Indian Cab Rental Services and The Funding Spree

We’ve been hearing about a cab rental service being funded every other day over the last couple of weeks. Why is there a sudden frenzy? This image summarizes the activity that has been happening.

The Cab Rental Space picking up at full speed was like a writing on the wall. With the highly unorganized bus sector taking some shape with RedBus, the effect had to trickle down to other unorganized sectors as well. Taxi services were considered to be for the elite not so long ago, but times have changed. I’ve personally witnessed occasions wherein a bunch of engineering graduates(who’re always low on cash) have preferred these taxi services over autos because the taxi was a more economical option! This trend has so far been seen only in the Tier 1 cities, but the effect is penetrating pretty fast.

I got in touch with Sameer Guglani, investor and founder at Morpheus and Samir Kumar from Inventus Capital (The VC firm that invested in Savaari) to dissect the case.

“Being a frequent traveler myself, I can say that there is surely a big enough pain point in this segment. There is definitely enough and more demand for good dependable car rental players. A company that can address the real issues faced by customers will definitely end up creating a lot of value,” says Sameer.

There are other players in the market also who haven’t been funded (or aren’t looking for funding). What would make an investor select a particular firm in this segment?

“The real challenge, I believe, is on the supply side. As compared to flights / hotels / buses - 'cabs' is the most unorganised segment and is full of smaller players. To get these folks to adhere to processes, guidelines and quality standards laid down by the company, so that the end customer gets a great experience, is a very tough task. Any company which cracks this puzzle will do well,” explains Sameer about where an investor might find value in a firm to fund it.

Samir and the team at Inventus capital have been studying the car rental market for a while now and seeing great potential, have met with most of the players in the space. “Our bet is almost always on the entrepreneur, and we’ve liked Gaurav, the co-founder & CEO of Savaari,” informs Samir about their investment. The other reason for going for Savaari was their pan-India presence, strong operaions team and network, and their use of technology.

On a broader scale, Samir also believes that car rental services are helping eliminate a major customer pain point, in a highly fragmented supply side market, and a market size which is pretty large.

There are various strategies by which a service provider can expand. It is very easy to expand very soon and blow up everything. “This is a very local business and should be built city by city,” warns Sameer about the way to spread out. Savaari and Taxi Guide have managed to build a very wide presence and have an upper hand when it comes to expansion.

My bet is that each of these service providers would eventually like to move to carpooling, but that is one area which is becoming increasingly difficult to crack. This requires excellent technological skills and capabilities to ensure seamless carpooling operations. It will be uber interesting to see who’d break the carpool code.

I also asked the common frequent traveler about the flurry in the number of options he’d be having access to. “Frankly speaking, I wasn’t aware that so many cab rental providers existed before hearing the funding news. But this is great! Cabs are actually solving a problem and it is definitely a case of, ‘More the merrier’ for me!” exclaims Pulkit, a ‘cab-fan’.

We’re in for exciting times in this sector and would be bringing in constant updates for you. If you’re hung up on the funding news, check out our articles about OLA and Savaari. We’ve also deeply covered cab rentals TaxiGuide, Cabs4Hire and will be bringing you more very soon.