Market opportunities - The TaxiForSure case study
Every entrepreneur has gone through the dilemma of quitting a well paying, full-time job and starting up. It is not as easy as it sounds and requires much thought before taking the plunge. I chat with Raghunandan G (Raghu), co-founder of TaxiForSure on his journey with the company and particularly the early days and how they went about evaluating the market opportunity.
You can also listen to the full podcast below.
Is the opportunity real?
Raghunandan G (Raghu), founder and former CEO of TaxiForSure (TFS) was struck with the idea of starting a local car rental service. It was all about solving the issue of booking cabs for the masses in India.
Recalling these early days, Raghu says, “When me and Aprameya (his co-founder) came together, we were both working in our respective companies. We were getting paid well, and I used to be a consultant and Aprameya used to handle business development. We got the idea in 2010, but we didn’t quit our jobs and were still having second thoughts about why no one else had implemented this idea.”
The problem was quite evident in front of the founders: the difficulty of booking a cab. However, they wanted to be entirely sure about addressing the right issue.
“Before we moved ahead with the plan, we decided to do a survey. We went around asking people on how they were finding cabs, was it easy for them, were they happy with it. We asked people who were frequent flyers, people near shopping malls, and other people who were regularly commuting. We garnered around 2000+ responses and from the feedback, we got to know that 92 percent of the people were not happy with the existing cab solutions and that is when we realised that it was a good problem to solve,” adds Raghu.
However, it was still a long road before they could implement the solution. They got in touch with people who had given them feedback and presented them the solution - only as a PowerPoint presentation - and they loved it. They did this to build their conviction, and once they had that, they quit their jobs and started giving life to the plan.
When opportunity knocks…
Being an entrepreneur means being open to opportunities, but one also has to be sure that the opportunity exists in the market. For Raghu, it was about being convinced enough to jump into the market because the opportunity cost was significantly high. “This is why we did that survey and later presented people with the solution. Then we looked at Justdial for the number of cab aggregators and made calls to figure out how many people would respond. In a city like Bengaluru, there were 1,200 taxi operators, on an average each one of them had 10 cabs, and they used to do maximum two or three rides a day. The cab guys were unhappy because they were not getting enough pay, the customers were unhappy because they were not getting cabs. The market structure was in such a shape that none of the parties were happy.”
However, that was not the only problem. The cabs were never present where the customers needed them, and no customers when the cabs were free. The customers’ dependency on the operators to get in touch with the cabs was posing a problem. As a result, the operators would mostly be busy, and the customers would have to wait for a long time till they would be able to get through to talk to the operators. Raghu observed this scenario in the market and realised the opportunity.
When they started in 2010, many other services like Uber, Hailo, MyTaxi etc., were also starting up around the same time, across the world. However, the concept was relatively new in India. Raghu saw this as an opportunity, and he thought that being a cab aggregator would be a unique edge for their business model.
Is it a large opportunity?
Raghu and team looked at both supply and demand side and understood the size of the opportunity. They were able to size the number of cabs available (supply) by looking at data such as number of taxi operators and commercially licensed cabs in Bengaluru and then across the country.
On the demand side, based on their surveys and also looking at data such as number of travellers to/from airports (since cabs to airports is a key market segment), they were able to estimate the size of the demand.
“We picked up the taxi operator services in Justdial and figured out what is the average number of cabs that they have, how many were shared, how many were registered with RTO? Then we looked at the supply and the money they were making and estimated how much they could make. We also looked at the flight frequency and the demand of cabs towards the airport. After all that was done, we decided to measure and figure out if we could solve this mismatch and realised that we could,” adds Raghu.
Based on their estimates, it was a large enough market opportunity across the country and all they had to do was to build the technology enabled marketplace to connect the demand and supply purely through aggregation without having to own any cabs.
Relevance of the business model
Picking the right business model that can scale is very key. TFS once they concluded they wanted to be an aggregator of cabs could have gone with either working directly with the cab drivers or with taxi fleet operators. They picked working with operators as their model for a few reasons:
- Taxi fleet operators had majority of market share not only in Tier I but also Tier II cities compared to individual taxi driver/owners.
- These taxi operators had anywhere from a few cars to tens of cars and there were about 1200+ operators in Bengaluru alone.
- And as operators make more money (with better matching of supply and demand by TaxiForSure) they were able to buy more cabs to deploy into the system.
- And TFS did not have to worry about security and maintenance of the cab or professionalism of the drivers since the operators were able to handle this.
The operator led business model led TFS to focus on its core technology and building the marketplace and more on the demand side since the operator model was able to bring enough supply of cabs into their system.
Market is the best teacher
Raghu is also a firm believer that the market is the best teacher for startups. The sooner you learn, the sooner you will scale. “The market teaches everybody, if you are a great team then you will learn a bit sooner, if you are a good team you will learn it and if you are a bad team then you will be the one who learned last.”
He believes that their openness towards the teachings of the market helped TaxiForSure in disrupting it. Once you have an insight, it is essential to experiment with the solutions. The rest can be learned from the market.
“Entrepreneurs, if you are agile, you are smart, and you really don’t have to figure out the solution. You have to figure out the problem, start with a solution and the market will teach you the rest,” adds Raghu about how to take a lesson or two from the market.
Competition: There is no fun in flying solo
While it is the best thing for any entrepreneur to have a competitive advantage in the market, it’s no fun being the one and only company in a space. Entrepreneurs should realise that competition is always healthy and it helps you grow, learn and innovate.
Raghu describes competition as the “best thing to ever happen.” He credited competition for the growth of TaxiForSure and felt that the competition in the market led to the increased usage in taxis. “Competition is the biggest thing that has really happened, if not for that we would not have grown the way we did. We were extremely agile because of the competition,” he adds.
Some advice for entrepreneurs
As a entrepreneur, who exited his business successfully and now an active angel investor, Raghu has a few tips for first time founders:
Be close to the market: Talk to as many people as possible in the market (actual supply, demand, etc.) to really understand the market
Don’t hire from the industry: Especially if you are trying to disrupt an industry using technology, avoid hiring from the industry (since they might be stuck to the ideas of the incumbent)
Focus is key: Focus on one core problem at the seed stage. During Series A stage, focus on scaling to multiple markets. Only post Series B, when you have established yourself as a brand in the core space, do you look for adjacencies.
Let it go: As entrepreneurs, one of the most important things is the hard and tough call of letting go of certain people. However, these are the calls they have to take, primarily if it is affecting the business. Another aspect of letting go, is letting go of certain responsibilities to more capable people who you can hire in — the specialists. He added, “You have to become the jockey, not the horse.”
Ability to say no: Learning to say no as an entrepreneur is very key — to employees, to investors, to the board — are all critical and figuring out what things to say “No” to is essential for the success of a startup
In conclusion, Raghu had one last advice for entrepreneurs and founders, especially first-timers — focusing on the core. “Focus on your core and hit it out of the park, be very nimble, be very agile.”
This story was first published on the Accel Insights Blog.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)