Mumbai: What V. Ramesh did on 31 December may well sound like a corporate executive’s pipe dream. The 48-year-old gave up a well-paying job as chief executive officer of brokerage firm Prabhudas Lilladher Pvt. Ltd to set up a business that reminds him of his childhood days spent cycling in his hometown of Palakkad, Kerala: a bicycle rental service with pickup and drop facilities across the city.
What he hadn’t reckoned with was the number of investors who turned him down.
“They said it is not so easy to give funds in this market, though they might have given me money in good times,” says Ramesh. Ecomove Solutions Pvt. Ltd, the company he has set up in Mumbai, aims to provide eco-friendly and cost-efficient alternative transport for short commutes by setting up a network of bicycle pickup and drop points across the city.
Wheels of fortune: Ecomove Solutions’ V. Ramesh in Thane, Mumbai. Ramesh, who had his share of naysayers even in a bull market, is finding fund-raising for his bicycle rental service company a difficult task. Abhijit Bhatlekar / Mint
By focusing on strategic locations such as railway stations and bus stands, Ecomove plans to attract commuters who would otherwise take a taxi or an auto rickshaw from the station to their workplace. It will charge a monthly rental that works out to Rs10 per day, as well as a refundable deposit to cover damages.
Ecomove is based on Ramesh’s hypothesis that if people have easy access to bicycles minus the responsibility of owning one, cycling as a mode of transport will gain popularity in cities. But Ramesh, who had his share of naysayers even in a bull market, is finding fund-raising an uphill task today. For 17 years, Ramesh worked for financial services companies such as ICICI Prudential Life Insurance Co. Ltd and Birla Sun Life Asset Management Co. Ltd. In his previous job, heading Prabhudas Lilladher, a typical day involved client discussions on “capital market lending, mutual funds and continuously watching the stock market”. Now he spends most of his time commuting between his home in suburban Thane and various banks in south Mumbai to convince potential investors of his project.
Ramesh first had the business idea while observing a similar service during a trip to Barcelona, and he worked on fine-tuning his model for six months before he quit his job. He has the business plan all figured out: He is looking to raise Rs1 crore in capital, and he will first roll-out services in Mumbai, aiming for 40 locations and 8,000 members in the first year of operations. His target is anyone who might use a bicycle—courier boys, college students and the health-conscious. In the next phase, he wants to expand to Pune, Bangalore, Delhi and Chennai.
But execution is proving more difficult than he anticipated. Asked if he is in talks with real estate dealers to set up pickup points, Ramesh says his prime activity so far has been getting funding for the project. At first, he tried to raise venture capital for the business, but later he changed strategy to raise debt capital, since he felt that equity valuations were very low in a market that was already down.
While clean energy is a high priority in markets such as the US and Europe, venture investors say eco-friendly, by itself, is not a selling proposition in India. In 2008, clean tech companies in India raised $277 million (Rs1,349 crore now), while those in the US raised nearly 21 times the amount, at $5.8 billion, according to a report by the Cleantech Group. “In India, the value to the customer has to be the same as, if not better than, the non-eco-friendly alternative,” says Mohanjit Jolly, executive director of venture firm Draper Fisher Jurvetson, that has invested in the Bangalore-based Reva Electric Car Co. Pvt. Ltd. “It’s an interesting idea, but how do you scale and differentiate a service that’s easily replicable?”
Funding is not the only snag that Ecomove has hit. As recently as a month ago, Ramesh was working out a deal with Chennai-based Tube Investments of India Ltd (TI Cycles) to manufacture customized bicycles for rent, with special features such as a capacious basket to hold office bags and space to place advertisements on the sides of the cycle. This plan had to be abandoned, because “the response from their side was very poor and I didn’t want to delay the launch further,” says Ramesh, who wants to launch the service on 5 June—World Environment Day. He now intends to buy branded bicycles instead.
Meanwhile, Ramesh is also getting ready the back-end software required to manage a real-time inventory of the bicycles. He has also taken on board two advisers—a financial expert and a logistics specialist, both of whom he declined to name—to help with other aspects of the business.
But if things have not always gone according to plan for the entrepreneur, he has also received support from unexpected quarters. Cyclists across the country who have heard of Ecomove have voiced their approval. “I have received emails from cyclist groups in Bangalore and Pune, asking me to launch the services in their cities first,” says Ramesh, smiling.
Friends and family members who were initially sceptical have also rallied around. A common question he was asked, Ramesh says, is why anyone would want to ride a cycle on a typically crowded Indian road. But he sees it as a chicken-and-egg situation: Unless people start riding cycles, he says, the traffic won’t go away.
Ramesh himself, incidentally, does not own a bicycle at present, although his two daughters, in class XII and class VIII, respectively, do. “My wife is still a little sceptical, but I have persuaded her to allow them to use the cycles for short distances,” he says.
What will he do if funding is hard to come by? “I’ll use my personal savings and take a mortgage loan,” says Ramesh, “I will go ahead even if I have to start on a very small scale.”
This is the fifth in a series about entrepreneurs starting businesses during the economic slowdown. Next: Pet, set, go.