Prateek Roongta, vice president at India Value Fund. India Value Fund, a premier private equity fund managing over $650 million has an equity stake in Meru cabs.
What must one keep in mind while creating a start-up in the transport sector?
Our research on the industry revealed that there was an absence of reliable, safe taxi service. A new entrepreneur looking to start afresh must understand the need gap. They need to also be sure of delivering the service consistently with the right systems in place. Six months prior to Meru's launch, we carried out an in-depth research of the market, the need gaps and the possible loopholes that could arise. The entrepreneur must also be aware of his strengths before deciding to launch. Having had the experience of running V-Links, a private fleet service, Gupta's expertise lay in handling large fleets and driver management. One needs to remember that every vehicle functions differently, and hence one needs to be adept at operating and maintaining each vehicle.
What are some of the infrastructure-related and financial hurdles for a new entrepreneur?
Fleet services are a very capital-intensive business. You have to own every car, so for a 10,000-car business, you need a Rs 500-crore investment. Where is one to get that kind of money from? It's also important to build a good brand. V Links tie-up with India Value Fund help provide added credibility. The fund is known for building good brands like Radio City, Mahindra Castings and Centurion Bank of Punjab, among others. It was on account of this brand association that we were able to get Accenture aboard to write Meru's business plan. Vehicular maintenance is an operational issue that a new entrepreneur needs to keep in mind. He needs to keep a check on maintenance time, i.e. ensure that not too much time is spent on upkeep.
With a freeze on the issuing of permits, Meru put together a dedicated team to pursue black-and-yellow drivers to join the company. Such focused persuasion is essential given the current industry scenario.
Transportation is a capital-intensive business. What is it that an investor looks for before putting money into a transport start-up?
What excited us about the fleet taxi service industry was its tremendous potential. Research revealed a huge need gap for taxis with safe metres. Metered-taxi services have caught on very well in Malaysia and Singapore, places with economies similar to Mumbai's. But Mumbai didn't have a single such system. If was the best opportunity for an entrepreneur to capitalise on this need and make profits.