Maharashtra alone, bus travel is a 15,000 crore rupees business annually.

More importantly, bus travel industry in India is highly disorganized. Bus operators, agents and states all make it difficult for consumers to purchase tickets with any ease. And until redBus, no company had focused on bringing the pieces together to make it easier for the traveler.

Phani explains, "Our customer is anyone who travels by bus, but we do focus on the middle class." That's because until now, the redBus remained an online service, and payments had to be made via credit card. With 3.7% of India's population on the internet, that market is large, but redBus would still miss out on the bulk of those traveling by bus.

In order to reach the non-English speaking & non-internet travelers, redBus is launching services like mobile payment systems, and call center services in both English and local languages.

Right now, redBus's competition comes from the bus operators and online travel sites. The bus operators are unorganized, and while they can undercut redBus's prices - and sometimes do - they don't and can't offer the convenience. And with travel sites not yet focused on this sector, Phani explains, "Our services are certainly better than these. And we're the only ones who offer bus tickets at no extra cost."

The main barrier to direct competition is the difficulty in aggregating the supply of bus tickets. redBus first task was to convince the bus operators that online tickets sales would be advantageous for them. While some signed up for real time tickets inventory update to redBus, many agreed to provide tickets to redBus on a quota basis.

redBus has worked hard to build the relationships with the operators, "The bus operators are seen as being difficult to deal with, but it's all about maintaining a relationship. The first three months were crucial for us," says Phani.



The Money


Once Phani and his two co-founders felt they understood the business, they developed a plan and submitted it to a TiE (the Indus Entrepreneurs) mentorship competition - they were among the three winners.

With the initial seed funding and mentoring provided, the founders launched their portal and service. Once they started to turn a profit, they attracted a further $1 million from Seed Fund, an early-stage venture capital firm.

Phani says, "When we started raising funds, we had only one office in Bangalore and we had 60 destinations on our schedule. Post angel funds, we opened offices in four more cities. The funds helped us increase bandwidth."



The Team


The founders all leapt off accelerated career paths. The three founders - Phani, Sudhakar Paspunuri and Charan Padmaraju - were classmates from BITS Pilani, and all held jobs at IT multi-national companies in Bangalore. They quit to found redBus.

Today redBus consists of 63 employees, with a leadership team of five.



The Company - today and tomorrow


When redBus was started, they had a turnover of Rs 2.5 crores, with no external investment or marketing. "This year we'll easily reach Rs 25 crores," says Phani. redBus's revenue comes from a combination commissions paid by the operators on the tickets redBus sells, and advertising on the site.

Today redBus offers its services primarily in South India. The company has recently increased the convenience of its services by introducing home delivery of tickets, pick up points for tickets, and mobile phone payment systems.

"We are looking at buses all over India," says Phani, foreseeing a pan-India reach. redBus already has 3 other locations in sight.



What keeps you awake at night?


My capability of keeping up pace with the organization's growth, says Phani. He feels that his company is hinged on human relations. "If I don't have time for something or someone, it might be seen as insolence or plain rude behavior. It'll get messy and breed problems."

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