Building a Billion Dollar Brand in India
I went to college at IIT Bombay, I finished my bachelors in 2008 in computer science and the IIT Bombay experience was actually an eye opener for me and it gave me so much exposure to entrepreneurship, to entrepreneurs and people like Nandan Nilekani used to come and give, you know, one of talks and Bombay is actually in the hub of the business world. So that gave me a lot of exposure. And after that I worked in Microsoft for 2 years from 2008 to 2010. But as soon as I had graduated I had– there was this itch that I wanted to do something on my own at some point, and after 2 years in my job at Microsoft – the job was very exciting but I decided to just, you know, take the risk. It was fairly early on in my career, I was just 24 years old when I started off. So, I had no real, you know, nothing bogging me down as such.
I think first time entrepreneurs, especially young ones, you know, start from a much more personal pain point than, you know, an excel sheet or a business – finance analyst kind of an approach to setting up a business and that’s what we also did. We actually started off with a business called olatrip.com and pivoted that after 6 months into Olacabs.com. Olatrip was all about selling weekend holidays online and it was from a personal pain point of not able to, you know, book holidays around major cities. That never went anywhere, but while doing that, we realized that for the pain point of cab aggregation for hourly rental or out station travel and that’s how we changed from selling trips to selling, you know, – to building a website where you can book cabs for going outstation, lets say from Bombay to Pune or Delhi to Agra etc. So That was the first portal we made and from there incrementally we kept learning more about the business, got people into transportation, learnt about how big an opportunity urban transportation is. So today, our mission is to build mobility for all of India.
So I started off in 2010, in mid of 2010, August 2010, and that time starting up it was not as hot as a market as it is today. Starting up was not as socially accepted. And, I come from a small town of Ludhiana, a tier 2 town. My family actually reacted – they said you are going to become a travel agent? And they didn’t speak to me for 6 months after that. So, these days things are much much better, families are more accepting. They’ve seen some role models emerge from the past 5-6-10 years. But, I would say for entrepreneurs who want to get into entrepreneurship, don’t wait for the best time, there’s no, you know, there´s no best time or right time to start up, the right time to start up is when you want, you feel that – you want to do something and you want to create a big business. And that’s the right time and you should aim big. Don’t try and solve small problems, aim to solve really big important problems.
Gaps in the market
In Ola cabs, actually we saw a need of customer not being able to get quality transportation on demand. It not easy for you to get – now it has become so because we have scaled up, but 3-4 years ago, it was not easy to book a car to get around the city or to go outside the city. And that was the core insight that we got and we built around that and today we believe that people need not own cars because cars are now available every 5 minutes on the app and it is much more easy to get around cities now. But that was very different 3 years ago.
The business model
Interviewee: Our business model is fairly simple. We take a commission from every driver, every trip that we send our drivers. We don’t own the cars. We work with driver partners who own cars, and today we have around 250000 car owners on our platform and every trip we send them, we earn a small commission from that. Staying ahead is about innovation. The market leader always has to out innovate, and keep doing product innovation to make sure he is ahead and he is growing the market and he is delivering a better experience to customers. And we have done that many times in our short history, For eg., we launched auto rickshaws about a year back, 8 -10 months back. And that was unheard of and un-thought of back then and auto rickshaws is a fairly big business for us today. A few months back we launched a food delivery product, a grocery delivery product. So, this is how keep doing product innovation to keep building up your ecosystem and making sure that you are the first ones for consumers.
Unique product feature
It’s a series of incremental things that make your product better for the local conditions. For e.g., one thing we did recently, which has had an immense impact on our business is we have made our app much smoother on 2G. India is a 2 G country, If you go deeper into the country people don’t have 3 G connections and people work on 2 G data and our app – actually we have done a lot of optimization since we launched a light version of it which people can use much more easily on a 2G and that in the smaller towns has really increased our usership.
When we saw people using us in small towns, we got very excited that you know taxis can even penetrate very very deep into India. There is market for mobility even in , you know, cities like Siliguri or Coimbatore or even smaller towns other than that. But when we were talking to the users there, we realized that it’s not so easy for them to use data. They don’t have proper 3G networks, even the drivers in those cities don’t have proper 3G networks and the vanilla solutions which were built for larger cities won’t work over there. And we listened to them, we heard them out, we did surveys and we understood the scale of the problem and we decided to build a product solution into it.
