Hemanth Jonnalagadda, who lives in LB Nagar in Hyderabad, has to travel to Gachibowli for work every day. That’s a distance of around 39 kms one way. Travel was becoming an issue.
Driving all the way is stressful given the traffic. Taking an Ola or an Uber on a regular basis is an expensive affair.
At this point, Hemant, along with his classmates Prasanth Garapati, Sandeep Kachavarapu, Charan Thota, Srujai Varikuti and Akshay Chennupati from IIIT Hyderabad decided to come up with a solution that was convenient, economical and safe for thousands of others like him.
And it wasn’t just them.
Rahul Jain, who was working in a company in Kothaguda in Hyderabad, near Google’s India headquarters, was also facing similar issues with travelling from Lingampally.
He, along with his friend Mayank Jain also saw a great business idea in solving this problem.
And why not?
Over the past decade, Hitech City, Gachibowli and Madhapur areas of Hyderabad have emerged as the IT Hubs with every IT major and MNC setting up offices here. Nearly 4.5 lakh software engineers work here. Apart from IT companies, there are tech MNCs, hospitals, and hotels, nearly every big company’s office in Hyderabad is located in one of these three adjoining areas.
Rahul and Mayank ran a survey among a group of techies to understand the issue further. How much are people willing to pay, what was a comfortable mode of transport to travel from work to home?
What they found was that while most people who owned a vehicle used it because there was no other option.
After running a successful pilot, they founded Easy Commute in November 2015.
The team of Easy Commute
Hemanth and his classmates too founded Commut at the same time to address the issue.
So what do these startups do?
Commut and Easy Commute offer transportation services to people travelling to work. The business model is similar to that of Ola and Uber in the sense that they are aggregators.
But these startups aggregate mini buses - 12 or 22 seaters. They bring mini bus drivers on board and run shuttle services from various points across the city of Hyderabad to these IT hubs with some stops on the way as well.
How this works is, there are set routes from one point to another at set timings in the morning and then in the evening. Any person looking to use the service needs to sign up with the startup, load their e-wallet, pick a start and end point and book their seat. Every shuttle has a set number of seats, which need to be pre-booked and paid for before availing the ride.
The vehicles on board are owners, drivers and vendors of these mini buses and are paid on a commission-type of model.
Commut pays its drivers a commission on the number of rides.
“We give them commuters, they do the rides. We are the tech platform involved here. Sometimes cabs got get filled and sometimes some seats are vacant. So the payment depends on the number of rides they take and all payments are done online,” says Anusha K, growth marketeer at Commut.
Easy Commute gives its riders a minimum commitment. The revenue generated over and above that by the driver is shared with the company.
“We give our drivers a minimum commitment as we need to maintain their interest as well,” says Rahul.
These mini buses are a mix of AC and Non-AC vehicles. Easy Commute charges between Rs 2.5-3 per km.
However, while this is the average per km cost since the routes are fixed, a ride for a customer costs anywhere between Rs 60-100 per ride, depending on the routes they take.
In the case of Commut, it charges Rs 3 per km and a ride costs a minimum of Rs 50 and can go up to about Rs 150.
But given the very similar business models and that both startups are addressing the same problem in the same city, there is tough competition in this market.
There are other players as well like EZShuttle and Bengaluru-based ZipGo, which recently entered the market.
However, EZShuttle operates on a very different business model.
Founded in 2016 by Purushottam, EZShuttle owns its fleet, which are 22 and 36 seaters.
EZShuttle has about five pick up points. At each of these points, there is an AC lounge where users can come park their vehicles and wait for the bus. Once dropped in their location, there are seven-seaters that drop users to their respective offices.
EZShuttle is a monthly offering and it charges anywhere between Rs 2,800-5,500 depending on the distance. Those who want to try the service can also pay Rs 100 per trip for a two-day trial before signing up for the month. Once a customer signs up for the month, they just have to show up at the lounge and board the bus.
Anusha says that the competition has increased quite a bit, especially in the past few months after ZipGo entered the market.
“We are focusing on consistency in our business, our service. Satisfying our customers has always been our focus. We have been stable and sustaining since we started and are the most efficient in the market,” she adds.
Rahul says that Easy Commute’s customers turn to them because of their excellent service.
“People always look at the quality of service–the vehicle condition and punctuality. We also offer a lot more route options than the competition and even more time slots, especially for those who want to leave early,” he adds.
Purushottam says that what makes its service different is that it is trying to address the same problem in a different way. It gives its customers a peace of mind given that for the entire month a seat is booked for sure and that there is an additional pick up and drop services from the office.
In a situation where the buses are full, EZShuttle books its customer an Ola or Uber to get to the office.
The metro that will soon be operational in the city is also not a threat to their service, these startups say. While Commut says it wants to be a service that complements and runs parallel to the metro, Easy Commute says that the advantage of these services is that unlike the metro, they provide last mile connectivity.
As mentioned earlier, the addressable market is huge. The fact that both Easy Commute has over 40,000 registered users and Commut have over 26,000 only proves that further.
Sanjay Jesrani, founder and CEO of Go North Ventures is also very enthusiastic about these startups.
“This is a very scalable business, in my opinion. These startups help them offset people’s stress by letting them relax and comfortably travel, possibly with their friends and colleagues to work every day,” he says.
However, these businesses are fairly operational intensive, Sanjay says. The key here is to offer a service that ensures hygiene, punctuality and comfort.
The founders of these startups must always be hands on and constantly keep looking into these facets of customers experience and ensure a level of excellence.
Today, Commut has a fleet of 70+ vehicles covering over 100 routes catering to over 1500 customers each day. So far it has completed over 400,000 bookings.
Commut's first set of customers
Easy Commute has a fleet of 90 vehicles, over 40 routes with multiple stops and does 2000 rides each day.
EZShuttle has of 15 mini buses, owned by the company and it runs about seven buses from each pickup point every morning and evening.
Going forward Easy Commute wants to increase its fleet to 200 vehicles in the next three months and eventually expand to two more cities.
Commut, on the other hand, wants to focus on increasing the number of routes and wants to address this market entirely before looking at venturing to other geographies. It is also looking at ways of reducing its carbon footprint.
Sanjay says that there is a lot more these startups can do to improve customer experience.
“When you have a captive audience, sitting in these vehicles for at least an hour, that’s your biggest asset. They should do some community building, take this opportunity to play games and have a lot of interest activities. If you drive value that way, people will value the service without worrying much about the price,” he adds.
Hence a good mix of reasonable price and adding value to the customer is key.