He raised $80M from Nomura before building a single bus | Manav Bansal, Drivn

Speaker A: We did not lose money in a single investment, so there is no fatality. The fear of Ganushin is overrated.

Speaker B: Manav Bansal is the founder of Trivan. Imagine a fleet operator who's running say Delhi to Dehradun bus route. Instead of buying an electric bus, which can cost up to 1 and a half crore, he can just rent it from Driven. Nomura found this idea so good that they put $80 million into driven even before they bought a single vehicle. In this episode of the Founder Thesis Podcast, Marrow breaks down Jesus business of leasing assets using data. I'm your host, Akshay Dutt. Uh, Manav, you are the founder of Driven. Welcome to the Founder Thesis podcast. Um, we were just chatting that we're both from the same B school. Uh, so I will take liberty of uh, maybe doing a little bit of reverse ragging to you. Uh, let me start by asking you this. What's a question that you wish an interviewer would ask you?

Speaker A: That's a super good question. I wonder, where did you plagiarize it from? So listeners, I can tell you I told you exactly this, that this is my pet interview. In an interview, like I was telling you, 19 out of 20 people really struggle to answer that question. Uh, and I think the question that you could ask is that how is it different from being, uh, a corporate person for majority of your life and how is it different when you're a founder? I think that could be a good question to ask. I'm not sure whether you would ask that question or, uh, not, but that could be a good question to ask.

Speaker B: I will come to this question first. I think it's important for people to understand what is your corporate journey and what is your founder journey? Uh, first tell me about Driven, the company that you founded. What is it that you are building at Driven?

Speaker A: Okay, that's a good question. So at a very basic level what we do is we buy electric trucks and electric buses. These are large trucks and large buses, not the smaller ones. Uh, these are the buses which run intercity. Uh, you know that typically what your listeners would travel from Delhi to Bangalore, Delhi to Dehradun, those kind of buses, um, and large 55 ton of trucks. These are not trucks you would usually see on roads. And we lease them. Electric trucks and electric buses. And why do we do that? Because, because these are expensive products. People find it difficult to buy. So they don't buy and therefore the entire ah, transition towards electric vehicle gets stalled. Because these are the most, uh, these form factors are the highest emission, uh, trucks and buses. So that I said at a very basic level, we do. But that's not the only thing that we do because in that case we just become a typical financier or money lender. Uh, given that fact that electric vehicles are born with data and we believe that today's businesses should not be run the way previous businesses should run. There's a lot of data products that we create, uh, a whole lot of AI layer that we are creating. And we don't use the word AI just to throw, um, the word because everybody else does it. There is actually a significant amount of work that goes into that. And, and what does it do? Actually? It actually makes the product more efficient, last longer and therefore benefiting us, benefiting the guys who operate it and eventually the environment and the country. Uh, that's in short what we do. Akshay.

Speaker B: And I'll dig in deeper on this. I have a lot of questions to ask about this. But again, staying with the broad corporate versus founder question, uh, what was your corporate journey like?

Speaker A: I think the answer to that is twofold. One is, uh, um, what is it on the cv? Um, and secondly, what is it as a person? Um, so CV question is easy to answer. Got out of mdi, uh, during one of the worst Southeast Asian crisis, uh, and then got a job, multinational job. So one MNC to the other, MNC to the third, MNC to the fourth, MNC to the fifth mnc, uh, got into the private equity fund management space way back in 2006 I guess, or 2007.

Speaker B: Were you a finance professional?

Speaker A: Yes, I was a finance professional. Or I thought I would want to be a finance professional. Though I'm not sure how much finance you actually end up doing. Once you were mostly selling. Um, but yeah, so I was an investor. I've invested in bunch of companies or I have. I led funds which have know invested in bunch of companies. My last position as a corporate person was as a, uh, as the MD and head of India for uh, British International Investment, which is uh, the development financial arm, um, of the UK government. About two and a half billion dollars under management in India. So that was my last position. But I think the way that I actually like to answer that question is not how, how it was as a cv, uh, but how is it as a person? So growing up in the middle class background in India, uh, during partial Soviet era, uh, I think you do a lot of things because of the insecurity. Your fear of failure is your biggest driver rather than reaching out to success. Um, and that in Many ways inhibit you. Um, you're not allowed to lose a job, or at least during the times that I grew, you're not allowed to lose a job. You're a little failure. You know, you have loans and EMIs and so on and so forth. Um, so that I think is, uh, is worth talking more about rather than, you know, what did I do as a, as a career, uh, which, thanks Lord, was not necessarily a bad career. But yeah, that is, that is what defines me as a person.

Speaker B: So you're saying like the aversion to risk was like a core part of your DNA? I'm just wondering, uh, as an investor you are. I mean, investment is essentially about risk taking, right? Yes.

Speaker A: And therefore, you know, because you've been, um, you've been taught how to assess the risk, or at least you believe you know how to assess the risk. Um, a lot of that investment, uh, people may not talk about is actually being at the right place at the right time. Did you catch the cycle at the right pace at the right time? Um, but then a lot of it actually is about assessing and pricing the risk. Um, I used to tell everybody that we don't get paid to solve problems. Uh, any person with half decent intelligence can do that. What we actually get paid to is anticipate problems to be able to figure out what can go wrong. You know, what you spoke about risk and then to the extent possible, mitigate it. And finally, all things said and done, it's a lot about relationships. It's about winning the trust of your investing companies, uh, for them to open up to you when there are problems. Uh, as Indians or as investor investing communities, um, we tend to hide. Um, and if you're able to create a culture of openly sharing problems do tend to get socialized and solved rather than just keeping it within yourself. So, yeah, so that is, uh, but that doesn't take away from the fact that the overriding motivation is it should not fail.

Speaker B: Give me some examples of deals you did at British International Investment in terms of how you evaluated the risk around the deal. Uh, in know what's the investor lens, which a PE has. And I'll give you a little bit more context before you answer. Um, so I have, I uh, mean my show is called Founder Thesis and I typically interview a lot of founders. Um, you don't have PE founders as such who are really interviewable. So just by design or whatever. I've not really interviewed PE folks much. Uh, most of my investor interviews have been VCs. With VCs, what I have learned over multiple interviews is that a typical VC thesis is invest in exceptional founders. Um, I am guessing that that's not how a PE thinks to invest in exceptional founders. So I'm super curious on the PE investment lens versus the typical VC investment lens.

