Startup and VC Ecosystem Updates | Issue# 3 [August 6, 2024]
A recent article by Inc42 throws in some great insights about Ola and the unicorns shaped by its founder, Bhavish Aggarwal. Bhavish is at the forefront with his unicorn ventures, from Ola Cabs to Ola Electric, and now Krutrim. The imminent IPO of Ola Electric marks a significant milestone, making it the first auto sector company to list on Indian exchanges in two decades. Let us look at some of the ventures that Bhavish is working on.
Ola Cabs
The Need to Reassess
Initially launched in 2010, Ola capitalized on the booming ride-hailing market and competed with Uber. Despite raising over $5 Bn in funding and growing significantly in its early years, the company has struggled with customer complaints and a decline in service quality. Recent competitive pressures have prompted Ola to reassess its operations.
Battling Competition
Competitors, such as Rapido, BluSmart, InDrive, and Namma Yatri, are challenging Ola and Uber’s dominance. Rapido, which recently entered the unicorn club, for instance, has rapidly expanded from bike taxis to cab hailing and auto rickshaws, showing significant revenue growth even during the pandemic, while Ola’s revenue has stagnated.
Focus on EVs
The ride-hailing industry is shifting towards Electric Vehicles (EVs), driven by the government’s targets for green mobility. Although Ola has been slow to adopt EVs, it plans to integrate electric two-wheelers into its ride-hailing service at a large scale. Though the plans are currently on hold, the broader vision includes an electric car business that will eventually feed into the supply chain for EV-hailing.
Ola is balancing the costs of its traditional ride-hailing operations with investments in green mobility. The goal is to achieve profitability by FY25, but sustaining profits through the transition to EVs remains a significant challenge.
Krutrim
While Ola Cabs may be close to profitability, Bhavish has to ensure the profitability of Ola Electric and Krutrim as well. Krutrim, an AI computing stack for India and a recent unicorn (Bhavish’s third, after Ola Cabs and Ola Electric), is central to new cloud and mapping technologies. Its AI will enhance Ola’s maps and ride-hailing operations, and is crucial for battery production and testing. Despite its promise, Krutrim is in the proof of concept stage and aims to provide AI tools for enterprises. Achieving profitability will take time due to the high capital costs, slower revenue growth in India, and competition from the big tech giants, such as OpenAI, Google, Microsoft, Amazon, Meta, and others.
Ola Electric IPO
Ola Electric has been a market leader in the electric two-wheeler segment in India. Ola Electric’s IPO, a landmark event given it is the first IPO rolled out by an Indian EV startup, has seen a valuation cut from $5.4 Bn to $4 Bn. The company faces operational losses and significant debt, raising concerns about the timing of the IPO. The funds from the IPO will partly go towards debt repayment, highlighting the financial challenges ahead. No extra points for adding that maintaining investor confidence will require a focus on profitability and reducing debt.
Mapping India
Ola is venturing into map services with Ola Maps, positioning itself to compete with established players by integrating advanced navigation and location-based services into its ecosystem. The product will aid the growth of the Ola ecosystem, comprising of Ola Cabs, Ola Electric, Krutrim, and Ola Foods for food delivery, and is set to become a cost-efficient alternative for Ola to Google Maps and MapmyIndia. Bhavish may also consider spinning off Ola Maps, currently a Krutrim offering, as a separate entity. The race for creating data-led mapping solutions for India is definitely set to intensify with Ola Maps, Google Maps, and MapmyIndia fighting it out.
Another Stab at Food Delivery
Leaving three failed attempts behind, Ola (Ola Foods to be precise) is re-entering the food delivery market for the fourth time. This time around, the company is leveraging the Open Network for Digital Commerce (ONDC) and offering substantial discounts. The approach aims to capture market share in a competitive sector dominated by the likes of Zomato and Swiggy.
Thoughts
Bhavish has been a vocal advocate of ‘Make in India‘ and is not shy of taking expensive bets aligning with his vision and intensifying competition with the big tech giants. Krutrim, Ola Maps, and Ola Foods are at a nascent stage and have a long way forward. Reassessing the operations for Ola Cabs to drive it to profitability in the near future would certainly help strengthen Ola’s position in the ride-hailing sector in India.
As for Ola Electric, it would probably have helped if the company waited to get close to the zone of profitability and sustainability, and gained investor interest and confidence. Being a relatively new company, investor pressure for exit is probably not the defining factor for Ola Electric’s IPO. Instead, the company probably looks to offset its debts, as it looks to build in-house technology, infrastructure, and manufacturing, to drive itself to profitability.
Building a successful startup is not easy. We do appreciate the vision of serial entrepreneurs, such as Bhavish Aggarwal, who intend to build in and for India and take the country to the world stage. The skills required to balance the growth and success of multiple startups requires taking critical decisions, including slowdown on certain fronts and focus on some other fronts. We will hope that Bhavish’s leadership is able to steer Ola’s family of startups to success and profitability and wish Ola Electric the best for its IPO.
If you are interested to learn more, feel free to check out this blog post by Inc42.
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Acronyms used in the blog that have not been defined earlier: (a) Venture Capital (VC), (b) Initial Public Offering (IPO), (c) Billion (Bn), (d) FInancial Year (FY), and (e) Artificial Intelligence (AI).