Transcription
In FY-2023, India spent more than 14% of its GDP on logistics costs. And for context, this number was 10% in the case of China and 7-8% in the case of developed countries like the US and Japan. This shows how inefficient and expensive the Indian supply chain is when compared to more productive nations. Even countries like Vietnam and Thailand rank better than India when it comes to the Logistics Index, and this sometimes makes these countries an attractive option for companies to do business in, compared to India.
Now, it's not that the government is not doing anything about it. The current government had, in fact, launched a national logistics policy in 2022. And one of the aims of this policy was to reduce India’s logistics cost from 14% to 8%, something that will help India compete with developed nations. Now the government can only make policies. It's up to the private sector and startups to make use of them and build businesses. And in this video, I want to talk about one of the fastest-growing logistics companies in India. A company whose founders were inspired by Uber, and how it organised a heavily unorganised sector of taxis. And Porter is trying to do the same with the last-mile logistics in India. It is going after a 200 Billion dollar market. And in this video, we will talk about its origins, struggles, and big future ambitions.
To understand Porter, we first have to understand the problem it is solving. Intracity Logistics. It is basically the transportation of resources inside a city. So if you as a business owner, or a regular customer, need to send a package to someone inside the same city, it is called Intracity Logistics. And the thing about logistics is, it determines how efficient an economy is. So the cheaper and faster it is to move goods inside a country, the more productive it is going to be. Something that I talked about earlier in the intro.
In 2024, 90% of India’s logistic sector is still unorganised. And this situation was even worse 10 years ago before two college friends from IIT Kharagpur decided to start Porter. And the problem they were trying to solve was this; Let’s say you are a small business owner in a city like Bengaluru and you want to ship your product to your customer. The first thing you would do is pick up your phone and dial all the logistics companies in your area to get a quote. Now, many of these delivery guys won’t be available. And if you get someone, they will charge you a bomb. And the reason for this is that, because the sector was so unorganised, these delivery people would only get 1-2 deliveries a day, and hence it became expensive. You then negotiate with them and agree on a price, but then there is another issue. Tracking. Since this arrangement is just over the call, you will have to continuously call the driver and track your package. So, firstly it was hard to find a driver, then the rates were too expensive and on top of that the delivery was mostly not on time. This is what you had to deal with as a small business owner. And the story is very similar if you are just a customer, and want to move any package to your friends across the city. Companies like Delhivery tried to solve this problem for intercity logistics, but no one solved it for intracity.
And, this problem which I just explained, was very similar to the problem of cab booking at the time. You had to go through a similar process before Uber came in. And this is precisely what inspired Uttam Digga and Pranav Goel, the founders of Porter.
In 2013, Uttam and Pranav worked as analysts at JP Morgan in Mumbai. This was when they had first heard about Uber. The fact that how a startup used technology to solve the inefficiency of the entire ride-hailing industry really inspired them. See before Uber came in, the ride-hailing sector had the same problems of non-availability of cabs, higher fares, and no quality checks. And Uber, by building a marketplace, connected both drivers and customers on a single platform. And so now customers got cheaper cabs much more easily, and drivers got more rides on a daily basis. And Uber out of it got a nice commission, a win-win for everyone.
Uttam and Pranav were so impressed by how Uber had solved the problem of vehicle underutilisation that they wanted to find other industries where they could do the same - increase asset utilisation to decrease costs for customers. One day, Uttam on his way to the office saw many small trucks or light-commercial vehicles parked on the side of the road. He realised that there was a problem here to solve. The founders then talked to more than 500 truck drivers. They then realised that these truck drivers and small business owners were facing the same issues the drivers and customers were facing in the ride-hailing industry. These drivers were only getting 1-2 orders a day when they could do 4-5 orders. Basically, they were only at 30% utilization of their vehicles- this was highly inefficient. And this inefficiency was leading to higher costs. They wondered - “If Uber can move people efficiently, why can’t we move goods efficiently?” - which was actually an even bigger problem. This idea led to the birth of Porter.
Both Uttam and Pranav quit their jobs and started Porter to create a marketplace to connect truck drivers and their customers. In the beginning, it was just Uttam and Pranav. And so they divided the roles between themselves. Uttam would go on to the field to onboard truck drivers. And Pranav would get on the call with small business owners and anyone else who needed trucks to move their goods. Once Pranav would get a lead from the customer, he would connect him with the truck driver. And in the early days, they were doing this just with a phone and Google Sheets. There was no app or algorithm, which matched the drivers with customers. But once rows in the Google sheet started getting longer, the founders realised that it was not sustainable, and they needed a third co-founder, who would build the tech for them. And so the duo brought in Vikas Choudhary as their third co-founder. Pranav had met Vikas when he was in Kota preparing for his IIT exams. Later while Pranav went to IIT Kharagpur, Vikas had gone on to IIT Kanpur. And so now, Vikas was tasked with building their technology platform. And Uttam and Pranav continued to build the supply and demand side of Porter.
What’s interesting is that when they started Porter, their only pitch was - “book from us, we are 20% cheaper”. And this pitch worked. In less than a year, Porter had more than 500 business customers. They processed more than 3,000 bookings a month and had a monthly revenue run rate of 30 lakh rupees. And all this without any app, they just had a basic website and a phone number to take orders. This shows how much the industry needed a solution like Porter's. In fact, even the company Delhivery was using Porter to do intracity deliveries for their customers. This early traction helped the company raise 500,000 dollars in their seed round and then 5.5 million dollars in their series A round in just a span of a few months.
