After burning over ₹30,000 Cr, Indian VCs have finally realised the economics of Cab aggregation

So after 15 years of burning over ₹30,000 Cr in cab hailing, and even faking American accent while saying, "Oh my gawd it's so great I don't own a kawr anymore!", the VC space has finally got the economics of the business model.

An investor on condition of anonymity has said, "Ridesharing in India is an extremely tough proposition to build profitably". But back in 2016, when I used to ask, "Don't you think people who can actually afford AC cabs in India are very limited? And that would make the market for Cabs too small to justify such investments?", they used to scoff and say, "This is disruption, bro! Everything's gotta CHANGE!".

And then it began! India went on a Pradhan Mantri Venture Capital Ameer Kalyan Yojana on steroids, with companies getting billions of dollars to give "free rides" to customers and "incentives" to drivers. For years, they subsidised both sides of the marketplace from their pockets, all in the name of "growth" and "capturing market share". These artificial discounts and bonuses were the bedrock(s) upon which these companies were built. And what happened next?

After years of making losses of tens of thousands of crores, as soon as these companies withdrew those discounts and incentives, both customers and drivers fled as if they were trying to avoid the plague. Drivers canceled trips, customers cried. And then, quite inevitably, went back to taking a bus, metro, or - no prizes for guessing - an auto.

Well, it's a $10 billion dollar story. But my questions were always fundamental. When compared to US' $70k & China's $12k, India's GDP per capita is around $2400 (around ₹2 Lakh/year). How many cabs rides do you think the Average Aakash making ₹2L/year take? Maybe once a month? And that's when he's feeling rich. But thanks to Uber & Ola's generous discounts, even Aakash took a cab every week, because it was free (or cheaper than an auto-rickshaw). This was the destruction of the market these companies excelled in. But not anymore.

Aakash is back to taking a bus, making the market much smaller, as it always was. And Ola and Uber, after collectively burning over ₹30,000 Crores in the last decade, have now been overtaken in number of trips by Rapido. A company which, until now, primarily operated bike taxis (followed by autos). Rapido raised much less money, and will make money sooner, and will also touch more lives. As it was always supposed to happen.

Whenever I write on these matters, people often say, "Oh, it's easier to say now that it's all happened". "Benefit of hindsight" and all that. I'd urge them all to read a very detailed piece I wrote in 2021 on why I believe the gold rush in Cab aggregation was unsustainable. It's aged well.

I wrote exactly the same stuff even in 2015, back when I was building The Testament. It's just that it takes time for the truth to eventually win and really “hit” enough people. Case in point - Seneca.

Being ahead of the curve is a great place to be eventually.

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