Booking a bus ticket in India used to be a nightmare for many. Then came along a few friends from BITS Pilani, one of India’s most prestigious engineering institutes. During Diwali, the Indian festival of lights, one of the friends tried to get home for the holiday; but he didn’t know his schedule till the last minute and taking a bus was his only choice.  He ran around hunting for a ticket, but they were all gone - traffic in Bangalore can be rough. And so, redBus was born.

redBus (website) is an India-based startup focused on providing consumers with the convenience of booking a bus ticket over the internet. Internet penetration is rapidly growing in India, and not just in urban areas. More and more, Indians are turning to the Internet to book their train and airplane tickets. So why not buses? We recently sat down with Phanindra Sama, the CEO & Founder of redBus to talk about the company, its business model and being a start-up in India.

The company has raised $3.5 million to date including $1M from India-based investor Seedfund (website) and $2.5M from a group of undisclosed investors. Additionally, redBus is mentored by TiE (The Indus Entrepreneurs), which helps budding entrepreneurs through providing advice, guidance and assistance from successful & experienced entrepreneurs and professionals.

Excerpts from the interview with Phanindra are given below.  To learn more about redBus and track its progress over time, visit the redBus ChubbyBrain profile and add it to your watchlist so you’ll get email alerts anytime it’s profile is changed.

What is the Market Opportunity as you’ve defined it?

The primary market we seek to reach is both the luxury bus travellers, and the bus travellers. Essentially, there are two primary methods in which people travel by bus in India. The first is known as the stage-carrier method. Buses with the stage carrier designation stop at various intermediate locations, and always have a conductor present on board collecting tickets. [This is similar to a city bus that makes several stops throughout the city.] The second is known as the contract method. This is where a bus travels from one destination to another, makes no intermediate stops, and by law, cannot have a conductor who sells or collects tickets on board. The latter method is the market we target, where people have to purchase their tickets prior to boarding the bus.

Additionally, Redbus have two primary revenue-bringing business models. First, Redbus provides technology support to bus-ticketing operators who manage heavy volumes. They provide inventory-management SaaS (Software as a Service) to such operators and take a cut on the larger transactions.

Secondly, traditional travel and booking agencies such as Makemytrips.com typically provide services to the upper middle class demographic, who tend to be more tech savvy. There was no service like Redbus providing middle class/lower middle classes the opportunity to book bus tickets with ease. Typically, the common user of Redbus earns between 10,000k/month  onwards.

How likely is a middle class/lower middle class person to have the tech savvy and Internet access to utilize Redbus?

Right now, Redbus provides their service to the travel agent who the middle class/lower middle class worker would normally use to book a ticket. The travel agent utilizes Redbus’ vast database of bus-ticketing operators to then find the appropriate ticket for their customer.

Who are your competitors and how do you provide a better service?

Initially, we were the first ones to launch this concept. The idea was taken well, and in short time there were about 30 companies doing the same thing. Since then, those 30 companies have slowly died down. Think about it from the perspective of the bus-ticketing operator or the travel agent. We have grown very aggressively and have seven locations in 15 states, and are larger than any other competitor in the market. Therefore, when an Bus Operator needs to sell 5 seats, he can be assured that Redbus will fill at least 4 of them. No other competitor can network so effectively, and in that, Redbus has the advantage.

How significant is the lack on Internet Infrastructure in India?

Many of our potential customers may indeed not have Internet access. We’ve been able to tackle this by addressing the travel agents that our customers would contact to get access to their inventory. Travel outlets and agencies are increasingly adopting the Internet. One problem that has led travel agencies to adopt our service is this. Let’s say  a travel agent in Mumbai needs to book a round-trip ticket for his customer to Bangalore. Booking a ticket from Mumbai to Bangalore would not be difficult but booking a return ticket would require him to contact operators in Bangalore, and that process becomes more difficult. Redbus makes it easy because computerization allows the travel agent to sell twice the number of tickets.

With Internet infrastructure in India still developing, how significant has Mobile penetration been for Redbus?

Very important. Right now we offer two services for those using mobile phones to book tickets. They can use SMS or GPRS (General Radio Packet Service). To do this, we have partnered with two other companies, mchek and ngpay [which are backed by venture capital firms Draper, Fisher, Jurvetson and Helion Venture Partners respectively]. We utilize mchek for SMS ticket booking, and it allows users to make payments through their phone. We utilize ngpay for GPRS (mobile internet) booking.

Could you speak a little more about what it’s like partnering with two firms, mchek and ngpay, both of whom are also considered start-ups, and both of whom are venture-backed?

mchek and ngpay, though small, are the biggest players in their respective markets. When we needed to provide mobile services to our customers, it was only natural to turn towards them.

How much financial backing have you received and from whom?

We have received 1 million dollars from Seedfund, and another 2.5 million dollars from an undisclosed company. We have a total of 3.5 million dollars in backing of which we have only spent 1 million.

I’ve noticed an option for advertising on your website, as well as scattered banner ads. How significant do you envision online advertising being in your future revenue streams?

Very little, almost none. We have that option there because a number of travel agencies and other travel related websites wanted to advertise with us, so we are willingly listening to offers. But, unlike a content-based site, we are not looking to online advertising as a source of credible revenue. In fact, I know many content-based sites that are quite disappointed with their reliance on online advertising based revenue models.

How does Seedfund add value to your operations?

They are various ways in which they help us, and they’ve added tremendous value to our operations. All of the original founding team had engineering backgrounds (BITS Pilani). So, we didn’t know about any financial terms or techniques or metrics, which Seedfund helped us streamline. Their broad experience in working with so many other start-ups has given us insight on a more operational basis. Additionally, our industry is one of networks and networking. We need to develop relationships with many different organizations, travel agencies, bus-operators in order for scalability and growth. They had many connections and gave us many leads.

Finally, here’s a fun question: What is the longest debate your team has had in the last 30 days, and what did you decide?

The debate that we had was in regards to running our business like a start-up versus running our business like an organization. In the past, things were much more chaotic. Everyone would do everything and anything. You would see a marketing guy doing our finances, or vice-versa. At one point, a few of us decided that we need to do things in a much more organized way, so we could scale our operations more efficiently. But, at the same time, we wanted to maintain that fun environment. Bringing in a certain guy to do a certain thing may not exactly be fun, but it is what we felt we needed to do to get organized, and be able to efficient track metrics, and scale up.

To visit the redBus, Seedfund or Arjun’s profile, click on the widgets below.  If you’d like to embed any of these widgets on your blog/website, you can do so by visiting the Widgets tab.

This is a guest blog post by Arjun Bhimavarapu,  a Wharton School of Business student currently working in India.  He will be interviewing promising young venture-backed startups in India over the next several weeks.