Business factors impacting Ola’s future
Sure. I think that’s a very well framed question. Our business – there are many macro trends in India right now, not just for our business, but for the entire internet mobility business. Two of those trends are India is seeing immense growth in mobile phones. People in India have never had access to a screen which is in their hands like mobile phones. Not many people had desktops in India. Television is a one way medium and mobile phones have really opened up this interactive medium for the first time with Indians and that’s going to open up consumption in every vertical. And businesses like ours, businesses like e-commerce businesses will have to innovate for that platform. That’s one – the hardware is there now and it is getting cheaper and cheaper. Data costs are coming down, data is improving gradually. 4G is being rolled out. Data costs are coming down. That’s enabling again the whole consumption on the mobile phones. Capital is available for smart entrepreneur to build very local business models and all these things, this whole technology growth is happening in parallel with this interesting dynamic of sharing economy globally. Where people can now have more flexible work schedule, people can have more flexible work choices and this also has a very deep interplay with what kind of regulations need to be built around this whole sharing economy and these mobile ecosystems. So, new businesses have to straddle all these worlds of regulatory, economic, technology, social impact. And it is important to take along stake holders from each of these verticals. For e.g., we work very deeply with the governments in centre, in state, in cities. We need to ensure that they understand the value we bring to the society, how we are helping driver entrepreneurs lead a better life, how we are building an urban utility for consumers. It is much better for the city if people use the shared cab service rather than buying their own cars. There is a research which says that one taxi takes 15 personal cars off the road. It’s important to build out this product. It is important to make sure all stake holders are fully aware of what you are trying to build, they see value in what you are trying to build and it is very important to communicate very openly with the entire ecosystem.
Social Impact of OlaCabs
Interviewee: I personally don’t own a car, I don’t feel the need to own a car anymore. A lot I am seeing around me many people not buying their first cars also, my employees and other people who would have bought their first car by now. Stepping back at a macro level, if you see India, India has only 5 % car ownership and the public road structure is also – we are overcrowded and overwhelmed, completely overwhelmed, unlike west where there is 70% car ownership and the infrastructure is much better. So India cannot have a paradigm of mobility when everybody owns a car, it’s just not going to happen and the paradigm for mobility is going to be a shared service like Ola. And I see that around me everywhere like you know people are not using their cars if they own a car they are not buying their second cars, many people like me are not even buying their first cars. I think that its going to change much faster than most people expected it to.
Advice to entrepreurs on building budgets
Interviewee: The biggest bucket of mistakes in building our budget are not clearly stating or understanding your assumptions and at different levels of the company, this mistakes keep coming back because if you don’t put enough efforts in modelling out all the assumptions and understanding your business very deeply, you will under budget or over budget things which on hind sight you will realize later. So it’s important to be very detailed when it comes to budgeting and planning. It is important to understand all the levers, all the assumptions, clearly state your assumptions, clearly state your risks, model them into financial terms and as you execute on that plan – once you have planned and once you execute on that budget, it is important for you to periodically in a structured way, keep revisiting these assumptions and keep validating on the positive and negative sides of those assumptions. That’s something that we have learned from experience.
So many mistakes we have made and it is hard to remember any specific one, but at every step, we have made so many mistakes, then on hindsight learned from it. Maybe I could think of something. I think we used to – we never really understood our marketing spends till recently and we used to confuse brand marketing with customer acquisition- a lot on hindsight we have learned how to separate those things, separate budgets for different targets and having clearly defined the matrix even for, let´s say, our brand building campaign.
I think on odd structure it is a very good question. Each company has its own style of organizing itself. We like to be nimble around it, we like to build organization structures for like 6 to 9 months and then revisit them because the business is growing so fast, that the context changes and every 6-9 months we have re-orged ourselves and as we grow bigger, we have gotten more and more deeper into our work rather than broader. Once we were smaller – While we were smaller, we had more of broader roles, lot more generalists working on broad roles, as we have grown we have gotten specialists going deeper and deeper into each problem that we have. At the core of our way of organising ourselves is that we are nimble and we make sure that we take a view of 6 to 9 month of it and not longer than that because we are growing so fast.
Interviewee: Most important for us is attitude fit, experience is important in some verticals but it is not the only factor. We hire a lot for attitude, we hire a lot for culture fit and every startup again has it’s own unique culture it’s important to understand that culture and make sure that you are able to communicate that clearly and objectively and check candidates against that list objectively. So we focus a lot on ambition, a lot on passion and aggressive execution, a lot on obviously intellect and problem solving skills in our hires.
Culture at Ola Cabs
Ola is about being very first principles, we don’t like to work from an approach of I’ve done this before , it’s been done before and in this way, we like to reimagine things and build from first principles. We like to focus on big problems and be ambitious about what you want to build and I like to think that we work really hard on those problems. I believe these three things are core to every employee of Ola.
On sustaining cultural values
So values percolate and values sustain if the leader exhibits them and it is followed every day. They don’t sustain from having a – something on the wall or pillars painted in the office, I think that’s very ephemeral, it’s about senior leadership, middle leadership, middle management exhibiting those traits every day in every meeting or in every aspect of the company’s life. And the way to institutionalize that is to have that as a part of performance management. Structures have – we are making sure like founder downwards everybody is reflecting that every day.
