An Unusual Idea Can Take You Places

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Publication: The Economic Times Mumbai; Date:2010 Aug 30; Section:Spl Report; Page Number 8

On A Wing And A Dream

THESE WERE EVERYDAY PEOPLE, BUT TWO things set them apart: the nudge of a new ideaand a passion to excel. Egged on by venture capitalists, they broke new ground in their respectivespaces: an online bus ticket booking service, selling insurance policies over the phone, a home away

from home... Today, these seven businesses are on their way. Through this week, ET takes you

through the success stories

MERU CABS

Neeraj Gupta MANAGING DIRECTOR

Cool Cabs

FOR LAKHS OF MUMBAIKARS WHO travelled to and from work everyday in the citys muggy, worn out black-and-yellow

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cabs, commuting was a nightmare. In 2006, Meru Cabs air-conditioned taxi-on-call services brought in some fresh air. TheGPS-linked, electronic metered taxis were the brainchild of Neeraj Gupta, who was inspired by similar services in Londonand Singapore. Gupta sensed an opportunity when the Maharashtra government invited tenders for such a service for10,000 cabs. His confidence stemmed from running taxi services for BPOs and corporate clients. This time, he wanted to

cash in on urban Indian aspirations. To attract private equity investment, Gupta corporatised his operations by creating aparent company, V-Link Fleet Solution. India Value Fund pumped in Rs 50 crore into V-Link Fleet and promised to payanother Rs 160 crore when required. The fund enlisted the services of Accenture, KPMG and E&Y to prepare the accountsand audit. Meru runs 5,000 taxis in Mumbai, Bangalore, Hyderabad and Delhi and has a topline of Rs 100 crore. It expectsto post its maiden profit in 2011. The company has developed its own software, which directs the nearest taxi driver to pickup customers. It is working on a technology to offer TV services in its cabs, and plans to launch a workshop for the cabs itruns in India. Guptas main challenge is to keep pace with the rising demand for Meru cabs.

REDBUS

Phanind ra Sama CEO

The Long Haul

MISSING A BUS TO TAKE HIM HOME FOR Diwali some years ago was no reason for Phanindra Phani Sama to fret and fumeabout a wasted opportunity. Today, he runs a nearly Rs 100-crore online bus ticket booking company, redBus, that wasborn out of his experience with the vagaries of road travel. Phani enlisted partners for his online ticket booking venture, and

took an informal survey among travel agents, bus operators and frequent bus travellers to test its viability. All of them weresold on the idea. But this was when he came up against hurdles. Four of his friends left the venture for various reasons.



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Besides, bus operators across Bangalore and Hyderabad were cold to the software the team came up with. At this point,Phani and his friends came in contact with global professional network The Indus Entrepreneurs. One of Phanis mentorswith TiE, Sanjay Anandaram, told him that he should consider selling tickets directly. RedBus kicked off operations in August2006, and the service took off with a huge demand for tickets. RedBus posted revenues of Rs 60 crore last year. In February

2007, redBus received Rs 3 crore from seedfund, a Bangalore start-up fund. It received Rs 8 crore last year from HelionVenture Partners, another Bangalore-based VC fund. Bus operators took a while to settle in to the idea, but are nowcomfortable with the new entrant on their turf.

NETAMBIT

A Phone Call Away

Girish Batra CHAIRMAN & MANAGING DIRECTOR

ALL SALESMEN DONT REALLY SELL, when they knock at customers doors. Most of the time, theyre identifying a need fora product. To Girish Batra, sales manager at Godrej, this was a colossal waste of field time.

Batra broke out of the system, and applied what he believed to be a more efficient selling technique: use the telephone togenerate leads.

In 2003, he quit his job, borrowed Rs 1 lakh from his father, hired five undergraduates and approached ICICI Prudentialto sell life insurance products. Soon enough, he started calling potential customers.

His experiment clicked. NetAmbit, the company he founded, is eyeing a turnover of Rs 180 crore this fiscal, and has

grown from five people to over 4,000.The companys premium collection says it all. From direct marketing, for instance, companies earn an average fresh



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premium of about Rs 70,000 per month. NetAmbit, however, is able to get Rs 1.7 lakh to Rs 2 lakh fresh premium everymonth per work station, per agent.

The model attracted two venture funds Bessemer Venture Partners (BVP) and Helion Venture Partners. BVP invested Rs15 crore in 2007. In December 2009, NetAmbit raised Rs 50 crore BVP invested another Rs 10 crore, while the remaining

amount came from Helion.NetAmbit is able to keep costs low not only by using phones to sell, but also by hiring undergraduates and putting themthrough a 21-day training. It covers about 250 cities across the country. NetAmbit sells life insurance for six companies andgeneral insurance for Oriental Insurance, New India, Reliance and ICICI Lombard. Besides, it sells mutual funds andcorporate FDs of M&M and Unitech. The company plans to set up a financial services supermarket.

HUMMINGBIRD

Vivek Madappa & Vinod Thimayya FOUNDERS

A Place Like Home

THE IDEA OF COMFORTABLE, intimate, affordable apartments for executives was new, not just to the corporatelandscape, but also to Vivek Madappa and Vinod Thimayya, who were both executives in big companies till they took theleap.

