Last month, when redBus.in, India’s largest bus ticketing firm was acquired by the Ibibo Group for around $125 million, there were celebrations across the country’s start-up ecosystem. Venture capitalists hailed it as long-pending endorsement for Indian e-commerce business and felt that it could trigger a new wave of such exits. Entrepreneurs, especially in the Internet commerce space, heaved a sigh of relief believing that their nightmarish hunt to raise additional money would end.
Phanindra Sama, who founded redBus in 2006 with just two bus transporters offering inventory of around a dozen seats daily, became the rock star every start-up in India wanted to emulate. Sama, his early founding team and the investors made money. Everybody went home happy.
Unfortunately, the sale also cut short an entrepreneurial journey that could have potentially spawned more risk-taking founders if redBus had persevered on its own to become a business of $500 million or more in revenue. If the founders had not rushed into selling redBus and instead scaled it to achieve a $1 billion valuation, the bus ticketing firm could have attempted to create what’s known as the “PayPal Mafia” in Silicon Valley.
Redbus could have groomed more new leaders from its ranks capable of creating other disruptive start-ups. The experience of working through a painful, slow burn to achieve critical mass, living those moments of frustration that force employees to quit and start on their own, were all lost.
The PayPal Mafia was created when the online payment firm was acquired by eBay in 2005 for $1.5 billion and some of its staff went on to create and invest in Silicon Valley’s hottest start-ups including Zynga, YouTube and LinkedIn.
Ryan Holmes, the CEO of social media management firm HootSuite, said in a Fortune article earlier this year that it was critical that tech entrepreneurs grow their companies.
“It seems worthy to note here that a young, Vancouver-based Flickr—one of the Internet’s first real photo-sharing sites—was sold to Yahoo for a paltry $35 million in 2005. That $35 million figure may not sound paltry. But a similarly promising photo-sharing site called Instagram sold to Facebook for $1 billion last year,” Holmes wrote in his article.
As such, original ideas are hard to spot in the Indian start-up ecosystem. Apart from many me-too ideas promising safe returns from an existing market, there are several startups focused on popular and proven models of car-pooling, online travel planning, etc.
Redbus was different in many innovative ways. First of all, it addressed a real problem faced by thousands of people looking to travel by bus and scrambling to book tickets at the last moment. There was no single, centralized platform that reflected real inventory of seats across hundreds of routes. When Sama started in 2005, some 2,000-3,000 bus operators ran around 25,000 buses on different routes and none of the booking agents had access to information about seat availability on a real-time basis.
Redbus created a real-time interface that integrated inventories of seats and routes in a single system, making it easier for agents, operators and commuters to transact.
By the time redBus was sold to Ibibo last month, it was handling 1 million passengers every month. This figure could reach 10 million in a few years, given the opportunity to scale across more cities and routes.
As the HootSuite founder Holmes said, perhaps entrepreneurs could learn from a sequence in the film The Social Network where Facebook’s first president Sean Parker tells the founders, “A million dollars isn’t cool. You know what’s cool? A billion dollars.”
Redbus founders cannot be faulted for selling the firm. After all, entrepreneurs and investors have the right to create wealth for themselves and all involved after years of painfully building a company.
It’s just that the Indian start-up ecosystem is desperately waiting for its PayPal Mafia, which could potentially trigger a much bigger start-up revolution.