Speaker A: It's a very good question and I would uh, extend the journey or uh response to not only BII but, but when I was actually a GP Running Knee Fund 1 and 2. Um, so I used to say that

Speaker B: some context of knee fund as well. Like what's the background?

Speaker A: Okay, so that's, that's a, that's a private equity fund. Uh so first fund was about 500 crores. Second fund was about 1200 odd crores. Uh so BII because I was the head and MD, uh I was a couple of steps removed from directly interacting and assessing deals myself. You know there will be teams who will do that but when I was running the fund I was the fund manager and therefore a lot more um, hands on uh, decision making.

Speaker B: Would it be fair to say you were like the founder of new fund or what?

Speaker A: I mean in a manner of speaking though it was an institutional fund but I was the CRO and which institution? So it was a joint venture essentially between government of UK and a ah, step down subsidiary of State bank of India. The thesis was to invest in uh, climate and uh, development sectors. Uh, which made it doubly and totally difficult because you not only needed to find uh, founders who would go on to do well but also find founders who would be wedded to good governance, um, and wedded to actually doing good. Um so the subset actually became tougher and tougher. Uh, but we did well. Um, some of the, many of the. We did not lose money in a single investment. So there is no fatality. Uh, um, and that is perhaps where you started with the risk from uh,

Speaker B: what are some of the flagship investments?

Speaker A: So for example we invested in a company at a very early stage which uh, was creating green silos. Uh, these are these uh, modern silos, uh, that uh, store uh, wheat. Uh and typically it was stored in those fuddy, uh dirty old concrete buildings where there were 5 to 10% grain loss. Uh, you had mice which are the size of cats. Um, and then obviously it made no sense for India to lose 5% of their grain as wastage. So then these are modern grain silos. Um, another investment for example we did is in a waste platform. Uh, this company is called Blue Planet. Um, when we invested it was just a paper company and being founded by three uh, people with background in it. Uh, and here they are coming and saying that we want to create a waste management platform, uh, doing municipal waste and industrial waste. Um, and it's one of the most successful business, uh, now valued close to a billion dollar across Asia and other geographies as well.

Speaker B: Ah, but these are like Indian founders. This fund was investing in Indian companies.

Speaker A: Okay, yeah, it was Indian. Another one wherein we invested in a, in a biofuel company. Uh, again, young founders. Um, you know, and you know, they were, they were quite small when we invested in. Now much bigger. They, they're the market leaders and in uh, you know, in uh, way to energy projects. In um, you know, you know, a lot of these urban, uh, waste to energy and waste to gas kind of projects. Um, yeah, some of these that come to my mind straight up.

Speaker B: So these don't sound like typical PE investments if you're investing in the idea stage pre emf.

Speaker A: Yeah. So yes and no. So what we did is that being a risk. So it is partly VC and partly pe. Um, uh, intersection of that. Um, the construct does not change, however. Uh, so it's not always, you ask me, what is the thinking behind just not investing in great founders. Um, so there are essentially three or four things that really work. The first one is obviously the team that you're backing in and that could be a founder or that could be a set of people. Uh, but equally you invest, or I used to invest in Beta. Whereas how's the market moving? So even if you have an average founder, if the market trend is secular and you are able to back that market trend, then you know that you will at least make some returns and you will not have the fatality. Um, another example of this is a company that was more like a PE company was a company called SunSource where they were doing rooftop solar. And these are early rooftop solar days, uh, wherein people were moving from a grid solar to uh, commercial and industrial applications. Um, the second thing that you do on top of it is to, um, so you not only invest in the business, but you invest in yourself. So you say to yourself that the team that you're investing in starts falling short. Do you have the capability and the wherewithal to stand by the founders and give them the backstop, uh, to be able to help grow the business. Um, and that's what I believe made us different from anybody else. And I do believe that that is a role that private equity investors need to play. And that is not limited to just trying to get them, um, a better, uh, team and sometimes when I used to run fund of funds, lot of private equity funds used to come and pitch to us. And they say, my standard question is that what do you do for your portfolio companies? And some of them would say that we help them find talent, we help them put policies together, but that's just not good enough. Um, you actually have to spend time with those teams, those founders, um, helping thrash ideas, helping solve real world problems. And you are uniquely positioned to do that because you see problems across a portfolio of companies and some of them are common. And your ability to say, okay, in company A, we face this problem and therefore it has an application in company B. And I can give you an example, for example, what we found is that when the companies are relatively smaller, they don't necessarily go to a top tax firm or a law firm because they find it prohibitively expensive, um, to go to them. Uh, a very simple solution is that instead of them procuring a top law firm, top three law firm, you do it as a fund, um, and therefore you make those services available to your portfolio companies. The portfolio companies benefit because they get the benefit of the best lawyer, and you benefit because your portfolio, portfolio company is getting the best advice. Um, and the bunch of such examples you just said, it's just that you just have to work a bit harder, you have to work a bit closer, you have to have those relationships that uh, the companies actually come to you and talk to you about the problems. I'll pause there.

Speaker B: So, VCs operate with what is known as the power law, that uh, out of ten investments that a VC fund makes, they assume three or four will die. Uh, three or four will be average and there will be one or two which will be so exceptional that they will pay back the entire fund multiple times. Um, this is typically the formula for all successful VC funds. So from what I understand, you're saying that this, um, is not how a P fund operates in terms of being okay with one third of the portfolio failing.

Speaker A: Because I would actually, I mean, as a matter of principle, um, I would take exception to this very premise. Because you are, in building your risk, you are already saying that, you know, I am presupposing a failure. And I would say, why give it in so easy, work harder and harder and harder and ensure that those failures actually are not a failure either. Um, I mean, yes, I mean, market can turn, uh, you thought that there would be, ah, a certain business and there is a regulatory discontinuity. Or for example, you know, you would assume that oil was 90 rupees, and historically was always 90 rupees. And suddenly there is a war that changes things, uh, but things that are in your control. The question that you have to ask yourself every day, did you do everything in your power, uh, to help the portfolio company, or did you just, uh, because you had presupposed a fatality of 30, 40%, you let it go? Um, I belong to the former campfire. We say that each of those portfolio companies are important. I mean, you have 10 kids or you have five kids. You just don't say that somebody will not do well, and therefore you just let him be. And the person who's better in studying, you just back into her to study. Just try and give the best that you can for each of them.

