Vehicle of change
Kamya Jaiswal November 29, 2008
EARLY START: He never made a business plan for his start-up. He refused a Rs 50-lakh funding for it. His first offices were the coffee bars of Delhi. And he does not earn a single rupee from his venture directly. But these are trifle abberations for a business that aims to upgrade the rickshaw segment by converting them into advertisement vehicles, launching pre-paid booths and using rickshaws to provide value-added services like courier delivery and sale of water. For an idea as different as this to succeed, Irfan Alam, founder and promoter of SammaaN Foundation, had to do things differently.
Some would say that it also takes different business sensibilities. Alam certainly has a claim to them. He was only 14 when he launched his first venture, Matins, a portfolio management proprietorship. “No, it doesn’t run in the genes,” clarifies the first-generation entrepreneur. It all started when Alam recovered the Rs 5 lakh that his father lost in the stock markets in 1991. His skills attracted the attention of his father’s friends. So Matins was born in 1994. Over time, the interest in managing others’ money faded. Matins is now headed by his brother. But Alam had found his calling in entrepreneurship.
On a hot afternoon in 1999 at Barauni, Bihar, Alam flagged a cycle-rickshaw to take him home from college and asked him for water. “He refused, saying it was too expensive to carry,” recalls Alam. His dormant business sense kicked to life—the rickshaw-pullers could sell water and juice to augment their income and the supplier could make a profit. Alam tied up with a distributor to supply mineral water at a margin of Rs 2.50 a bottle. He convinced two rickshawpullers to sell them for a commission of Re 1 per bottle. “They sold three bottles daily for one month,” he says. The business idea had passed his “litmus test”.
VALIDATING THE IDEA: Nevertheless, it did not take off immediately. “My parents persuaded me to complete my studies first,” says Alam. Meanwhile, he continued to research the idea. “In three years, I must have interviewed about 2,000 rickshaw-pullers,” he says. The mammoth effort proved invaluable as he discovered facts—nearly 90% of India’s 10 million rickshaw-pullers rent their vehicles and the rickshaw manufacturers are as unorganised as the rickshaw-pullers—that shaped his future business model.
However, even after he graduated in 2001, his family and friends were not convinced to contribute to Alam’s savings for the seed capital. Undeterred, he pursued his masters in foreign trade to add meat to his resume. It was his specialisation in entrepreneurship through a three-month programme from IIM Ahmedabad in March 2006 that taught him the intricacies of business. The confidence boost came when he won a television reality show on start-ups in August 2006. But Alam refused the prize of Rs 50 lakh. “The sponsors wanted a majority stake in the company, which was unacceptable to me,” he says.
SETTING UP: Alam conducted the first “proper” pilot project in Noida with 50 rickshaw-pullers the same year. “Incentives like health insurance and bank accounts convinced them to participate,” he says. For customised design, he approached a manufacturer in Delhi. It was during this brainstorming that Alam realised they were sitting on precious advertising space. The rickshaws could work as mobile billboards. He approached the marketing departments of various companies. “I met over 100 people in two months,” says Alam. Finally, HT Media and Bisleri agreed. In addition, the rickshaws also agreed to sell fruit juices, water and snacks. The rickshaw-pullers earned their fares, a commission on what they sold and a fixed share of the advertisement revenue.
The project was a hit. In late 2006, Alam received an offer of Rs 15 lakh for advertising biscuits of Priyagold through 200 rickshaws in Bihar. But he did not have any funds as he had exhausted the Rs 10-lakh loan from his family. His networking skills came to the rescue. An IIM professor was on the board of directors of Dena Bank. Alam made a presentation before the board. “They sanctioned a Rs 25-lakh loan without any collateral,” he says. Alam started building a team and a friend agreed to oversee the Bihar operations. “He hired people for supervising the company’s yards (where rickshaws are parked) and training rickshaw-pullers,” says Alam. SammaaN Foundation was launched in January 2007.
CHANGE IS CONSTANT: In one-and-a-half years, the client list has swelled to 12, including the Punjab National Bank (PNB), Idea and Airtel. The company operates in Bihar and Uttar Pradesh and will launch in Delhi by mid-December this year. SammaaN even received a Rs 25-lakh loan from the Indian branch of the Mexico-based Friends of Women World Banking in September 2007—Alam being the first male recipient.
His biggest challenge? “Training the rickshawpullers. They would misbehave or take off the branded Tshirts. This made the clients angry,” he says. Alam overcame the problem by involving the rickshaw-pullers’ wives. “We explained how discipline would increase their regular income by nearly 40%,” he says. Now, the women are involved in the business through a catering service. The biggest change, however, came when a telecom client withdrew its contract. “Nearly 60% of our revenue was gone,” says Alam. Thus began a hunt for ways to overcome this dependence. The answer was pre-paid booths.
SammaaN Foundation tied up with Bihar Tourism to use rickshaws at places like Bodh Gaya. Alam also realised that his specialisation lay in resource mobilisation, not in branding. So he has outsourced the advertising arm to Lowe Lintas.
WHAT NEXT?: The company has signed an MoU with PNB to expand to 100 cities by 2010. The bank is also funding low-cost houses (Rs 1.5 lakh each) for the rickshawpullers. “They will repay via equated daily instalments,” says Alam. The company too will be reinvented as SammaaN Ventures, with 24% equity reserved for registered rickshaw-pullers. “Currently, the company cannot declare dividends for stakeholders,” he explains. But this move is not motivated by personal gain: Alam doesn’t earn from the company, but from his lectures in business schools.
He is reticent about revealing his income, saying only that it is “very handsome”. He also doesn’t want to talk about the awards he has won for entrepreneurship. “These events are opportunities to make contacts. This is how SammaaN boasts an illustrious board of directors,” says Alam. A different perspective indeed.