Micro-mobility start-ups are solving Indian commuters' woes

Clearing the last mile for office-goers in most metros has always been a pain. They might be able to cover the first leg of the journey in relatively quick time but once they get off the metro/train, they dread the last mile commute. They hope to cover the last couple of kilometres to their office in a few minutes. But the never-ending queue to get a rickshaw or the limited space in a bus makes them want to tear their hair out. 

To them, we say, keep your hair on. There are micro-mobility solutions to the rescue. That’s a mouthful but they really are just bikes and cycles that you share with others, and start-ups such as Yulu and Mobycy (Zypp) have them parked and ready. These are meant for ‘micro’ distances (or last mile connectivity) which is measured as anything less than eight kilometres, by global standards. The start-ups here charge for the duration of use, in minutes and hours, averaging about Rs.15 per hour for cycles and Rs.70-80 per hour for e-scooters. As expected, most of their subscribers have been those between 25 and 35 years of age, using the rides largely for office commute.

Cycle sharing caught on in Europe, China and the US nearly ten years ago, but they were mostly with docked vehicles. That is, they needed a parking area with physical locks and keys. After 2014, dockless bikes began to be rented out; these are ones that can be locked-unlocked using a smartphone and therefore can be parked at any legal parking spot. DD Mishra, senior director analyst at Gartner, says that micro-mobility grew exponentially over the past two years. “There are more than two dozen operators globally, and they are spreading quickly to new cities in every region. These solutions theoretically could include most passenger trips of less than five miles (eight kilometers), especially in China, the EU and the US,” he says. He cites a McKinsey report that says the global micro-mobility market could grow to $300-500 billion by 2030.

Over the past few years, between 2017 and 2018, Indian start-ups too opened for business. They let loose IoT-enabled, electric vehicles — or smart and green transport — on the roads. These two-wheelers can be located via smartphone apps and unlocked for a ride by scanning the QR code on the bike, which links the user’s phone with the wheels.

Mobycy claims to be India’s first ever e-bike and cycle-sharing app, started in August 2017. Co-founders Akash Gupta and Rashi Agarwal launched their first fleet in Gurugram. They chose this location because it is a start-up hub with a cosmopolitan crowd and, with a dense metro-rail network, would need last-mile connectivity. Also, the founders wanted to go after the “toughest market to crack” in India, which they say is NCR, for various reasons including poor infrastructure and harsh weather. “We decided to catch the bull by its horns. If we can solve this in Gurugram and NCR, we can solve it in any part of the world,” says Akash, a former VP at Mobikwik. The start-up has partnered largely with government agencies such as the Gurugram Metropolitan City Bus Limited (GMCBL) and the local municipality corporation, parking its vehicles at metro stations and bus stops.

Yulu went first to the Garden City of Bengaluru. Founded by InMobi’s co-founder Amit Gupta, the start-up idea came as a surprise to his investor friends. Amit shares, “I was on the verge of retiring from InMobi, when I wanted to try something new. This felt like the right step after seeing how air pollution affects everyone.” True, pollution hurts everyone but polluting transport is easily accessible. How then do you convince users to try your unfamiliar proposition?

Hemant Gupta, co-founder and chief of operations, says that they first went to tech parks which “speeded up customer acquisition considerably”. They launched their fleet in Bhubaneshwar, Pune, Navi Mumbai and Powai too. Additionally, Bengaluru’s climate — with most days having a nip in the air — worked in their favour. 

In this southern capital, many residential localities have developed in close proximity to tech parks. In contrast, most people who work in Mumbai have to travel anywhere from 15 to 45 kilometres to reach their office everyday. Given this ground reality, of Yulu’s fleet of about 8,500 cycles, 8,000 are deployed in Bengaluru. 

