‘ We were new to business and learnt as we ran’
The recent sale of India’s largest online retailer Flipkart to American retail giant, Walmart, reaffirms the potential of Indian startups. One of such startups which made big is redBus.
Redbus, the largest digital ticketing platform for bus services in India, made headlines not more than four years ago. It was sold to Ibibo, a subsidiary of Nasper, making the founders millionaires, overnight. And, it was all because a 25- year old native of Nizamabad couldn’t get a bus ticket to go back home for Diwali. Phanindra Sama, an alumni of BITS Pilani and the recently appointed CIO ( Chief Innovation Officer) of Telangana, talks about his journey, innovating a digital solution in the time of low internet connectivity and no payment gateways, and why it was the right time to sell redBus.
Edited excerpts:
Q First, let’s recap the genesis of redBus.
I was in my first job in Bengaluru. Being a bachelor, I would take the bus back home every weekend to be with my parents in Nizamabad. Getting a ticket wasn’t ever a problem except for that Diwali of 2005. Seeing me disappointed, the bus operator asked me to check with other operators and travel agents. This intrigued me — he was sending me to his competitors because he did not have information on seat availability. Being an engineer, the solution seemed obvious.
In 2005, entrepreneurship wasn’t big ( Flipkart started in 2007), there were no VCs and internet connectivity wasn’t great. Along with my cofounders, Charan Padmaraju and Sudhakar Pasupunuri, we thought of a not-for-profit solution for the operators. But the operators weren’t excited and we wondered why?
Around the same time we applied for TIE’s ( The Indus Entrepreneurs) acceleration programme, EAP. Our mentors from TIE offered us a perspective we didn’t have — they said we’d be successful and profitable if the bus operators, travel agents and consumers, got onto the same platform. We had to abort the program we had created and start building the custo- mer interface. That’s how redBus. in started. Our first ticket on the website sold on August 22, 2006 from Bengaluru to Tirupati. We read it as an auspicious beginning.
Q Talking of divinity, you’ve said somewhere, that for an idea to be
successful, it takes many things to come together. What does that mean?
I think many, many, many things have to come together. The Universe does conspire... In our case, the arrival of the mentors, us accepting their inputs instead of challenging them, was magical. We started by offering just two seats based on static data. When those sold, we’d buy the next two and it would go on like that. It didn’t make sense for consumers to come to our website, but they did. There were no payment gateways then… live inventory was a nightmare, and money wasn’t easy. We ( founders) had collectively put in ` 5 lakh. We weren’t even aware of alternate funding or VCs. Yet, we managed to have a turnover of ` 25 lakh in the first year itself.
Q How difficult was it to let go of what you’d created? That was a typical businessman’s move. Is there a regret that you exited too early, especially in the light of Flipkart’s valuations? ( redBus was acquired by Ibibo, Nasper for ` 680 crores in 2013.)
Since we raised money from VCs, we understood that they would make money only if their shares were sold. We were new and learnt as we ran. The exit options available were either through private sale or public listing. Every six months we received offers from potential buyers evaluating us between ` 50 to ` 100 crores. After running it for seven years, we felt it was time to exit. Our decision made us and our investors happy. Very few companies have shown cash exits.
Q How has your life changed post redBus?
It’s the same except for the house we live in. My wife, Sarika, and I have chosen to keep life simple and we stick with our value system. I have pursued learning and travel. I studied Economics, Psychology and Theatre at Stanford, Sustainability in Sweden and took a Financial Services fellowship in London. I’m treating this as a break. I am also associated with Kakatiya Sandbox where I am mentoring 15 initiatives. My redBus co- founder, Charan, now lives in a village, applying technology intervention to farming.
Q Where does one get the value system from and how is company culture created?
I think it’s built over time. In my case, it also got built as we built redBus. An example — during college days, if we jumped a signal and got caught, I was often asked by friends to talk the cop out and I would. After starting the company, my mentors, especially Sanjay Anandram, made us think about the company culture we wanted to nurture. Would we accept an employee forging bills? The journey of entrepreneurship is a journey of purification. No smart person joins a company run by people lacking integrity. And without talent, you don’t have a company worth talking about.
Q You’re a first generation entrepreneur who’s turned an investor ( he has invested in about
25 startups). Where’s the risk taking appetite coming from?
I’m not betting the whole house. It’s not about risk as much as it’s about new ideas. I get in when the idea is still being developed and prototyped.
Q You’ve recently been appointed as the CIO of Telangana. What are your observations and plans?
My job is to nurture innovation in the state and strengthen the bonds in the startup community. KTR, as the minister for technology and industries, believes that if innovation is encouraged, the economy will be fueled differently. We plan to take innovation to farmers, schools and colleges, SMEs and tier II and III towns. Stories such as Padman exist in almost every district. Who would have imagined that an online laundry in Nizamabad would generate revenues of ` 1.5 lakh a month within a year of it being launched. We need to celebrate success as part of building an ecosystem. People in small towns are hungry for solutions. One has to only think differently.