This is pretty much the story of every heavily funded Indian startup. Revenues increase in multiple factors, but they increase due to heavy spending, thus taking losses even further. Ola –Uber’s fiercest local rival — has the same story.
Amid increasing competition from the ever money-raising, $70Bn+ valued Uber, Indian taxi aggregator Ola cabs witnessed an eight times increase in its revenues during 2014-15. However, the losses jumped by whopping 20 times during the same period largely due to cash burn associated with massive discounts and heavy incentivisation schemes for drivers.
Documents filed with Registrar of Companies (via Mint) showed that Ola recorded ₹418 crores in revenues during 2014-15 compared to ₹51.50 crore in 2013-14. But these revenues came largely due to an even increased cash burn to capture market share — a major issue plaguing almost every Indian startup. This caused its losses to increase to ₹754.87 crores from ₹34.21 crores in 2013-14.
Ola’s Good Times ?
Notably, this was the same period in which Ola raised money through two of its largest funding rounds. First one happened in July 2014 when it secured $41.5 million from Tiger Global, Sequoia Capital, Steadview Capital, and Matrix Partners. This was followed by a bigger round of $200 million which was funded by Softbank.
Towards the end of that period, Ola also carried out one of the largest acquisitions in Indian startup ecosystem by acquiring its Indian rival TaxiForSure for a staggering $200 million.
Last year in April, Ola again managed to raise money — this time even bigger than the previous ones. It raised close to $400 million from a clutch of investors including the likes of DST Global, Tiger , SoftBank, GIC and Accel Partners. The firm was valued at whopping $2.5 billion after that round.
Ola vs Uber
2015 was a year when VCs literally flooded Indian startup ecosystem with money. Such rapid was this money flow, that the overall funding ballooned past a staggering $9 Billion for 2015. 2016 however, has been completely opposite, with investors taking a cautious approach.
While Ola managed to somehow sustain its operations, Uber was on its way to rapid expansion not just in India, but globally. It expanded its reach to 21 cities during last year, riding high on its massive funding rounds, which continue to come its way even till today.
Although Ola did manage to raise another $500 million in November 2015, that paled in comparison to the constant inflow of cash by Uber into its India operations.
In fact, Uber executives had claimed to capture 40% market share by December 2015 as compared to just 5% market share in January 2015. More recently, Uber India CEO claimed that Uber had already claimed 50% market share in India.
However, despite its increasing losses, Ola has not shied away from indulging in a price war with Uber. It launched Ola Micro at Rs.6/Km and recently claimed that this particular category alone was set to overtake Uber in terms of the number of rides. Those claims haven’t been verified. In response, Uber also slashed prices of Uber Go bringing them on par with Micro.
At present, Ola is admittedly present in more number of cities than Uber. And it has also started expanding the range of its offerings to become a one-stop solution for road transportation. It recently launched its out-station cab service. It has also begun renting Ola cabs on an hourly basis to more effectively cater to demands of Indian consumers.
Last month, Ola came up with a luxury car line to allow its users to hitch a ride with cars like Jaguar, Audi or Mercedes.
These however, are a mere temporary substitute to Ola’s rather declining market share. While presence in more cities gives ola an edged, but that is the only aspect which keeps it ahead. And en edge like that, won’t really stay there for long, considering those billions being pumped into Uber on a regular basis.
Ola’s tech has come under repeated backlash from users and critics alike for being archaic and unmatchable to the smooth experience which Uber offers. Its navigation in particular — despite being powered by Google Maps — has been termed by many, as ‘good for nothing’.