Seeing so many people zipping by in rented bikes is what must have spurred Bengaluru-based Bounce to buy Ofo’s India assets. The start-up took over the distressed Chinese bike-sharing company’s set up including the staff in 2018. Ofo had been operating across seven cities in India, before it shut shop due to cash crunch and poor strategy in July, the same year. “We are still successfully running those cycles and plan to add more to our fleet of 5,000,” says Bharath Devanathan, senior vice president-growth and electric vehicle (EV), Bounce. The start-up’s co-founder Anil G says, “We get around 120,000 rides a day. Each vehicle is being used by eight to 10 people daily. About 40-50% of the users are metro commuters.” Bounce has the same business model as Yulu and Mobycy, but is different in the machines it rents out — these are regular bikes that have been modified, and are not the latest compact e-bikes. Karan Mohla, partner at Chiratae Ventures, says that these modified vehicles are its strength: “These vehicles, which are keyless and go anywhere-to-anywhere, are what has led to the company’s tremendous growth in the past nine to ten months.” Bounce has expanded its operations to other parts of Karnataka, Rajasthan (Udaipur, Jaipur and Jodhpur) and some parts of Telangana and Andhra Pradesh.  

Yulu and Bounce are clocking much better numbers, in terms of rides and number of subscribers, than Mobycy. The first two clock 35,000 and 120,000 rides a day, respectively, on a user base of 1.8 million and 2.5 million. The third sees around 17,000 rides a day on user base of 350,000.

The two fare better than Mobycy in cycle renting too. “We found that people were using it but it was largely niche and worked well only in campuses. They were put off by uncertain weather conditions and poor road infrastructure,” says Mobycy’s Akash. But Apoorv Sharma, co-founder and director of Venture Catalyst, a key investor in Mobycy believes they dodged a bullet by keeping away from cycles. “The biggest issue will be surveillance and maintenance. Most of the time, the tyres are punctured, while e-scooters are really low maintenance. Scooters have a shelf life of three years and won’t cost more than Rs.30,000. If each of them does business of just Rs.200 a day, you can recover your investment in less than a year,” he says. For now, the start-up has made their cycles available only at specific campuses in Delhi-NCR on a B2B basis, from where it gets monthly rentals.

As Mobycy had to get out of cycle renting, around May last year, the start-up began working on its next edition of e-bikes. They wanted to offer something novel to the commuters and came up with a new bike named Zypp, which weighed just 35 kg, had a compact structure and a speed limit of 25 kilometres per hour. This is specifically manufactured for the start-up, just as Yulu gets its cycles and bikes made by a facility in China. Yulu’s e-scooter weighs a bit heavier at 43 kg, but it maintains the same speed limit as Mobycy’s bikes. 

While the Gurugram-headquartered start-up worked on reducing the weight of the scooter, the Bengaluru-based Yulu wanted its bikes to be more fuel-efficient. Their bike can travel 70 kilometres on a single charge, compared to 45 kilometres from Mobycy’s Zypp. “We were also looking at creating the parts of the bikes in a way, that it would be unique to our model and couldn’t be used anywhere else. This helped us reduce the chances of spare part theft,” Hemant adds. 

The start-ups say that whenever anyone makes an attempt to steal their bike or damage it, they get an alert. Additionally, they have teams located nearby, for every zone. To encourage users to be careful, Yulu charges a security deposit of Rs.100 for cycles and Rs.500 for e-scooters, while Mobycy requires users to have a minimum of Rs.50 in their e-wallets to unlock the vehicle. 

Money calls

With a group of veteran entrepreneurs coming together to start a new venture, attracting investors and funds was never a problem. After an undisclosed amount was raised through friends and family, Yulu received a seed funding of $7 million from Blume Ventures; 3One4 Capital, a Japanese family office; and angel investors including Binny Bansal and Amit Ranjan. Sanjay Nath, managing partner, Blume Ventures says, “Knowing Amit Gupta from his InMobi days and how he had envisioned Yulu, I was in.” Nath was also impressed by the start-up thinking beyond the product and developing the necessary infrastructure, such as charging networks. 

Yulu installed its charging stations at tech parks, hotels, residential areas and kirana stores. The partners (who host the charging points) are paid a commission on the electricity bill. “In the near future, we are looking at installing a charging box every 200 metres in the areas we operate,” says Amit. The start-up also has a team of Yulu Pilots, as they call them, who carry charged batteries and track the charge on their two-wheelers in the vicinity. If it falls below the optimal level of 15%, the Pilot reaches the user with a replacement. 