Speaker B: I wish I had, uh, one of my VC founder guests here to argue back with you because I am sure, uh, they would very strongly object to that characterization. Uh, I mean, they are operating in a different asset class. I guess it is inherently, um, trying to find rocks, uh, which will get polished into diamonds, and some of those rocks will end up being only rocks. You're taking a bet, you're paying for 10 rocks, assuming some of them will be diamonds, and you do your best to evaluate them, but there's only so much you can evaluate by looking at a rock. Uh, I mean, that's how, uh, so, I mean, it's a different asset class, is what I would say.

Speaker A: In their defense, I don't disagree with the, with the idea. If you were to say that we, our risk appetite is higher and, uh, what is the point of taking a risk appetite if some of it does not manifest? Um, I do not have a problem with that part of the statement. Uh, where do I have a problem? That if you're in incoming premise or you're going in premise itself, is to say that, okay, you know, because I always believed somebody will fail, I let that fail. Where is. So hoping that your VC founders are not belonging to the category who accept failure easily. Um, I do hope that they're giving those founders who are struggling, um, enough and more support before they let them go. So just to take example of a rock, um, they did polish rock hard enough and long enough, um, and from each and every angle to see whether anything can be, uh, salvaged from the rock before they just let it, before they discarded it.

Speaker B: Got it. Okay. Okay. Okay. So essentially the PE mindset is, uh, founders, yes, but also market. You are, uh, underwriting a market, so you have to look at broad secular trends, uh, and, uh, you do Everything possible. Uh, basically a PE is not buying a ticket in a bus, which is typically the VC mindset that you're buying a ticket in a bus. Uh, a PE is the navigator of the bus to some extent. Not the driver necessarily, but sitting next to the driver and navigating the bus. So that mindset, uh, is completely different from a VC mindset.

Speaker A: Yeah, yeah, true. I think very well articulated. I think that's, that's probably where we

Speaker B: would think, okay, interesting. Uh, so, you know, you must have seen, uh, some, uh, uh, something which made you feel that taking the plunge, quitting your job is not that risky as it may seem to somebody else. Like you are an entrepreneur. But I feel like given your mindset, you have hedged your risks well, like whatever you have selected, you are fairly confident that it will work.

Speaker A: Yeah, I mean, I think that is a very incisive way of, uh, coming to the point. Um, the answer is yes, though the way I like to articulate it is that after a certain age, uh, the risk of risks become a bit lower. Um, so, you know, the inherent insecurity, so to say, goes away when you reach a certain station, um, in your life and therefore your ability to be able to take some risks become, uh, easier. Uh, fear of failure is less, uh, bothersome when in some ways you've already had success. Uh, but, yeah, but, but it would then be disservice to 30 years of working if you're not thinking through the risks and whether you have assessed the risk and um, uh, how you chose or how we chose, what product to focus on, how to focus on what scale, all that, uh, the whole business plan. Um, we do believe that it's fairly risk free. Um, and we do believe that it's got risk written matrix is fairly favorable there.

Speaker B: And which is also how you got $80 million funding at the idea stage.

Speaker A: Uh, yes, yes, pretty much the idea stage. Pretty much the idea stage, which is unheard of.

Speaker B: Right. The only other company to get that kind of money would be someone building a large language model, one of the, uh, foundational model, uh, AI companies.

Speaker A: Perhaps you're right. Um, but for me it's actually quite obvious. Um, uh, the model that we have works only with large capital. Um, it does not work, um, with smaller capital. And then it was for us to be able to explain to the investing community what, uh, is the risk for them and how is actually fairly mitigated, um, since the investment is essentially going into underlying assets. Uh, now what we have to now assess and figure out is how Are we managing and mitigating the risk on the underlying assets? Um, and I think that is perhaps where the years of experience that we've had as not only me but my other co founders and senior team, they um, come in and put together a business plan which we believe is fairly compelling. Uh, and anybody who spent some time, uh, would come to a conclusion that, yeah, um, it is worth backing.

Speaker B: How much did you dilute for this? 80 million.

Speaker A: It's not an answer that we could

Speaker B: give, but is it more than 50%?

Speaker A: I mean 80 million is what we announced. Uh, there were investments beyond this as well. Um, um, and dilution is something that we always look at because we will not be limiting ourselves to these fundraise. There will be subsequent capital raises also. Um, so we will have to, so to say, manage our capital stack in a manner that uh, that takes us ah, longer distance. Um, I personally am not, um, uh, I do not worry. And when I see some of the founders worry about dilution, etcetera, Um, I personally think that is overrated. The fear of dilution is overrated. Uh, I think if you have access to capital and you're able to build and take leadership, uh, subsequent rounds actually even out. Uh, so don't necessarily be worried about dilution so long as you are diluting or you're bringing on board the right kind of investor. I think that is far more important than, uh, just worrying about dilute. I mean I've met so many founders who think, well, we've diluted so much, do we have control left, etc. Etc. I mean, I think that's an overblown, uh, fear.

Speaker B: I'll be a little blunt in my question. Um, are you the CEO of a PE owned business or are you a founder of a startup? If you understand the difference between, you know what I'm saying, getting it here,

Speaker A: I'm totally a founder of a startup, um, or as a new business, um, and you know, we will subsequently be raising significantly large amounts of capital.

Speaker B: But you have significant ownership still in the business.

Speaker A: Yeah, yeah, we have significant ownerships in the business and my co founders have significant, significant ownerships in the business.

Speaker B: Okay, understood. Yeah, that's what I wanted to understand. Um, okay, so, uh, talk to me about, you know, you thought about the risks and those shaped the strategic choices. Uh, talk to me about those strategic choices that you made when you were forming your business plan.

Speaker A: So we wanted to do it at large scale, um, and uh, we wanted to do it in electric mobility.

Speaker B: Tell me why. Also for each, like why Large scale. Why electric mobility?

Speaker A: Uh, electric mobility because what we spoke about as a secular trend, uh, when the cost economics of electric mobility is higher than the cost economics of diesel mobility, uh, that clearly is a secular trend that you need to ride. Uh, so even if you had a mediocre business plan, I think that would uh, at least not lose money for anybody.

Speaker B: I feel like this, um, used uh, to be a given truth that electric mobility is uh, more economic. But I somehow feel like that sentiment has changed of late, uh, especially after Bluesmart. And you are in a way doing Bluesmart for like a B2B version of Bluesmart in a way.

