Drive-it-yourself

Drive-it-yourself

Backed by Sequoia Capital, Mohandas Pai and other notable investors, Zoomcar is disrupting India’s largely chauffer driven market with self-drive car rental services

MADHUMITA PRABHAKAR

FULFILLING A NEED

David Back and Greg Moran belong to the class of entrepreneurs who dropped out of B-School to pursue their passion for entrepreneurship.

In late 2000, when Back was first exposed to Zipcar’s self-drive car rental service in Beijing, he, along with his business partner Greg Moran, began research on replicating a similar business model in developing economies. The research, which involved interacting with entrepreneurs who were developing similar businesses in Mexico, Turkey and Korea, validated the success of the model. However, their initial plan to startup in China (as opposed to India) didn’t work because the market already faced intense competition from NASDAQ-listed eHi Car Services and NYSE-listed China Auto Rental.

IDENTIFYING THE RIGHT MARKET

In 2012, they turned to India and founded Zoomcar. From day one, their goal was to build a billion dollar company with a social impact. The impact resulted from both founders coming from a clean energy background and aspiring to reduce the number of cars on Indian roads.

DISRUPTING A MINDSET 

For Back and Moran, their target audience was the section of consumers who were saving up to buy a car. “We targeted Zoomcar at them with the hope that they would delay their purchase by a year or two,” opines Back. But, is that enough? Not really. There were several other factors too which validated the model for the founders.

As a first, they founded the company in Bengaluru to target customers who had the desire for independence and privacy. “This is a city where a lot of people move to for study and work. So, we’re looking at consumers who drove their parents cars but now don’t have a mode of transport and those who moved from the West and are seeking a reliable transportation service,” explains Back. Second, of course, is the universal appeal for cars and third, the size of the family. For example, in China, since there is a one-child policy, every household doesn’t need more than one car. Whereas in India, given the multi-generational system of living, several households need more than one car at times and this, Back sees as a big opportunity for his company. “This is particularly prevalent in cities like Mumbai and Delhi, which we see as two of our biggest markets for this business,” he states.

BALANCING THE DEMAND-SUPPLY EQUATION

Since their official launch (of service) in February 2013, the founders had to turn away customer requests for 95 weekends due to non-availability of cars. “While we started out with seven cars on board, by Christmas in 2013, we had 50 vehicles. In spite of that, for every reservation we made, we had to turn down five more,” recalls Back.

For the first nine months, the company had a zero marketing budget. For the next nine months, it spent less than two per cent of its capital on marketing spends. “We realised that with every penny spent, we are going to lose a potential customer (because we turn them down),” he says.

Eventually, by February 2014, the startup had 100 cars on board and by 2015, 900. “This is our pivot point. Just last month, we advertised on newspapers and radio and now, we’re actively hiring marketing teams to meet the demand,” shares Back.

LOOKING AHEAD

Since founding, Zoomcar has raised a total of U.S. $11 million from various investors including Sequoia Capital, Mohandas Pai (of Manipal Group), Empire Angels, Funders Club, Basset Investment Group and more. The funds, as Back points out, were primarily channelised towards building backend technology and hiring. A part of the equity also went into financing vehicle purchases.

Going forward, while the founders wish to retain their core focus on building a car rental service, they are also exploring other opportunities in the two-wheeler space. “Over the next three months, we want to enter Chennai, Hyderabad and Mumbai and double our fleet to over 2,000 cars,” shares Back. The company has currently partnered with automobile manufacturers such as Ford, Mercedes, Honda and Mahindra to source vehicles. Its cars are targeted at the mid-income as well as the higher income segment.

At a macro level, over a period of time the founders aspire to make Zoomcar available within one kilometer of where all customers live and work, in several locations across the world.