Ola – The brand name
Ola means hello in Spanish and it is a very nice youthful, energetic expression and that’s how we just took that and thought we will build it into a very nice and youthful brand in India and I think we are still in that journey, but that thought remains.
Because we are essentially a very utilitarian service, we get a lot of word of mouth. And we have done a great job of institutionalizing and accelerating that word of mouth through a referral programme. So our referral programme is fairly large, we get a lot of our customers through that. As we have grown though, our brand has become bigger and stronger and customers get attracted to us because it is the biggest brand in the space. And that’s organically scaled. What helps is if your brand is good and if your brand is large you don’t have to spend that much on let’s say paid marketing or digital SCM marketing or app marketing etc. That’s it because the mobile app industry in India is very nascent and a huge growth opportunity, we invest significantly into paid marketing
We started off let’s say 3 years ago doing a lot of web marketing, lot of SCM, SCO stuff which has completely gone away now because we are a mobile only company now. So form web to – somewhere 2 years ago we built up a food program and that started scaling up very well because that was the way of accelerating the word of mouth to later last year we started doing brand marketing. We did a big TV campaign. And consistent across these 3 years have been the mobile app marketing on the mobile platform which has actually increased over the past 1 or 2 years significantly. Our share of budget on the mobile app ecosystem has gone significantly higher than most of the other paid channels.
Ola’s reference feature
It’s actually very simple. If I am a user of Ola, I can refer a friend. Once he joins, he and I can both earn 200 rupees of Ola money. So it’s a great way of rewarding users to refer their friends to you. And this they like, biggest like, a good customer brings another good customer and it’s a great way of making sure that you have the right kind of customers on your platform.
On choosing investors
Interviewee: It’s very important to ensure that the investor is aligned with the long term vision that you want to build out. Ola has been very lucky to have a wonderful set of investors who understand the internet space globally, who are very long term focussed and were great partner to the entrepreneur and the management team. We have great investors in Tiger Global and Sotbank and Sequia, Matrix and all of these people have really helped us to leverage the learnings and also been great partners in the eventual vision. So most important for me is ensuring that the fund and the specific partner of the fund understands our long term vision and actually believes in that.
How did you receive your initial funding?
Interviewee: We started off in 2010. So it was a very slow start for us. That was not a time when there was lot of excitement in the Indian start up scene, and we bootstrapped the business, we didn’t have too much capital either. So I remember in the first month, in Jan 2011, when we pivoted to Ola cabs, we had one trip the entire month and I was so excited and in the next month, we had 4 trips, one a week and I was again very excited. It was a very very slow start because capital was a big constrain for us early on. But all along we knew that we are solving a very big problem and we knew that once we have certain scale, we should start reaching out to investors and take the money. So sometimes in the end of 2012, we reached out Lee and Lee of Tiger Global got very excited with the opportunity and he gave us money.
Advice to young entrepreneurs on funding
I think now is a very different time. It’s important to make sure you don’t take money too early. It’s important to build out a prototype, build out, get real customers get revenue if you are in the business of making money immediately, if that’s the product you have. Make sure you have a prototype, scale it up as far as you can, invest your own money and then go to a fund so that you can have a conversation with them from a position of strength.
Beating the competition
UBER had actually been in India for 2 years. When Uber came into India, we were very small, I remember we had less than half a million dollars in the bank when Uber came to India and were doing 2000 rides a day, just nothing. So Uber and Ola have evolved actually fairly in parallel in India. We’ve done a much better job of building a much more local product and if you look at how a local company can retain it’s market lead and grow it’s market share it’s about being more local, fundamentally being more local in everything, on the product that you are building, different geographies and different cultures require different features on the brand that you are building in our case on the driver end and the consumer end and on the partnerships and the integration with the ecosystem. Because if you are a local, you can do these things much faster.
Ola’s user experience
Interviewee: User experience is getting a car in under 5 minutes, getting into a car which is clean and the driver is courteous and being able to pay very seamlessly for that ride. And this experience should be across multiple modes of transport. Different people prefer different modes of transport for different use cases. For eg., we have 3 kinds of cab services, we have a taxi for sure which is an economical car, we have an auto rickshaw service, we are launching a bus service fairly soon. So we see ourselves as providing the choice across different modes. All of those modes should be very quickly accessible in less than 5 minutes and you should be having a good experience in the ride and payment should be very seamless.
Advice for budding entrepreneurs in India
Interviewee: It’s important to just get into the fire. Don’t wait for the right time, don’t wait for money, don’t wait for a team etc. If you are passionate about it, just get into it. This is the time when India has the opportunity for budding entrepreneurs, there are multiple – everything about Indian consumption is being re-imagined using modern technology, especially mobile. So, just get into it, you will figure the rest along the way.