Speaker A: Oh God, uh, I hope never.

Speaker B: Okay, Bluesmart was also like similar, right? Own the asset, right?

Speaker A: Yeah, but own the, yeah, electric.

Speaker B: Own the asset. I mean, what's the difference? You're like a B2B version, right? From that angle, if I look at those choices.

Speaker A: So in many ways, uh, that is what informed the choice of the product. Um, and I'll give an example that assuming you are doing commercial, uh, three wheelers, uh, that cost you about three lakh rupees, um, an electric bus costs you 1.5 crores as opposed to what

Speaker B: is the price of a diesel bus? What's the difference?

Speaker A: Say about half. Equivalent would be half. An intercity bus would be equivalent. Would be half. So now effectively you have to do 50 three wheelers for one bus. Now typically when you're doing a commercial three wheeler, electric three wheeler, you would do with the driver directly. When you would do with the bus, you would do with an owner of 20, 30, 50 buses. Let's just say fleet company. So assuming it's 30 buses. So effectively 30 times 50. So instead of 1500 clients, you have one client. Uh, so your ability to manage and um, track and uh, spread the asset becomes so much better and higher and therefore your own operating costs become so much, uh, lower. And that really informed our business plan. Uh, and uh, it is a known or accepted uh, truth that the larger is the form factor or the bigger is the uh, form factor or longer is the run, um, the better is the cost economics because obviously you are able to amortize it over a uh, period which is more favorable. And I can give an example, um, when and when you run, uh, a uh, diesel bus between the two cities, it costs you about 50 rupees per km. And this is before an impending rise in diesel prices. Uh, equivalent electric bus costs you 35 rupees. So that is 15 rupees per kilometer saving, uh, for running electric bus versus the diesel bus, a typical operator, runs about 2 lakh kilometers a year. So that's 30 lakh rupees. That is 2 lakh rupees times 15, 30 lakh rupees saving every year. Now, assuming it costs you 70 lakh rupees more, 75 lakh rupees more, that's two and a half years payback period. Um, so the total cost of ownership economics, as we call it, is so compelling. Um, and yet, because a truck, a bus, is one and a half crores, so you need to have the scale and the capital at that level to be able to play in that market. Now, uh, a typical.

Speaker B: One question I have about your calculation of economies, uh, like the economic benefit, uh, of electricity, uh, the resale value for electric vehicles is pretty poor, right? Because batteries, uh, die. It depends on how strong the battery is. Uh, does that factor into, like, does that change this calculation?

Speaker A: Uh, no, it does not. I mean, the answer, the perceived risk on the resale value of the bus is much higher. Um, when I talked about 35 rupees per km, it includes amortization of battery.

Speaker B: Okay, got it.

Speaker A: A, uh, typical battery would cost you, let's say 50 lakh rupees or 40 lakh rupees. Uh, and it will run at least the warranty will be for, say, 6 lakh kilometers. So that's about 6 rupees or 7 rupees per km of battery cost. If you just amortize it, uh, let's say the old battery, you can sell it for 15, 20%. Effectively between 5 to 6 rupees per kilometer is the battery cost. About 10 rupees is the cost of charging. So effectively 15 rupees equivalent diesel will be about 27, 28 rupees.

Speaker B: How are you going to 35 rupees then? This 15 rupees is what you just told me.

Speaker A: Uh, so this includes. So when I spoke about 35 rupees includes the cost of battery amortization, didn't

Speaker B: you just tell me it's 15 rupees, 5 rupees for battery, 10 rupees for electricity.

Speaker A: And rest of the other costs, the common costs also no. So common cost of driver, uh, uh, cleaning everything. So total cost. When an operator runs a bus, it's all the costs included. 50 maintenance, for example, tires, for example.

Speaker B: And the other costs are same across both. The only difference is the battery and power costs. The rest of the cost remains same?

Speaker A: Yes and no. Um, sometimes the maintenance cost for electric is higher because the number of people who provide that maintenance could be higher, uh, the toll costs or ah, the permit costs in electric are lower because uh, there is a uh, fee waiver. So that's about three lakh rupees a year. So about one and a half rupees will be the difference because of the uh, waiver in the permit. Uh, but just you assume that there is no government subsidy, etc, even then, um, it is 13 rupees maybe or 13.5 rupees, uh, which is better for running electric bus.

Speaker B: Got it. Okay, so why electric? You have answered, uh, let's go to the next question. You said large form factor. Also you have answered uh, with a large form factor, uh, the uh, two and a half year payback period. Am I right? Large form factor is what allows a two and a half year payback period, whereas on a three wheeler the payback period would be longer.

Speaker A: Yeah, I mean large form factor allows you to um, have a clear visibility of scale. So one and a half and you know, you can maintain lower your own, lower cost. I don't have to deal with uh, you know, 150 drivers, uh, or more. I just have to deal with one operator and if I'm doing a lot, uh, I can do a billion dollar book with about 500, 5,000, 6,000 vehicles. Um, and the other thing is that these buses and trucks last far longer. Uh, and every three wheeler we will have to replace every three years. So not only you have to replace, you know, you have to get those um, clients, you have to replace them every three years. Um, the cost is much higher. So that's where how we came to the electric trucks and electric buses. And why Intercity and not within the city? Because within the city is mostly government. Intercity is private. So you have an ability to play in the private market, uh, run a profitable business.

Speaker B: Okay. Okay. Uh, are these the only three choices that you had in front of you? Any other choices?

Speaker A: I mean largely these three, uh, we could have looked at becoming, uh, uh, you know, taking some stake in the, in the OEM market, um, that is we become the manufacturer, etc. Uh, but then, you know, a lot of people believe that you can just uh, you know, import a chassis, um, from China and put together something on it and you know, brand it and you believe that you can actually become uh, an OEM of some note. Um, the challenge there is that you create it and then the incumbents can come and wipe you out. Um, and we've seen that happen in multiple other form factors where you try to become big and you created the market and suddenly the old incumbent comes in and says, okay, thank you so much for creating the market.

Speaker B: Talking about OLA here.

Speaker A: Yeah. And therefore you create a moat in this. Now the same question can apply to us. Why cannot a Shiram transport or a State bank of India come and ypr. Um, and that's where the tech comes in. You create that layer.

Speaker B: So strong sdram M Transport is in nbfc.

Speaker A: Yeah, they're in nbfc.

Speaker B: Nbfc. Okay.