The brothers started HummingBird in 2005, and have grown to having over 750 customers, including IBM, Accenture, JPMorgan and Wipro. The company projects revenues of Rs 35 crore this year.

But the journey this far wasnt easy. Banks didnt give them money, and together, they had just Rs 3 lakh in savings. Butthey kept the dream alive, systematically working on its fruition.

In 2008, Bangalore-based venture capital firm, Helion Venture Partners, invested $4 million in Hummingbird.With its no-frills approach to marketing, HummingBird doubled turnover in 2008-09, the year of the economic slowdown,





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from Rs 11 crore in the previous year. Today, HummingBird runs 285 suites in 25 properties across the metros.

MAHESH TUTORIALS

Mahesh Shetty FOUNDER-CHAIRMAN

Touch of Class

ACHANCE MEETING WITH A FRIEND IN THE 1980s changed Mahesh Shettys destiny from pursuing a career in the army toentering the thankless, then unremunerative world of teaching. Shetty took up a job with Dr Shettys Academy aftergraduation on his friends prodding, not realising where the journey would lead him.

In 1988, he started Mahesh Tutorials. With banks unwilling to finance his land purchase, he mortgaged his mothersjewellery, took loans from a maternal uncle and his grandfather, and booked a property worth Rs 6 lakh in Mumbai.

Shetty was fortunate: Parents wanted him to continue teaching their school-going children, and paid him the entire feeamount at the time of admission. Shetty soon purchased more property in two Mumbai suburbs, and entered into apartnership model to cut his risks. By 2006, Mahesh Tutorials grew to 26 branches across Mumbai. It now has 180branches, with 50,000 students enrolling every year.

In 2007, MT Educare the holding company got its first external funding from Mauritius-based private equity investor

Helix Investments. Mahesh is one of the first few coaching companies to get institutional funding in the country. Helixoffered him $12 million, but he took $8 million and gave them 30% in his preparatory business. When Helix walked into MT





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Educare, its revenue and net profit were Rs 40 crore and Rs 24 crore respectively. In 2010, it earned revenues of Rs 100crore.

Shetty no longer takes classes and is a full-time manager. He plans to take the institute public in the near future.

YOU LOOK GREAT

Rahul Bhalchandra CEO

Cut & Polish

BEFORE RAHUL BHALCHANDRA EMBARKED ON his beauty salon business, hed discovered a secret no man knew: how muchwomen spent at beauty parlours every month. Kanwaljit Singh, MD of Bangalore-based fund Helion Venture Partners, whoBhalchandra went to meet about his proposed chain some years ago, was stumped by the realisation. Sure enough, hisguesstimate was way off the mark. Barely four months later, Helion pumped in Rs 20 crore into the company, You Look

Great, or YLG. The first outlet opened in Bangalore in January 2009, and a year later, the chain has spread to 18 locations inthe city. YLGs model tweaked the way the business was conducted, based on its holistic understanding of not just theindustry, but also customer behaviour. Most women, says Bhalchandra, basically have three beauty needs, and differentmotivations when availing of them. Services such as pedicures, manicures and massages are a monthly routine, hairstylechanges are less frequent, while spa services come with a premium. The company began packaging its services, andintroduced the concept of salon membership. For Rs 1,000 a month, customers can go in for unlimited basic services. It nowhas over 3,000 members using the services regularly. Many customers are locked in for a year. YLG also creates a databaseon each customer.





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VORTEX RURAL ATM

L Kannan FOUNDER-CTO

Country Rhythm

CASH MACHINES ARE NO LONGER exclusive to urban landscape, thanks to a group of techies at IIT-Madras. In the earlypart of the decade, professor Ashok Jhunjhunwala, head of IITs Telecommunications and Computer Networks approached LKannan, an alumnus and founder of Chennai-based Vortex Engineering, to come up with technological solutions for ruralIndia. They first set up an internet kiosk to take banking to rural areas. But as the team soon realised, most banks neededto own or exclusively draw in customers. The group thought of establishing ATMs, and started with a few near Madurai inTamil Nadu. While the initial response was good, this too was not financially viable for a place with low usage. Aconventional ATM would cost around Rs 5 lakh, and including air-conditioning and a room, the total cost of installation wouldbe Rs 8-10 lakh. Worse, the ATMs would be shut for hours because there would be no electricity.

All this gave shape to Vortexs energy-efficient, cost-effective Gramateller. The basic model cost Rs 1.75 lakh, one-fourththe price of a conventional ATM. Vortexs first order for 545 ATMs, 300 of them solar-powered, came from State Bank ofIndia early this year.

Beginning in 2001, Vortex got two rounds of funding from Venture East, a Chennai-based venture capital fund whichexclusively finances TeNeT projects. Venture East invested nearly Rs 30 lakh in Vortex. In 2004, Aavishkaar, a Mumbai-based microfinance company, invested $2 million in Vortex.

Apart from private banks, Vortex has been getting enquiries from African countries and Indonesia, Malaysia, Afghanistanand Pakistan too. Inputs by KAUSIK DATTA, SHELLEY SINGH, REENA ZACHARIAH, SHIVAPRI YA N, VISHNUNARASIMHAN Photos: NARASIMHA MURTHY , BHARAT CHANDA, AMRENDRA JHA

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