Building The Largest Online Bus Ticketing Company in India: redBus.in Co-founder and CEO Phanindra Sama (Part 10)

Sramana: How did you achieve an industry-leading conversion rate?

Phanindra Sama: We have taken our analysis down to fine details. We have a specific orientation for the bus on the entry page. We have done a sensitivity analysis which shows which orientation gives us the best bounce rate. There are so many other things that are done at the back end that have contributed to our conversion rate. We did not achieve that conversion rate by accident.

Sramana: How did you finance your first year of operations, which included live chat support and manual inventory negotiation?

Phanindra Sama: Initially, we had a lot of savings. We had no idea how much money it would require to start a business, and we thought that what we had would be sufficient. We started in August 2006 and we ran the show with our money. Later, when we were selected by TiE, we received a lot of interest from venture capitalists. There were a lot more VCs in 2006 than there were ideas for them to fund.

We had no idea what VCs were, so we went back to our mentors. We asked them to explain what function VCs played, and they explained the entire model to us. They told us we could raise money and what the right amount to raise. We came up with a number of 13 lakh rupees to build this company throughout India and make it profitable. That was the wildest number we could think of.

We went back and presented that number. We were talking with all of the VCs, and they all smiled and us. One of them sat down with us and helped us build a realistic plan. We revised the plan and came out with a plan of 3 crore rupees to spend over the next three years to build one phase of the company. As founders, we were shocked to think that we would need 3 crore rupees to build a single phase of the company. If we had that money, we would put it in the bank and earn interest!

That VC told us that he was ready to write us a check for 3 crore rupees for 30% of the company, which implied a valuation of 10 crores. We were just six months into business and we could not believe our company was that valuable.

Sramana: Which VC was this?

Phanindra Sama: The company was SeedFund. We were comfortable with them, and our mentors told us they were good VCs to work with. We raised the money. We did not do any further negotiations. I kept telling them that we would not be spending all of that money, but in retrospect we spent all of the money in two years. I now realize that companies take a lot more money than you can think of.

Many first-time entrepreneurs have those issues. We can’t think of the right numbers because they seem too wild. Big numbers become a barrier. Right now, people are saying you need to build a thousand-crore company. In the bottom of my heart, I think that is a very big number, and I have to ask if we are truly making sense or is it just wishful thinking?

Sramana: What is the size of the business right now?

Phanindra Sama: Right now it is at 150 crore. In the next four or five years, reaching a thousand is viable. The numbers seem wild, but they are viable. We are now looking at an even bigger number.

This segment is part 10 in the series : Building The Largest Online Bus Ticketing Company in India: redBus.in Co-founder and CEO Phanindra Sama
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