Speaker A: They're one of the largest, uh, you know, financiers, uh, of trucks in the country.

Speaker B: Are you also in nbfc?

Speaker A: No, we did not go the NBFC route. We are Asset core, which is asset holding company, um, for uh, multiple reasons. Uh, essentially the final reason is the access to capital. Um, we found it easier if we remain in asset pool and not go then BFC root.

Speaker B: I'm surprised, I thought, uh, NBFC root allows you access to debt as well.

Speaker A: We believe, uh, and my experience suggests that uh, access to debt will be easier were it to be an asset co. Because then the lender can look at um, an asset backed financing rather than an unsecured financing, uh, which would come in an nbfc, uh, book. Um, and then finally it will take for you to be able to get competitive, uh, pricing on the banks. And NBFC would require you to be rated fairly high. That means at least two or three balance sheet cycles. Um, as an asset co, you have an asset, uh, and you loan to value is fairly attractive, uh, for a lender to take a view.

Speaker B: Okay, so this was another decision on whether to asset core versus nbfc. So you went the asset core route? Yeah, uh, something like say I think there's Brookfield or something. I may be mixing up the name which owns warehouses in that. Like an Asset Core example?

Speaker A: Something like that. Yes, absolutely.

Speaker B: M. Okay. Okay, got it. Uh, okay, so any other choices? Uh, the Intercity, the form factor, the.

Speaker A: Yeah, largely. And because, you know, so if for example just we said that uh, for at least one client you need a 50 crore capital, right. 30 buses or um, 30 trucks or whatever. Now if that allows you to do capital as a moat also, um, so if you were to be funded through sea danger, you know, 1 million, 5 million, 7 million, uh, you cannot. So anybody who has to do it either has to do it at scale or they'll not be able to do it. So on day one, so to say you start with a moat, um, that smaller players or anybody who wants to start this market today, uh, will find it difficult. So Only very serious players can actually play in this.

Speaker B: This is essentially like someone like a Brookfield might have someday entered India straight away with this playbook, which instead of them doing that, you are doing this as a startup, that infrastructure holding, uh, company kind of a playbook. Uh, okay, very interesting.

Speaker A: So Brooke feels what you said. There comes our exit option in some ways.

Speaker B: Right. Okay. Okay, got it. Very interesting. Uh, so you were saying, how are you different than SBI, uh, or ASRI, Ram, uh, these NBFCs, which you, uh, were, I guess, going to talk about the AI and the data layer.

Speaker A: Yeah. So that is where a lot of data, uh, analytics comes in. Wherein, um, because EVs are built that way, uh, the amount of, uh, investment we actually put in that business is almost, actually $2 million, uh, putting up that data and, uh, AI layer. What it allows us to do is to manage the asset, um, in a manner that best optimizes its use. And one of the examples, I give it to everybody that when you go and buy a car, it says, get yourself service in certain thousand kilometers or one year, whichever is earlier. Uh, there is no thought, why should it be 10,000 kilometers? Your driving behavior may be much better than mine. Uh, so my car probably needed to get service at 7,000 kilometers and yours probably needed to get service at 12,000 kilometers. Um, but since I did not do it at 7, my asset life is reduced. And because you did it at 10 instead of 12, you actually wasted 2,000 kilometers worth of service, uh, period. Um, EV allows you to do that. It allows you to optimize and pinpoint. Because we, uh, collect about 700 data points, and at any point in time we know exactly the state of health of the vehicle. Um, so when should the preventive maintenance be done, when should the major overhauling be done, et cetera is then managed, uh, to optimize the asset health. And this is on the cost side. Similarly, we've done a lot of analytical pace on the revenue end. Uh, today we can talk to you and tell you revenue, total revenue collected on 90 routes. Uh, um, which route is profitable, which route is not so profitable, uh, what is the seasonality, um, where is an EV bus likely to do? Well, all that. So a lot of our clients find it useful to do their own route planning. Um, uh, with us, it's not that in any way we are undermining their commercial sense because they've been in the market for much longer than we have. Uh, but we do get data, um, and some of the elements they see is, um, quite revealing. To them also. And one of the examples that I keep giving is that it is a known um, adage in a trucking world that you make money on the return load. So if you're carrying load at one end and you have to bring that truck empty, it's less profitable than to bring a load back. Um, but then we have a use case wherein a uh, truck is running 280km one side, uh, loaded and they actually find it cheaper to bring back the truck empty, uh, because it reduces the duty cycle. The cost of operating the truck empty is much better than uh, uh, loaded. Uh, so you are able to optimize both the duty cycle, which is the revenue side and the cost side. And all of it is possible through data.

Speaker B: What is duty cycle?

Speaker A: The duty cycle is the time it takes for truck to load, go to the place, unload, load again and come back.

Speaker B: Okay, okay, okay, okay.

Speaker A: So the four hour saving because you're coming back uh, empty, um, plus the fact that you're saving some time on uh, some energy on running empty other than loaded, um, actually is about 15% better than to have returned with a 30% load. Um, and you can measure it because you have data.

Speaker B: Would this be true for uh, diesel trucks as well or in diesel trucks the cost of running empty and the cost of running loaded is the same.

Speaker A: It will not be the same. Uh, obviously empty will be lower. But it's very difficult to make that assessment going in. Okay, it will be more, it will be after a few years you may be able to make that assessment. But going in, can somebody make that assessment a, um, bit difficult. You know, they'll be doing the back of the envelope calculation and uh, but the adage will be that if you have 30% load, just bring it, just bring it. Um, but in this case you're optimizing, you're optimizing the fact that you don't have to wait for 1 hour for charging etc. Etc. A lot of that elements flow in. So now imagine this EV transporter is now competing with either another transporter who does not have this information or this analytics, or with a diesel, uh, operator. So obviously this, this guy has an advantage. Um, and as a financier, not many people think about this and that's why we believe that we, on day one when we envisaged it, um, and perhaps this comes from the original question, the risk mitigation, um, we thought through what will be the risk not today, but two years from now when they will be just taking your example, a brookfield consensus. I will do it at scale and maybe I'm more competitive than these guys at scale or I will buy the market share at scale. Ah, what will set us apart? What will set us apart is this huge ah amount of data and analytics that we would have built over two years.

