RedBus was founded in the year 2005 by Phanindra Sharma, an entrepreneur from Hyderabad. It all started with a simple inconvenience that Mr. Sharma faced. He was unable to book tickets to go home during Diwali as all tickets had been sold out.
After probing into the situation a little more, Mr. Sharma was puzzled as to why it was so hard to get a simple local ticket booked. And why was no centralized system there to book intercity bus tickets?
Later, this idea was going to be pursued as a part-time venture by him along with his friends – Charan Padmaraju and Sudhakar Pasupunuri, when Phanindra was studying at BITS Pilani. They had no plans to pursue a profitable startup; they were just college graduates who wanted to solve the problem.
They, with whatever minimal software knowledge they had, decided to create an open source ticketing system which they would distribute to travel agencies and hoped to implement it by putting up their bus tickets for sale on this site. The aim was to have a centralized bus ticket system, where all bus tickets could be sold and bought.
Soon, after accumulating savings of Rs. 5 lakhs, Padmaraju, Pasunpunuri, and Sharma started putting together a portal which became the humble beginning of RedBus. Once they had a proper body of a ticketing service in place, they started approaching travel agencies to tie up with, who would put their bus tickets up on their system.
In 2006, they hit their first successful deal with an agent in Bombay. He said that at least 5 seats per week needed to be booked through RedBus, in order for his agency to be persuaded to use it in the future. Now, even though they had a sparse roster of users of their portal, no travel agency was willing to pay money to put their tickets on the RedBus. It was already difficult to persuade them to use the service for free. Thus, the company was not making any money so far.
TiE Event:
The fact that RedBus needed to make some money was a priority now because too much effort and money had been put in, to go back and not make it a business. The bus ticketing sector was heavily unorganized but it was also full of potential. To be more specific, the industry in India was growing at a rate of 30-40% year-on-year and the founders of RedBus knew this.
The long dark tunnel of RedBus not seeing any substantial success at all was hopefully coming to an end, as the company entered the TiE Entrepreneurship Accelerator Program. Here is where the founders were assigned three mentors who would help them set up RedBus as a proper business.
The founders learned how to deal with ticketing, how to cater to customers, what are the commission systems between ticketing systems and travel agencies, and the works. TiE became a turning point for the company and word-of-mouth about the company grew. RedBus became mildly popular and investment firms and venture capitalists soon started getting in touch.
Funding:
In 2007, as interest in RedBus grew, the founders decided to run their first round of funding in February. This one got them an investment of USD 1million. Consequently, they ran three more rounds in 2009, 2011, and 2012, and raked in total funding of USD 10.1 million. The lead investors included Seedfund, Helion Venture Partners, and Inventus Capital Partners.
However, things changed in the Series D funding round of RedBus in 2013. Ibibo group came in, and not only to pitch an investment but also to co-opt the company. If RedBus would agree to the deal, it would be one of the biggest acquisitions for an Indian start-up at the time. It would put Indian start-ups on the map and help RedBus grow into what the founders wanted. And so the tie-up was greenlit. In 2013, RedBus became a subsidiary of the international giant- Ibibo Group.
“We were doing our series D fundraise, Ibibo Group offered us an attractive proposition. The deal appeared good from all perspectives – Ibibo is a part of a respectable company, Naspers; their travel business was gaining very good traction in India; they have a very strong technology background; the team was young, we found an instant match, and the valuation was fair”, said Phanindra Sharma in an interview.
While the financial details of the deal are not out in the public domain, rumor mills say that the company was taken up for anywhere around $130 million USD.
Growth and Future:
While many have questioned RedBus’ acquisition, for the founders, it made perfect sense as they wanted to have an international presence. By 2013, they had absolutely monopolized the Indian market by selling upwards of 1 million tickets a month. They were also operational in every city that they could have a feasible presence in. The next step was to head outside the country.
While the founders themselves departed a year after the acquisition (which they had planned even before the Ibibo acquisition came in), RedBus kept on growing as a company and as a brand.
RedBus is now an international brand where it is catering to multiple countries across the globe. This includes Singapore, Malaysia, Colombia, Peru, and Indonesia.
In India itself, the company is showing a whopping 80% year on year growth and has 1800 bus operators on board, as of 2017. Apart from private bus services, even state driven bus services, i.e., the buses of the State Road Transport Corporations are on RedBus.
The company is now one of the largest bus ticketing services online and has 8 million customers. The plan is to expand further in the coming years and as Phanindra Sharma said during the Ibibo acquisition – “the best is yet to come”.
