Flashback Friday: BookMyCab (Live Minds Solutions)

BookMyCab is an on-demand taxi service with options to rent metered city taxis as well as from their own fleet of cabs. Their taxis are equipped with real-time tracking technology to ensure complete passenger safety. They follow a stringent process of recruitment of taxi drivers and taxis. They also own exclusive rights to advertise on the taxis, i.e., on doors, and inside the taxis.

BookMyCab was founded in 2012 in Mumbai and operated with taxi licenses from state governments and approved taxi drivers only. They acquired CabOnClick, a Hyderabad based online taxi booking provider in Nov 2014.

Why did you invest in BookMyCab?

It might be hard to remember, but hailing cabs in 2012 was a challenge, especially if you wanted to travel a short distance. BookMyCab offered mobility solutions to a growing target audience of people using smartphones and provided additional income for taxi drivers. The taxi drivers preferred long-range rides since they make more money on those, whereas getting a cab for 2–3 km was quite the task for the consumer. Their platform enabled taxi drivers to find passengers without having to stand in line and wait. Consumers could book a cab which would pick them up, an idea which is standard today. Investing in BookMyCab at the time was a no-brainer since they solved problems for both markets.

What was your competitive analysis for BookMyCab? As per reports, Ola had already raised 4 Million US dollars from Tiger Global when you invested in BookMyCab.

The most significant moat that BookMyCab had was being the licensed booking service for Mumbai. While Ola was utilizing tourist taxis for local travel (technically not allowed at the time), BookMyCab got the local ‘ kali peeli’ taxis, licensed by the RTO. The license gave them a considerable competitive advantage in 2012, before the loosening of regulations that allowed Ola and Uber to expand aggressively. While the other platforms were working in a grey area, I thought this competitive advantage would be critical in fighting off the competition. BookMyCab had a fleet of close to 100,000 taxis they could onboard very quickly. In contrast, the competition had to spend copious amounts of capital to acquire drivers and give massive bonuses to keep them sticky.

What did you like about Avinash? Did his IIT Mumbai tag play a significant role in the selection?

More than the IIT tag (I’m not much of a believer in tags), what excited me about working with Avinash was that he was willing to get into the nitty-gritty. He was a part of Financial Technologies with Jignesh Shah, so he had a history of working in intrapreneurial positions. Convincing cab drivers to accept digital cash as payment was a big deal. I appreciated that he was willing to get his hands dirty.

The taxi market in cities like Mumbai and Kolkata is still fragmented (Yellow taxi in Kolkata and Kali peeli in Mumbai). Would you invest in a similar startup today if they are looking to consolidate the pending fragmented market?

Consumer preferences have changed today, and there already clear market leaders in this category. People would prefer to either book an Uber or an Ola due to the standardization of services, timely drivers, the cars are in better condition, and well, air conditioning. I wouldn’t change my decision to back BookMyCab in the past, but today, the market is very different from what it was in 2012. The cream-of-the-crop drivers are already on competitor platforms like Ola and Uber. By the way, both platforms also let you book kali peelis.

What were your learnings from your investment in BookMyCab?

Whenever you invest in an early-stage startup, they must become a market leader to cement their position. 80% of the investment, visibility, and revenue goes to the top two market leaders. Here are the learnings from my investment with BookMyCab:

1. Push them to be more aggressive in acquiring drivers. This is not to say that Avinash was not aggressive; I should have encouraged him to be more aggressive.
2. Early on, I focussed more on growth over profitability.
3. Not to depend on permits as a competitive advantage. I had (too much) faith that the government would protect the license, and the competition operating in grey areas would ultimately be shut down. Public good consistently trumps legislation. I applied this learning in our investment in LenDenClub, which is doing exceptionally well.
4. I learned a harsh lesson when Ola offered to acquire us, but the board declined the offer. Ola’s offer value grew by almost 15x over the next 2–3 years. If I had taken the deal, BookMyCab would be the biggest winner in our portfolio, but the lesson was learned. Therefore, if consolidation cements the number one position, then take the offer.

Originally published at https://showmedamani.com on June 19, 2020.