Greg Moran and David Back always had a strong passion for India, dating back to their time together at University of Pennsylvania where they pursued a course in International Relations. Both had a strong group of friends here too. “This helped us gain an early perspective on India. Post-school, we began focusing on sustainable enterprises,” recalls Moran.
Moran, 27, and Back, 28, considered the idea of a membership-based self-drive, car rental service. “I spoke with Moran about starting a car-sharing (as car clubs in the US are called) company abroad, taking a business model that worked in developed countries to developing economies,” says Back.
After extensive research, they concluded that India was probably the best country worldwide for car clubs. Back says they were shocked by the absence of such a service in India.
Back and Moran felt Bengaluru’s population demographics was best suited to the concept and thus launched Zoom Inc., in January 2011. But even before they got started, they hit a road block. While executing the project, the duo realized the Indian government has a stringent law governing self-drive car companies. It stipulates that an entrant must start with a minimum of 50 cars and have five offices across the state of operation. “Given that we are a startup, this was naturally difficult to meet,” says Moran, CEO, Zoom. Back serves as the President of the company.
Heavy brainstorming led to a solution. They struck a 70:30 revenue-sharing partnership arrangement with Ramesh Tours and Travels, a local car rental operator in Bengaluru, six months ago which allowed them to leverage the name for initial operations. This ensured that Zoom had complete insurance on all cars and total protection under regulations.
Ramesh Tours has acquired seven cars for Zoom in their name which enables the startup to leverage necessary regulatory requirements. “We found it a unique concept for Bengaluru. We partnered with them as we think the service will work,” says Ramesh Babu, MD, Ramesh Tours.
Moran and Back have spent the last two years on market research, general due diligence, developing backend systems, in-car features, and the website. By the time this issue of Entrepreneur is out, Zoom would have formally launched operations.
Providing a choice
Zoom works on a membership-based model offering self-drive cars on hire, either by the hour or by the day without any rigid hire packages. The average price to rent a car would be Rs. 180-Rs. 225 per hour. An integrated booking and billing platform lets members reserve a car through the website or a mobile application, but only on advance payment using a credit or debit card. “Our service is designed to be hyper-local and will allow members to access cars that are within a short walk from their place of residence or work,” explains Moran.
Each Zoom car will be equipped with a seven-inch tablet to help with navigation, also pre-bundled with the mobile application if members need to extend their reservation. “We are helping people deal with traffic and parking problems by providing real-time traffic monitoring solutions in the vehicle’s navigation system,” explains Moran. To ensure hassle-free parking for members, Zoom will partner with various establishments across the city, like shopping malls, to provide dedicated parking spots.
Back and Moran say they are keen to solve the lack of choice in personal and private transportation in Indian cities with a simplified service, better distribution and using advantages of technology as an enabler. They want to bring the benefits of car ownership to countless Indians who do not wish to own a car but would like to access it on select occasions.
Making it work
Zoom’s customer profile will vary depending on the location of its vehicles. “For residential complexes, we expect to attract a customer belonging to a family owning one vehicle, where other members too know to drive. In most instances, they will need a car, for more than a few occasions a month. We found that they would like to have access to another car,” says Moran reiterating the market opportunity for Zoom. “Often their buildings do not have parking for a second vehicle.”
At university campuses, Zoom will target graduate students with disposable income as well as college faculty. Hotel guests and corporate employees are another potential customer base for the startup. It will be adding luxury vehicles to its fleet and has tied up with German automobile major BMW for the same. Zoom expects to launch this service by July 2013.
Zoom was bootstrapped till the summer of 2012 when it raised its first round of capital funding. “We raised funds from various high net worth angel investors in the US, including Empire Angels,” says Moran, who mentioned they secured over $100,000 in initial funding from these individuals.
Graham Gullans, Founder of US-based Empire Angels, says he invested solely betting on the team and corporate partners. “Greg and David were able to accomplish a good deal while living in the US and hit the ground running when they moved to India. We are glad we invested early, enabling them to launch quickly,” says Gullans. While there is no credible study, industry veterans and operators say the car rental industry in India is valued at Rs. 15,900 crore and growing at over 10 percent annually. Over 95 percent of this segment is unorganized and a large section is chauffeur-driven. “We view the market as still largely undefined since a service like Zoom has never been introduced,” says Moran. Zoom is targeting revenues of more than Rs. 10 lakh in its first four months of operations starting February 2013 with seven customers till date. Moran claims their long-term goal is to touch Rs. 500 crore within the next few years.
“Zoom needs to target other large markets in India once they prove their business model in Bengaluru. It can be easily scaled up on successful growth but needs to watch out for competitors,” foresees Gullans. The company is looking at Delhi and Mumbai as expansion targets. “Doing business in India is certainly chaotic. I like dealing with individuals, and find larger organizations quite difficult. For all the difficulties, it has also been rewarding. Starting Zoom has unquestionably been the hardest thing I have ever done and we are just beginning,” says Back.
© Entrepreneur India March 2013