A few weeks ago, I had an opportunity to speak with Reyasat Chowdhury, the always excellent Co-founder and CEO of Shuttle. Below is the transcript of our conversation, lightly edited for length and clarity.
The conversation is intellectually empowering in its entirety and we talk about the ecology of mass transportation, how mass transportation works, the B2B transportation market in Bangladesh, Shuttle’s model for affordable mass transportation, the state of Shuttle’s business, its ambition going forward, business building, and raising investment and much more. I thoroughly enjoyed doing the interview and I hope you enjoy it as much.
Ruhul Kader: We last spoke in June 2020. A lot has happened over the last one year. Pandemic drags on. You have raised a new round of investment. Your business and strategic direction have changed. Pandemic has affected your sector quite badly. Could you please give us an overview of Shuttle today — a comparison between what Shuttle was when we spoke last time and what Shuttle is today?
Reyasat Chowdhury: Even though we initially started as a women-only B2C service, we launched this new service called Shuttle for Business before the pandemic last year where we wanted to help organizations support their employees by providing them office transportation. We received a tremendous response for this new service at the beginning of the lockdown last year — 2020. We were just exploring the new product at the time and it was not fully ready yet. When we last spoke in June 2020, we were already providing the service to a few companies but we were not promoting the product publicly at the time.
We officially launched “Shuttle for Business” in August last year after the first lockdown and validated that there is a need for such a service.
Before this, people knew our service was only catering to women because we had only one product — Shuttle for Women. We changed our positioning where we communicated that Shuttle is a transportation-tech company and we have two products: Shuttle for Women and Shuttle for business. Shuttle for women caters exclusively to individual women. Shuttle for business serves businesses based on their needs. Companies can hire vehicles exclusively for women or all employees.
Since we actively started promoting “Shuttle for Business”, we have seen an increased demand for the product around this year’s lockdown. It turned out to be a great opportunity for us especially because a lot of companies were operating during this year’s lockdown. Although shutdown was a different case. Most companies had to temporarily stop their physical operation during the shutdown. Despite that, many companies such as banks, e-commerce companies, other essential product companies, and emergency services operated during the shutdown.
We had to make several strategic changes as we were not expecting the shutdown. We were planning to hire new people for our office and many of our deals were almost near close. Then shutdown came into effect and everything got delayed.
Good thing was that we also received a few new leads the day the shutdown announcement was made. Companies that needed to operate amid the shutdown reached out to us for our service.
We believe that we are a company that is not adversely affected by the shutdown or lockdown.
We had to make some changes based on the demands of our clients but our business is operating smoothly despite the disruption due to the pandemic and the shutdown.
Ruhul: That’s great to hear. Your Shuttle for Business is doing well.
Reyasat: We are focusing 100% on it.
Ruhul: In your recent fundraising announcement, you mentioned you want to become an affordable and accessible transportation solution for mass people. What do you mean by that? If that's the case, that changes everything about the Shuttle because as you mentioned earlier people knew you as a transportation solution for women before, and now you are no longer an exclusive service for women. With an eye on becoming a mass transport solution, this changes everything about your product and direction.
Reyasat: When people hear that we are a transportation company everyone thinks that we are similar to the popular ride-sharing services and that we are merely yet another new player in the segment. Whereas we are a completely different service. Our product and value proposition are different. We are looking to solve a different problem. In short, we provide safe transportation at an affordable price by moving more people with fewer vehicles.
Now, this could be a minivan, bus, sedan car, or any other small or large vehicle as long as the whole idea is that we are enabling groups of people to commute together. We saw that public transport is a huge problem in Bangladesh.
When the ride-sharing services came along, they solved transportation problems for a segment of the population but this segment is relatively small. How many people can afford private cars to commute daily? Some people can afford them for infrequent uses but most people can't afford them daily for multiple times. It’s unrealistic to think that regular people can spend 700-800 taka per day on transportation.
This is the segment we are targeting — mass people who cannot afford expensive alternatives for daily commute.
When we started working with mass people, we came to learn that different people have different needs. Businesses have different needs. Women have different needs. Regular office commuters have different needs.
We realize that a mass transport solution should cater to the needs of each of the segments separately. There cannot be a generic solution for everyone. That's why we work with different segments separately although our target is to work with mass people.