Speaker B: Okay, correct me if I'm wrong. Um, the optimization on the cost side um, would and the optimization on the revenue side are basically ways to reduce npa. Like the number. You're a finance guy, you know so, so you must be looking at what number is this influencing? This is essentially influencing the NPA number. Or is there some other uh pricing metric which is linked to something? I don't know how do you price it and what these two things which you're doing to optimize cost and revenue, what else are they impacting other than npa? NPA means non performing assets which is essentially a transporter going under because they were loss making.

Speaker A: So two things. A obviously it uh, it helps make uh stronger underwriting. Um it also helps us create different underwriting products itself. So for example can we look at um seasonally varied rentals. Um but for us to be able to do that we need to be able to have a very strong data and historical background. Uh does it allow us to do um uh revenue share rentals? Uh but for that again we needed to have a very strong view on what the revenue performance is likely to be. And finally uh, we believe or uh we have a plan to uh flip some of them into products um some of them free which helps uh our lessees and partners to optimize. But some of them are going to be predictive in nature. Um accident predictions, uh, fleet optimization, um, driver ranking, uh, route optimization. Route optimization. So what if analysis. Uh some of them will be uh paid services which will also help us uh increase our revenue. We do at about 2 years time about 5% at least our revenue come will come from uh tech product than just uh plain vanilla uh rental model.

Speaker B: I don't know if you read recently there was this article about how I think maybe there's a double digit revenue contribution at Ether from software subscriptions.

Speaker A: Safe. There you go.

Speaker B: So I think electric uh form factor makes it possible. If you want Google Maps on the ather scooter screen then that's like a paid service and uh a significantly large number of ather customers are paying for software subscription. Uh not just the hardware. Uh so that's pretty interesting that you are also thinking along those lines. Um, I want to understand what is your. So you Said seasonal rental, uh, variation. Uh, why would you give a discount on a certain season? Am I looking at it the right way or is the right way to look at it? I will charge a premium in some seasons.

Speaker A: Yeah, both. So supposing an operator comes in, says, hey, uh, if I were to be taking a, uh, normal financing, uh, product, I have to pay the emi, but six months a year I'm really underwater. Um, so can you peg yourself at a level where I can make payments to you, um, during lean season, so summer and winter? Um, and the normal answer would be no, because you'll be taking significant risk because you'll be underpaid during the lean season for you to recover in the peak season. Um, but if you have the strength of data, you can actually sculpt your leases, um, to meet the requirement of the person who wants this. Suddenly your time becomes much, much bigger. Um, but you're not then, um, taking a risk on hearsay. You're actually taking a risk on your own. Data that you've collected and tested your

Speaker B: revenue, uh, is like a fixed monthly subscription right now.

Speaker A: It is fixed monthly subscription.

Speaker B: Okay, so when you offer someone this kind of a custom pricing, then you're making up for the discount in the low seasons with some premium on the peak seasons. And yeah, okay, but then you have

Speaker A: to be sure that there will be a peak season. And you will need to be sure what will that peak season be? Uh, whether they will have the wherewithal to make up on the peak season.

Speaker B: And this you would only know if you have peer level data like other people who are doing a Delhi to Chandigarh intercity route. Uh, what is their revenue like? But how do you get access to revenue, uh, someone who's running a Delhi Chandigarh bus service, um, how will you get to know how many tickets he sold in every trip?

Speaker A: So that in some ways is our secret sauce. There's a, um, lot of tech development that has happened behind it. Um, I'm not sure I can disclose all that. But, but, but yeah, we do have, uh, currently we have, um, on a daily basis, uh, 91 routes in the country for which we have uh, the entirety of data. So if you are a four rated bus, um, what would you be charging and you know, going to the next level that uh, what would you be charging if the tickets in a, in a bus which are higher rated than you are still vacant? Uh, and what you will be able to charge if, if this already filled, um, then that allows the data. No, see, data is such a beautiful Thing that once you have it, um, then it is just limited, uh, by your imagination. Um, so we've actually, I mean, when I started, we spent $2 million putting this together. Um, that's where it is. And it's just starting.

Speaker B: This is, um. I mean, I can only visualize two ways. One is if the fleet operators are consenting to have you do some API integration with their booking, like the Red Bus or whatever tools they use to sell tickets. Or if you have some sensor which detects how many people are on a bus at any given point of time or something like that. I don't know.

Speaker A: So let's say that, um, what, you don't know, you don't know.

Speaker B: But I'm guessing it's more of the former, uh, than the latter.

Speaker A: So one of these days, actually, we will invite you to our office and we have this large, uh, network operating center. And then you'll be able to see. Wow, man, this looks like magic.

Speaker B: Okay, good stuff. Okay, so, uh, I guess one of the choices also then is that to invest in tech or not, which clearly you have done this investment in tech, which allows two things. One is lower npa. Second is also the ability to convert more customers because you are able to do pricing which works for them. Uh, and probably they will be a lot more sticky with you. I'm guessing. There's not a business which sees any churn, right? Somebody who comes into you will stay with you. I wouldn't see why they would ever churn. Right.

Speaker A: Unless somebody comes and says, okay, I'll give you something which is far cheaper. I have equity to burn. Um, so don't worry about my profitability. Look at, uh, so, yeah, I mean, and we would always encourage those customers to say, no, why don't you try those guys out also? I mean, and then we will have our own exposure limit. We, you know, we, you know, we probably not be able to solve, um, financing need of every customer fully. And we are pretty much okay with that. What we want, we're very clear what profile of customers we want to work with. Um, what is the aspiration and ambition and, um, their own behaviors that we look at.

Speaker B: So tell me about these choices, the choice of profile of customer.

