Delhi-based Vecto Technologies Pvt. Ltd, which operated inter-city cab aggregator Roder, has shut down operations, its co-founder Abhishek Negi told VCCircle.
Negi said the startup was forced to shut shop due to rising acquisition costs and low repeat rate for outstation travel. “Roder did not work out... but the outstation cab space, on the whole, is growing,†he added.
Ashish Rajput, another co-founder at Roder said the company ceased operations in March this year.
“At their peak, they were doing well in terms of revenues. The entry of new competition, specifically from Ola and Uber, made things difficult. Considering that and the fact that Roder was a startup, a tough call had to be taken. Even as customer acquisition cost was high in this space by design, Ola and Uber started giving out promotional offers which made it difficult for Roder to sustain operations,†explained Anil Joshi, managing director at Unicorn India Ventures, which is an investor in Roder.
In January 2016, Roder raised around $240,000 (about Rs 1.6 crore) in seed funding led by Unicorn India Ventures and a clutch of other investors.
In April 2016, VCCircle reported that the company was in talks to raise a $6-8 million in Series A funding led by SAIF Partners.
“We weren't talking to SAIF Partners for the Series A round. One of the reasons we closed down was the timing of other investors following suit in the intercity space. While we raised $240,000, other competitors raised twice the money in the same time span,†Rajput explained.
Joshi stated that the investors were indeed positive during the discussion stage in early 2016 as Ola and Uber had not yet aggressively forayed into the inter-city cab space. Ola offered inter-city services in its initial years but scrapped it, only to relaunch it in a bigger form in 2016. Likewise, Uber, which entered the space with a pilot in May 2015, has now grown its inter-city cab operations considerably.
According to industry observers, several standalone small players set up operations in the inter-city cab hailing space over the last couple of years to test the market for a viable business opportunity. With Ola and Uber’s entry, many of these startups found it difficult to raise follow-on funding after the seed and early-stage rounds.
“It is difficult to scale up without significant investment in the online cab space in general. Even a well-funded player like Ola seems to be struggling at times against the might of Uber,†said Satish Meena, senior forecast analyst at American market research firm Forrester Research.
The cab business, by virtue of its design, involves a lot of investment and time to build an ecosystem of drivers, which ultimately translates to a continuous fund tap.
“While the cost of customer acquisition maybe high in the inter-city space, a repeat customer rate ensures good margins and is indeed a lucrative proposition in the long term. While it is not a bad business to be in, one has to encounter growing consumer acquisition costs and battle big players for competition when trying to go pan India,†said Joshi.
In April 2016, Roder was present in 18 cities and provided one-way rates for inter-city journeys on 600 routes spread across north and west India. The company also claimed to have clocked a gross transaction value of Rs 40 lakh and recorded 30% month-on-month growth.
Meena added that it was always a difficult proposition to get investor backing for newer and smaller players in a space where Ola and Uber operate. It is quite unlikely that investors would bet against the spending might of these two large players.
“Unless there is an extraordinary level of innovation in terms of idea and technology, getting investor backing in this space for newer players will always be difficult,†said Meena.
Founded in December 2014 by IIT-Kharagpur alumni Negi, Rajput, and Siddhant Matre, the startup kicked off as a marketplace for cabs called Instacab. The outstation cab service was launched in January 2015 and it was subsequently renamed Roder in October 2015.
In September 2015, media reports stated that Instacab had reportedly raised somewhere between $350,000 and $400,000 from undisclosed investors.
Some of the small players in the space include Indore-based online outstation taxi marketplace InstaCar, which raised $1 million (Rs 6.65 crore) in seed funding from Hong Kong-based Swastika Company in September 2016.
In July 2016, Wiwigo Technologies Pvt. Ltd raised Rs 4 crore (around $595,000 million) from Indian Angel Network (IAN) and two high-net-worth individuals.