For example, we initially started with the women-only service. It was originally launched targeting female university students. That was our core target group at the time. Now that we are serving businesses, we serve both males and females. Our core target group for this service is companies that provide transportation solutions for their employees.
We are also launching a unisex service where our target group will be different. In a nutshell, we might end up having seven-eight services but we aim to help more people to move with fewer vehicles. We aim to provide an alternative solution to people who on one hand cannot afford ride-sharing cars and on the other hand, do not feel comfortable commuting on public transport.
Ruhul: I see upside in emerging mass transportation models if you could get into public transport — a kind of large-scale transportation solution for a large number of people. That's much more efficient and makes sense from all aspects. Anyways, when we last spoke, you were offering service in 10 routes in Dhaka and serving some 30,000 user base with a team of 76 people including trip managers and drivers. Could you give us an overview of the company today in terms of those numbers? What kind of coverage are you offering for your Shuttle for Business solution today and any other updates you would like to share?
Reyasat: When we last spoke, we did not publicly launch our B2B business yet so we did not speak about it. During the shutdown, our B2C service was on pause and we are just slowly resuming it now.
In B2B, we are now working with around 30 companies and the number is growing every month. Around 100 vehicles are operating right now. While we are mostly focusing on Dhaka, we are operating in Chittagong as well.
Ruhul: How do you work with your vehicle supplier partners?
Reyasat: We are connected with more than 500 rent-a-car companies. We have a network of individual vehicle owners from where we source vehicles as well. We mostly rent the vehicles but we have a few other models as well that we are experimenting with right now.
Ruhul: In terms of orientation, your B2B model is more customized. A business needs a vehicle, you provide it based on their needs. Your B2C was/is more open-ended and flexible to that end, anyone could use your app and book a trip if available.
Reyasat: Our model is based on utilization. The more we use a particular vehicle, the more return we get on the vehicle. Same for the B2C where we need to ensure occupancy of the vehicle. The full occupancy means we are doing excellent. Empty seats mean we are not doing so well.
Ruhul: You now have a B2B business. Once the pandemic comes under a manageable condition, which, given the condition of vaccination and other metrics, can happen early next year, you are going to reopen your B2C business as well. Based on your current strategy, your focus is going to be mass transportation. Cars and vans are of course options for mass transport. But buses also play a significant role here. Buses are the ultimate mass transport. So from here where do you see the Shuttle is going?
Reyasat: We are not stuck with any specific vehicle at all. We can use micro-bus, van or Bus, or sedan car. Based on the needs of our customers both B2C and B2B, we are open to using any type of vehicle. We will be using the best and most feasible options for our customers.
For now, our main goal is to establish the Shuttle for Business. By establishing, I mean not only creating awareness but actually serving more than 100 B2B clients in the next 12 months. That is the immediate goal and our main focus for now.
We want to be in a position where we are catering to the large organizations of Bangladesh and providing a good transportation solution. We want to position our product in a manner that companies will see it as an investment from an HR perspective for improving employee productivity and satisfaction instead of seeing it as a cost. This is going to be our focus for the next year.
As I mentioned before, we are slowly resuming our B2C services. We have been experimenting with the unisex service in the B2C segment for some time and now we want to scale it up. Obviously, we also want to resume the “Shuttle for Women” service as soon as the universities reopen.
Ruhul: Dhaka has several players in your vertical. There are new-age transportation companies and there are more traditional rent-a-car companies as well. What is your competitive advantage compared to other players in the verticals?
Reyasat: The biggest player in the sector is the rent-a-car companies who have been operating in this space for many years. A lot of the companies we want to work with already probably have vendors who provide them with rented vehicles for many years. Therefore, for us, the biggest competitors in B2B are the age-old rental companies.
We offer several advantages to the companies. The biggest benefit of course is the cost. Because of our business model, we can reduce 30-50% of the transportation cost for any company. That is the biggest value we provide.
Apart from that, we provide additional benefits such as managing transportation-related hassles on behalf of the companies. Managing employee transportation is a big hassle and many companies maintain separate departments for this purpose alone. In other companies, the HR department takes the responsibility for it.
We tell those companies that they can simply outsource these hassles to us. We take the responsibility to manage end-to-end transportation for companies. We also have our app and dashboards ready to make everything user-friendly. Users can communicate and track all the activities through the app. They can also book or cancel rides.