Speaker A: So, for example, we are very clear that if somebody is saying that I will just run five buses to see, we say that we not those guys. Because we believe that if you are running five buses, you are inherently, um, taking a far greater risk than if you're not running 20 or you want to run 20. Because, uh, your ability to redeploy across routes, assuming something goes wrong with one root stripe, flat, whatever, um, becomes inhibited. Uh, that essentially means going back to the starting of the discussion that you're assuming that you may likely fail. You don't believe in the model, you're just trying to dip and see because others are doing, are you doing out of fomo? Um, are you willing to put in that effort? Sit down with us, find a solution to your particular problem? Um, so those are the kind of people we're looking at. And mind you, these guys are not necessarily startups, uh, or founders. These could be legacy operators, uh, who've run buses for 40 years and some of them could be 60, 70 year old people with modern outlook. Sometimes they understand winds of change far better than younger generations. Um, and it's actually always refreshing when you meet people like those who actually not only learn from what we're doing, but also teach you a lot in the process. And we learn a lot from them because they understand the nuances. They actually understand that, you know, my bus will stop at this particular place in that Choraha and typically this kind of family will get on. And this is where, you know, this jockey is where I may get harassed. Um, so they're very, very knowledgeable people and yet they understand that there is a change happening. Um, you know, without giving names, I can talk to you about a few operators in South India. They came back and when we spoke to them, they said that, you know, we are worried that aggregators like Uber will come and, uh, wipe us out. And they said if we know so many, uh, taxi operators who said, oh, Uber and Ola are foreign phenomenon, they will not be able to be successful in India. We, you know, run these taxi shops forever. And suddenly they found themselves out of the job. And then they have come together and they said that we cann fight them alone. Let's come together, create an association, uh, because we want, we know that the EVS have to be done at scale. Um, and you know, we've been working with them for now, four months. Um, I don't know whether we will get a single order or not, but it's been a fascinating journey, um, where I think they learned from us and we in turn learned from them. Hopefully we will end up doing business. But even if not, it's something that, that's a very, very, uh, gratifying thing to see.

Speaker B: How do you acquire customers?

Speaker A: Uh, three ways. Um, one, a lot of manufacturers who have their own customers and who know they are looking their customers moving towards ev, uh, they refer their customers to us. Um two we have people uh on our books, uh, on our roles who been in this business. Uh so they go out to the customers and uh, explain to them either customers are already looking for solutions or we provide them a solution. This is what we call as boiling the ocean. It's a long list. We go to each of them. Uh and third there is a lot of inward inquiries which come because ah, through podcasts like you or others who hear about us, they reach out to us and say that we are looking for a solution. Do we have one?

Speaker B: Got it. Uh, tell me about supply. Supply of vehicle, supply of the asset. Um, does India have uh, OEMs who are uh able to supply? Because I, I do believe that I uh had interviewed Blue Smart founder uh two years back. Uh and one of the things he told me was that uh the big constraint in their growth is the fact that there's not enough supply of, of four wheelers that they can procure. And so they were planning to get into four wheeler manufacturing themselves. I don't know, you might be aware through Gensol there were some sort of a, there's some, some ambition to set up a four wheeler manufacturing unit because the supply was not there. I'm just wondering is there quality supply for uh, trucks and buses?

Speaker A: Yeah. So before I answer that question and that you know that's where the, the beauty of form factor comes in. Right. So for a billion dollar book, how many vehicles we need 6,000. So what is the supply you need 6,000 um, the entirety of the market needs in the next three years, what 30,000 or 40,000? Um the nuanced answer is that if you look at trucks and buses it's different, um trucks. Over the last one year we've seen the supply really come on board. So a year ago um, when we were and we said putting together our own business plan we were not sure whether uh there are enough truck OEMs uh of the size that we wanted the 55 tonnes. Uh but suddenly uh there are at least 8 OEMs that we are working with currently. Uh so supply on the truck side is not a problem.

Speaker B: And these are legacy companies or also startups?

Speaker A: Um, legacy companies. I mean there is a startup which is owned by a legacy company. So Murugapa Group has a, ah, has a truck manufacturing um so I'm not sure whether you call it a startup uh or whether you call it a legacy. So they don't have a legacy of creating large format trucks. So in that sense it Is a startup uh but it was bought by them but they do have significant ah exposure in mobility or electric mobility. So in that case it's a legacy company. Uh so the legacy guys all have it. Um there are a few startups also but just to uh be with legacy. So you have about eight odd um truck manufacturers or truck supplies plenty. On the bus side it is increasing um because a lot of bus supply currently is giving, going towards intra city and not everybody has an Intercity product um and not a product which has run enough kilometers for us to be comfortable with. Some uh of them have um and it is increasing. Volvo Aisha just launched a product. Tatas have a product now ah more uh geared towards Intercity. Uh you have bus bodybuilders who have now ventured into electric uh bus manufacturing. The Azads of the world, the Veeras of the world. Um so it is increasing I would say on the truck side it is perhaps a bit oversupplied today and in the bus intercity side perhaps a bit under supplied today.

Speaker B: Intercity form factor is different from Intercity because of uh yeah because of passenger

Speaker A: comfort and also design. Intercity typically also has sleepers, you know so the number of seats within the cities you want to maximize it could be 54, 60, uh Intercity is typically 45, 42. You'll have sleeper, you'll have sleeper seater. Um and even the design is uh a bit different because Intercity buses need to run much longer so wind resistance etc is a bit different. Also within the city we'll have lower floors um because you have you know multiple lightning and lightning uh Intercity product will be a bit different so the specifications are a bit different. The batteries are also a bit different. Intercity need to run longer uh, longer distances. They also need to have larger boot space which is not the case when you're running within the city.

Speaker B: So I guess we've covered most of the aspects of uh driven. Right. Is there anything that I have not touched upon? Yeah there's one thing I haven't touched upon, um, another choice which you would have made is people choice. Right? Uh, do you choose a co founder? Are you the solo founder? Uh what, what kind of team have you built or what are those choices

Speaker A: Like I think when you said that what is that you had not covered? I was going to say about that only. Um so yes, no I'm not the only co founder. I have two co founders. Um and what I also want to emphasize is that uh the last thing that people typically expect in a bus truck uh business uh are ah the number of women in leadership Positions. Um, so um, we are three co founders. One of them is more a funding ah, co founder out of Singapore. Uh, so Alpna and I are co founders here. So we have a woman co founder. Um, our head of credit is a woman. Our head of ops, um, is a fantastic lady who's actually spent time in manufacturing across three continents. Um so um, our board member is uh, an independent board member is a woman. She's a Danish national. Um, so the gender ratio that you typically would not find in um, any or most of the businesses in India and particularly uh, in a business which is trucking and busing, um, I think we're very, very fortunate to um, have that kind of talent come in work for us. Uh, it's just a very, very fascinating thing to see. Um, you know when I was in bii, when I was in at Neve, uh we used to speak about telling investing company that you know, look at gender ratios, look at, look at diversity. Um, and here we are not uh, not even by not even trying. We just got the best talent. Uh, and still we have so many uh, women at leadership position.

Speaker B: And how big is your team?

Speaker A: Uh, currently we are about 15. Um, we are likely to go up to 25 to 30 by June.