While Yulu has developed a private network, Mobycy has depended primarily on its partnerships with various government bodies and placed charging points at public places. So far, Mobycy has raised a seed fund of $50,000 from a US-based angel investor in December 2017, followed by a funding of $1 million from Venture Catalyst in November 2018.

Not a big man’s game

When the start-ups are advancing in this line of business, the big boys of shared mobility aren’t sitting idle. Ola launched their venture with 600 cycles at IIT Kanpur’s campus in December, 2017, under Ola Pedal. But that experiment didn’t last for more than a few months. Ola didn’t want to comment on it. “Ola and Uber have never done anything where they had to employ their own assets. They are a software company and function as an aggregator,” remarks Misra of Yulu, adding, “This is altogether a different business. It’s not in their DNA. Also, if you have too much money, you lose operational efficiency. Look at what happened to Ofo.”

Mohla maintains that Ola and Uber have to become a part of the changing ecosystem to sustain growth. “I think this is an area they (Ola and Uber) would look at addressing sooner or later. Ola already does so in an indirect way with their investment in Vogo,” he says. Vogo, too, is an IoT-enabled scooter-rental platform, which has recently started testing regular electric bikes in Bengaluru’s HSR Layout. As of December 2018, Ola had invested $100 million in Vogo, in a mix of equity and debt financing, post which it holds between 35-40% stake in the start-up. It had invested $7 million in Vogo in early 2018. Ola’s rival Uber on the other hand has taken the acquisition route internationally. It acquired US-based micro-mobility start-up Jump in April 2018. 

Do these biggies frighten start-ups? Mobycy’s Akash sounds unruffled. He believes Uber and Ola will stumble because of their size. “Everything is new in micro-mobility, we need to study users closely, which would be difficult for a massive brand such as Ola and Uber due to their size.” That said, Akash has had talks with Uber for exploring partnering opportunities in Delhi-NCR. Meanwhile, the aggregator has already tied up with Yulu to test this model in Bengaluru, wherein riders can book a cycle or bike through the Uber app. Hemant does not say if Uber has invested in Yulu.

Nandini Maheshwari, head-business development, Uber India & South Asia, says, “In India, we want to provide smart and affordable solutions for short distance commute, and first and last mile connectivity.” The company believes their partnerships with Yulu (dockless e-bikes) and Bajaj Qute (quadricycle for short distance urban commute) will further that. “Our goal is to complement public transport by bringing multiple modes of transportation, including micro-mobility options, under one app,” she adds. 

Gartner’s Mishra believes that one cannot do without partnership and collaboration in this space. “Uber can provide the necessary technology infrastructure and connect the consumers for a Yulu ride. We see competition is changing into collaborations… This trend is going to continue and create larger business value in future.”

Miles to go

Meanwhile, the start-ups are beginning to enter each others’ territory. In September, Yulu entered north, capturing Mobycy’s home turf — Delhi-NCR. In collaboration with Delhi Metro Rail Corporation, it has set up 40 Yulu Zones (pick-up and drop), at and around nine metro stations in the city with a fleet of 250 e-scooters. By the end of this year, it plans to increase the fleet size to 5,000 there. Interestingly, investors aren’t worried about the competition.

“The market potential is huge. In some time, every metro city will have at least five players and there will be one to two players even in the smaller cities,” says Sharma. Nath, too, agrees that it doesn’t need to be “winner takes it all”. Currently, only 18% Indians have personal vehicles, shares Devanathan, underlining the need for more low-cost bike rental platforms. 

But the government could throw a spanner into the works. Devanathan says, “There is a possibility of new regulations coming in, making it mandatory to register even low-speed two-wheelers, which means the users can no longer ride them without a license.” As of now, if a rider violates any law, he or she will have to pay the fine; the start-ups are not picking that tab.

These are early days and winds could blow either way, but Akash is optimistic. “There are 177 million people travelling daily, of which 50% commutes are less than 4.5 kilometres. I see this as the next billion-dollar opportunity in India,” he says.