So now, their idea is validated, they had money in the bank, and all they had to do was focus on growth. By 2015, almost 1 year after their start, Porter’s app was ready. They had money in the bank and the founders felt like they could do no wrong. But the company at this time, started suffering from something called ‘too much money’ in the bank. You see, many young startups, once they raise a lot of money, they open a lot of verticals to grow fast, and this ultimately becomes a reason for their demise. Ed-tech companies during the pandemic are a great example of that. Porter at the time, did the same. They were available only in Mumbai and the NCR region at the time and hadn’t figured out their existing intracity model properly, but they jumped the gun and also started doing intercity logistics. A sector that was already crowded with big players. This was the time of the funding boom in 2015, and the founders realised that they would continue to raise money in the future, so, they hired 50 new employees for their upcoming intercity logistics vertical. But, things didn’t turn out as planned. Before they could start earning revenue from their new vertical, the markets had turned bad, so raising money became difficult. And so, to survive, Porter had to shut down their intercity logistic vertical and let go of all the 50 people they had hired.
Their next trouble was the stagnation of growth. Remember their initial pitch, “Book from us, we are 20% cheaper”, well this pitch wasn’t working anymore. It did help them get an initial set of customers, but now, the price advantage wasn’t enough to bring in new users. Porter had to up their game. To make the experience for their customers better, the first thing the founders made sure of was that the truck drivers were reaching the customers on time. Next, they made sure that the deliveries were being done on time too. By now, they had an app, and so they were able to track the movement of every truck driver through GPS. And this information was available to their customers as well. On top of that, Porter’s team would constantly check in with the drivers to make sure there were no delays. And in case there were delays, they’d assign a new driver.
Next, the company focussed on customer efficiency. Since the industry was highly unorganised and drivers were known to be late, the customers too were not incentivised to be on time either, and this led to longer loading and unloading times. So to fix this problem, the company started charging a per-minute charge at the loading and unloading stations, so now if a customer would take longer than expected, they would be charged for it. And just focusing on these key aspects, Porter was able to make their operations efficient. Their customers were now getting timely delivery and trucking partners were happy too. This level of efficiency was unheard of in the Indian market at the time, and so Porter saw a huge growth in their customer base. And now that the number of customers increased, Porter was able to solve another key problem. They now started enabling truck drivers to get deliveries on their way back, making sure their trucks didn’t return empty. In fact, Porter claims that 80% of their drivers now get deliveries on their return trips, which increases the driver’s earnings by 20-30%. This is beneficial for both the drivers and the customers - for customers, it means lower costs. And for drivers, it means more orders leading to higher income. Porter was offering premium quality service to its customers at low costs.
In 2018 in fact, Mahindra Group decided to merge their own logistics platform SmartShift with Porter and invested 10 million dollars in the company. After becoming the biggest player in truck deliveries, Porter launched their two-wheeler parcel delivery service in 2020. And in just two years, they had beaten Dunzo in Bengaluru, a company that had been in business for 8 years. Since then, Porter has raised another 100 million dollars in their series E round in 2021, relaunched their intercity delivery service and expanded their presence to 20+ cities. In FY23, they earned 1,750 crore rupees in revenue. And despite this huge scale - what’s truly impressive about Porter is their quality of service. Just look at their ratings on Google Play Store - more than 6.5 lakh people have rated their app and they have a 4.8 rating. The experience of people is overwhelmingly positive. We did a short about them a while back, and the comments were full of positive experiences of people who used their service. Sure, there could be some negative experiences but for a company at this scale - the quality of their service is truly something for other Indian startups to strive for.
Now Porter’s founders haven’t said much about their future ambitions, but they have a massive opportunity ahead of them. Intracity logistics industry alone is a 40 billion dollar (3.3 Lakh Crore Rs) market in India. And their current revenue of 1,750 crore rupees is just a drop in that ocean. Next, as I mentioned earlier, they have relaunched their intercity service, and that’s a much bigger opportunity. It is worth over 200 Billion dollars in India. In fact, more than 87% of India’s logistics spending goes to this intercity logistics space - so it’s not surprising that they want to enter this market. For Porter, their USP is cost-effectiveness and timely service, and these are the most crucial factors to succeed in the Indian market. Right now, India spends 14% of its GDP on logistics, but as India moves towards becoming a developed nation, this has to become more efficient. Porter with a well-established intracity model, will try to replicate their learnings in the intercity logistics market too.
Along with being efficient, Porter is also getting clean. I mean their deliveries are getting clean. They already have 1000 EVs in their fleet and had recently signed a deal with OSM to add another 5,000 EVs to their fleet. And what’s interesting here is that Operating an EV is cheaper than operating a petrol vehicle. So this is great news for the company too.
Next thing that I feel could be a great opportunity for Porter is drone deliveries. And before you dismiss the idea, you should hear me out. Drone deliveries are already becoming a reality in countries like the US - Google’s Wing has completed more than 350,000 deliveries and another startup Zipline recently completed a million deliveries. Even though India is at an early stage in the drone delivery business, we still have a lot going on. Just recently, Zomato-owned drone delivery startup TechEagle completed a 47 km long journey to deliver medicines in just 34 minutes. This was done is the secluded hilly regions of Uttarakhand - a journey that would have taken 4 hours by roads. We’ve been talking to the founders in the Northeast regions for our videos and one complaint they usually have is the lack of road infrastructure which leads to longer delivery times in these regions. And for companies like Porter, this is a big opportunity to put drones to use.
In the end, I just want to say that the journey for Porter has just started. As the GDP of India grows, logistics companies like Porter will be the direct beneficiaries of it. And someday I want to see, an Indian company in the leagues of logistical giants like FedX and UPS. Let me know in the comments what Porter needs to do to get there. And also, what has been your experience using its services? Good or bad, write it down, and I will see you in the next one.