Speaker B: Amazing. Uh, extremely lean. And what kind of revenue will you do this year or what's your monthly revenue run rate or so?

Speaker A: Uh, we obviously cash positive. We are also a bit DA positive. Um, we will be about uh, about 180 odd crores revenue by December.

Speaker B: That ARR number you're saying, uh, it's

Speaker A: actually a derivative of aum, so you could probably take it at AUM m level, about 10. Basically the assets that we will have on our books, uh, between thousand to twelve hundred crores by uh, December.

Speaker B: And about 10% of the AUM, um, is what your monthly revenue is. Something like that.

Speaker A: But let's say closer to 15, 15%.

Speaker B: Okay, so about 100 to 150 cr monthly revenue by December.

Speaker A: Sorry. Uh, yearly revenue.

Speaker B: Okay, okay, okay. So about one, one and a half percent, uh on a monthly basis.

Speaker A: One and a half percent on a monthly basis.

Speaker B: Uh okay, so now let's come to uh, the, the funding part of it. Uh, with most people the question that how did you raise 80 million even before uh, like at the idea stage would give me some sort of like a hero's journey answer. But I feel like in your case that's not going to be so uh, you would have probably uh, had a very, very strong case for an investor. But I Still like to hear, uh, how you did this.

Speaker A: Okay, so what I say to myself and everybody around is first you have to believe. Um, and that's where we, most of us fail. Um, we tend to try and solve other person's problem or perceived problem rather than believe that there is a solution which exists. Now, if you believe in your business plan and you say that this business plan is so good or this business idea is so good that it will be attractive to an investor, rather than tell yourself, you know, how would you get funding of this size? You would say because it is so good, you would get funding. Um, the first really is believe. Uh, and once you believe, then you plan and you really plan. You go to a level of planning that should do yourself and people who you're talking to proud. So the question that you're asking, why this? Why not this? Um, what after this? Um, thrash it out, Thrash it out to the last detail. So we are very proud when you, when we say that, you know, our thesis has not moved an inch from where we were, uh, a year and a half ago when we had such little information with us. And then you execute. Uh, so first, and the most important part of this, in my opinion is first beliefs. Believe that it will get done, uh, and then you will find believers because you believed.

Speaker B: So you're saying if I had interviewed you, uh, pre fundraise, your answers would have been exactly the same as what you're giving me today?

Speaker A: My answers would have exactly been the same. Uh, even before the investment committee approvals that came, we had signed the leases for offices, um, because we believe that it should come through, you know,

Speaker B: Amazing, amazing. Some of your, uh, history would have helped, right? Uh, you as a PE investor yourself would have brought credibility to the table. I'm assuming you would also know how to package this. Uh, packaging is a big part of uh, getting an investor in. Right? Uh, or am I wrong in that about the importance of packaging?

Speaker A: I think overrated. Um, I think it is, you know, honesty is better. Um, yes, you should, you know, articulation is important, but articulation comes from planning rather than ad, uh, libbing. Um, and yes, I mean my own history and my co founders histories were very important. My uh, co founder, uh, MJ and Alpna are both institutions in themselves. Uh, so obviously it does help. But I would suggest to people that it's so much better to be honest and show the vulnerability rather than just be, show chatspa. You know, when some kids say that, you know, fake it till you make it, uh, or, um, you know, some of those phraseology. Um, I think perhaps a better way of doing it is to say that this is what we know and this is, this knowledge makes us believe that we will be successful. And in all fairness, this is something we do not know and we will figure out as we move forward. But what we know makes us believe that it will be successful. Um, and I do hope that people on the other side of the table, the VCs and the investors and the private equity folks who are evaluating those business models and those pitches, also look at it from that perspective. Everything does not have to be a shock tank, uh, kind of, um, packaged moment.

Speaker B: Ah.

Speaker A: Um, you just have an idea.

Speaker B: Yeah, the packaging differs based on the audience. That packaging of Shark Tank is for a different audience, but for a PE audience, packaging would mean, for example, very, very detailed numbers, you know, in terms of your forecast, your projections, uh, you know, down to very micro level numbers, being able to provide them with everything. Or if someone says, what will be your NPA after three years? And you have a number saying, this is our projected NP after three years. And here are the assumptions we have taken and here's what we feel and here are our competitors, NPA numbers and

Speaker A: absolutely, absolutely, there's a competitive number. This is the closest industry numbers. And why do I believe this number will be this higher than this, lower than this. And it's okay to say that higher than this. I mean, why not? I mean, just say it could be higher than this. Um, and if it's higher than this, this is the return we make. And if it is lower than this, this is the return we make. How much of our focus should be on the npa? And you know, I remember this conversation. Um, somebody said that, you know, how focused are you on your NPAs? Um, I said I'm more focused on my revenue today. And the reason I'm more focused on my revenue that if I reduce my NPA and I hope it's not being taken, Otherwise I save 100 crores. But if I focus on that revenue with that additional risk is thousand crores of revenue. So the risk return matrix today is such that uh, it allows me or it encourages me to take that risk, ah, for a thousand, for 100 crore NPA, for a thousand crore revenue. And it may, it may shift and you know, then at that point in time I would be focused more on this and which we are today. Um, so, yeah, so yes, detailed, you know, the second part of it, planning.

Speaker B: So uh, let me end with the question that we started with, what is the difference between being in corporate world and being a founder? Like, what did you have to change?

Speaker A: I think the insecurity piece. Um, now I do it because, uh, with all joy. Um, I don't think of failure. Um, I just think of success. You know, again, we have a, uh, statement in our office that we don't see walls. We just don't see walls. We just see doors. Um, and that's what has changed. There's just opportunities and possibilities. Um, it takes us to the three deaths, Dyno. You know, success.

Speaker B: Yeah, yeah, yeah, yeah, yeah. But, uh, wasn't there something which you miss about corporate world, or it's all been positive?

Speaker A: Frankly, no. Um, sometimes you miss, uh, the luxuries that you got as a slightly senior person in corporate world. The travel arrangements, and, uh, you come to office and for the IT services and everything is kind of, uh. You do miss that. Uh, but believe me, they're so minute, uh, compared to the joy that you get of creating something and creating something, which at scale.

Speaker B: Amazing. Thank you so much for your time, Manu. It was a real pleasure.

Speaker A: Thank you, Akshay. You've been super good at it.

Speaker B: Thank you.