We also provide a dashboard to the admin or HR where they can have real-time visibility of everything from how many vehicles are on the road to who is using what, the cost, report preparation, etc.
Ruhul: How do you work with the rent-a-car companies?
Reyasat: We rent cars based on our needs and demands. It could be on a daily, weekly, monthly, or yearly basis. This depends on individual cases and demand for the vehicles.
Ruhul: Ride-hailing companies operate more like two-sided marketplaces where they basically connect riders and commuters. Riders get paid based on the rides they serve. Do you see yourself in such a position where you are doing the same?
Reyasat: It could be done. For that to happen, however, we will have to scale our model.
For now, we want to keep things simple on the supply side. We are working on the demand side and trying to establish the current model. We can always experiment with new models as we scale.
Ruhul: As you mentioned earlier, Shuttle for Business was not in existence even a year ago. The service, however, has grown meaningfully in the last one year. What are some of the things that have helped you to grow the business?
Reyasat: The first thing I would say is the value proposition we offer. We tried to understand the pain points of our customers before launching the product. As I mentioned earlier, managing transportation for people is a hassle for most companies.
We have tried to offer specific solutions to these challenges that companies face. I think that is the main reason behind our traction so far where our customers did not need to compare us with rent-a-car companies and instead they just feel that there is this new company that is providing us an amazing solution.
Ruhul: How does your marketing and communication work?
Reyasat: We use common channels such as social media, digital marketing, and direct sales. Initially, we did not have a sales team. As the business grew, we built an in-house sales team. We use social media to build awareness and direct sales to generate leads and close deals.
Ruhul: How big is your team now?
Reyasat: We are currently a team of around 60 full-time people. If I add our drivers and support staff, it is more than 150.
Ruhul: What are some of the major challenges for Shuttle now?
Reyasat: One challenge is pandemic. Everything is uncertain. We do not know when things will return to normalcy, when the lockdown will be lifted and whether we will see another surge in infection in the coming days. Even in normal times, it is hard for startups to plan long term. It is harder now because we do not know what is going to happen in the next few months. We are ready to scale and are already doing it to some extent but uncertainty lurks. If things change then how do we adjust? We are thinking a lot about these things so that we could adjust when things do change. One year ago, we were a smaller team and it was relatively easier to handle because of our size but adjusting with a larger team is an entirely different thing.
Second, B2B is a huge market. We have just started in this market and we want to prove to ourselves and our investors that we have built a product that has a market and we can scale it. I would say it is too early to say whether Shuttle for Business is working or not because 20-25 companies are nothing compared to the market we are dealing with. More than the challenge, we need to validate. We need to understand we are serving the customers right, and our product is the right product and we can be successful in this market.
Ruhul: One interesting intersection for you is that in most metros a significant percentage of the daily commute is people going to and returning from offices. To that end, if you are providing transportation solutions to companies, it means you are already serving a significant percentage of daily commutes in most metros, at least on the weekdays. There are other purposes of commuting but on weekdays, it is mostly office going people. To that end, what does the transportation market look like in terms of how many companies really provide or want to provide transportation services to their employees? Is there an appetite for it? How big is the B2B transportation market, etc? Could you shed some light there?
Reyasat: According to our calculation based on several factors, the B2B transportation market is about a 1.2 billion market annually. This is not Dhaka alone. This is the entire market of Bangladesh.
Ruhul: That’s a big market. What percentage of companies arrange transportation for their employees?
Reyasat: Almost every company with above 50 employees has some sort of transportation arrangement in place. It could be transportation for the employees, for senior management, for the CEOs and MDs, etc. That is what we try to understand when we approach a new prospect — what their requirements are and how they are operating at the moment. We try to provide a customized solution.
Ruhul: You have raised a seed-round investment recently. What's your experience of raising investment? What are some major challenges startups face in raising money? What are some lessons you have learned?
Initially, finding and building relationships with potential investors was a challenge. I had no idea where to look for investors or how to approach them. In March-April of last year, I put a lot of effort into learning and got in touch with a few key people who helped me understand the whole thing from where I did not have to worry much about connecting with investors.
As soon as I realized I could connect with an investor anytime, my main concern became whether investors would see Shuttle as a good opportunity to invest or not.
The importance of confidence cannot be overstated. Now I'm confident that I can connect with anyone and have a meeting. That has been the biggest change in the last year or two. The more meetings I had with potential investors, the easier it got. I would like to thank Accelerating Asia for this, the accelerator program that we were part of last year. We were able to connect with several investors through Accelerating Asia. We have not raised a great deal of money through Accelerating Asia. Working with them, however, I gained a good understanding of the process and the game of fundraising — how to connect, build relationships, and deal with investors. After I learned that, the rest of it got easier.
For me, the key takeaway is the importance of being connected with the right people who can teach you the process and the tricks of the trade. It could be an international accelerator program or an international venture capital firm. It is not something you can learn from talking to someone. Everyone has to go through this process and learn by doing it themselves. You have to spend a lot of time behind it. Initially, it would be challenging, but after a while, it gets easier.
Ruhul: From your experience, what are some dos and don’t of raising investment?
Reyasat: First of all, you need to be clear about your fundraising requirements such as how you want to raise money - equity, SAFE, etc. and for how long (the runway) you want to raise the fund.
You should not play around with valuation. In my opinion, one of the things we did right last time was to base our valuation on the market price. We were like, 'We're building this company and we want to raise this much money'. Then, we observed what kind of valuation people who wanted to invest were willing to offer. After that, we chose a valuation that we thought was suitable for us, as opposed to putting together our own valuation and explaining why it was justified. We realized that my valuation is what people are willing to pay. If people are willing to pay me a high price then that is my valuation and if they want to pay me a low price that is my valuation. It does not matter what my justification is. If an investor wants to pay you 5 million dollars and another 10 million dollars, I suggest you take the 10 million dollars and don’t try to convince the 5 million investor to make it 10. We found that was very important.
My suggestion for new entrepreneurs would be to decide on a valuation that the market is willing to accept and lock the lead investor as quickly as possible. Conversations with potential investors become considerably easier if you already have a lead investor and the valuation for the round is already locked.
Also, I think it is better to set your valuation at 75-80% of your actual value. It becomes a lot easier to lock in investments once you do that. If I want to get the highest valuation in the market, it will shrink the investor pool for you. The deal would not be lucrative for investors. Instead, I wish to offer an investor a deal in which he would feel he is getting a great deal at a great price. By not haggling with valuation, you can raise money relatively quickly, which has many benefits.
Preparation is very important. Preparing your data room where you have all the relevant information in one place is super useful. For example, you meet an investor and he wants to know more about your company. If you have a data room with all your data and all the details in it, you can simply send him the link to the data room instead of preparing documents one by one as the requirements come.
For example, investors may ask for your pitch deck, financial model, and legal documents. If I send these documents one after another, the process gets lengthy and complicated. However, if I can share a link with the investor right after the meeting where he could find the details and everything in one place, it makes the entire process easy and quick. At the same time, investors also get the vibe that this person is prepared for fundraising.
Also, thinking about the shareholding structure from day one is very important. The first investment you are raising, the terms of the deal, and its implication — these things are important for your later stage fundraising.
In the early days, I used to think that getting money was everything. But now I understand this is not the only important thing for the business. Who are your previous investors, how much equity did they take, how much do the founders own at the moment, where is your company registered – all these things play a very important role when you want to raise a new round of investment.
Ruhul: Now you have raised money. I understand your priority for this year is establishing the Shuttle for business. Apart from that, what are some of the goals for the next few years?
Reyasat: In the early days, we did things as they came. We did not focus much on systems and processes. In the next few years, my priority is to build systems and teams in a manner that would allow us to scale exponentially without operational debt. For example, if I don't have a data team, I would not have a proper understanding of what's going on in the company and if we don't have a product team, we would not know how and when to do things. We will operate inefficiently.
We are now trying to build our team and structure the company in a way so that we could scale the business easily. That is our priority for the next two years.
Ruhul: Any final takeaway or lessons you want to share with other founders.
Reyasat: For early-stage founders in Bangladesh, the most important thing I would say is knowledge. Startup is a relatively new thing for us as a market. As a result, it is not easy to get the proper guidance on how to start and build a startup in Bangladesh.
For example, there are things about fundraising such as raising in equity, or SAFE, registering abroad vs registering locally, and so on. I did not know these things when we started and I had to struggle a lot for that. Hence, my suggestion for aspiring startup founders: spend a significant portion of your time gathering the relevant knowledge and continue learning.