Issue #14. Solving Public Transportation in Pakistan
Exploring how BusCaro strives to make commuting safer and more affordable
Hello dear reader,
Two pieces of news: First, for now, I will focus on discussing startups that are not that well-known. Second, I’ll take a break for a week—I’m swarmed with work.
If you like this newsletter, please share it with a friend.
Pakistan’s in-city transportation is not great. Karachi, the country's largest city, has the world's worst public transport system, yet 42% of commuters still use it. People often ride on bus roofs to reach their destinations. Karachi needs 15,000 buses, but only has 1,029, leaving over half of the city’s public transportation needs unmet.
Aside from roof riding, other issues persist. The average monthly salary in Pakistan is under $170, and commuters spend between 20% and 50% of their income on transportation. With Pakistan’s economic challenges, fuel prices are rising sharply. From August to September, fuel prices increased by 20%. Moreover, ride-hailing apps, such as InDrive, have unfair bidding practices, and the riding environment for women is unsafe.
Private companies attempted to address the transportation issue. Swvl and Airlift, the main players, have exited Pakistan, with Swvl focusing on other markets and Airlift shutting down. The pandemic was one of the reasons, but both companies also struggled financially. In 2020, Airlift pivoted to grocery delivery without success, and Swvl left Pakistan due to unprofitability.
Then BusCaro emerged.
The company
Maha Shazad, the founder of BusCaro, is a former Swvl employee. She believed so strongly in her vision that she launched BusCaro the next day after Swvl exited Pakistan. On the day Swvl announced their exit, she received approximately 1,000 messages on LinkedIn from people concerned about losing their safe and reliable way to travel to work.
BusCaro aims to address these concerns by creating a transportation solution that is safe, reliable, and affordable, thus improving the experience for both riders and operators. Fundamentally, BusCaro’s user experience is akin to Uber: you book a bus ride, track the bus’s arrival, and then hop in. The key difference is that BusCaro’s buses run on fixed schedules, not on-demand. If there’s enough demand, a new route is launched. Passengers can either book a single trip or buy a subscription, which is most common among regular commuters.
Safety is another crucial aspect of BusCaro’s service. Addressing the severe security issues of public buses, BusCaro collaborates with a security team, implements a rigorous driver verification process, conducts regular bus inspections, and maintains 24/7 emergency teams. There's even a panic button in the app.
The business
BusCaro operates with two business models: B2B and B2B2C, with B2B driving the margins. The models differ in their revenue streams:
In B2B, BusCaro provides clients with a bus and is paid regardless of occupancy.
In B2B2C, the company provides clients with seats and relies on high occupancy rates to be profitable.
BusCaro doesn’t own any vehicles. It rents buses and drivers for a fixed amount and also covers the fuel costs. While the company offers car services, they are not its primary focus.
A potentially intriguing part of BusCaro’s business model is its approach to advertising. From the beginning, the company has been earning revenue through advertising. However, the scale of this advertising segment is not fully known.
BusCaro makes money through advertising, but doesn’t advertise itself. Instead, it gains users through collaborations, targeting coworking spaces and offices in specific areas. By gathering user data and offering tailored services, BusCaro not only saves on marketing costs but also builds a predictable demand.
The numbers
In February, BusCaro recorded 13,000 daily bookings, which increased to 20,000 by November, serviced by over 300 buses. The company has reached $2.5 million in revenue.
As of May, BusCaro was already profitable on an EBITDA basis in two of the three cities it operates in. The key to this profitability, surprisingly, lies in its low pricing. According to Maha Shazad, BusCaro’s fares are about half the price of a rickshaw and a quarter of ride-hailing services, though slightly more expensive than regular buses. This pricing strategy does not see BusCaro competing directly with public buses but more with services like InDrive and Careem:
I compete more with say InDrive, and Careem today than I do with a public bus in terms of customer profiles.
Assuming BusCaro maintains its 2023 growth rate into 2024, gross bookings could reach $30-33 million in less than two years of operations—an impressive feat for a company initially rejected by 400 investors.
At its inception, BusCaro raised $500,000 in angel investment. This funding supported both day-to-day operations and expansion into Lahore and Islamabad. In November, BusCaro secured $1.5 million in Pre-Seed funding, primarily to develop its B2B segment. With a monthly burn rate of less than $50,000, the company has a substantial cash reserve.
The future
Every external factor affecting BusCaro's business has two sides to the coin. Consider government actions: regulatory roadblocks are a significant challenge. Despite the presence of companies like Careem for nearly a decade, ridesharing is still unregulated in Pakistan. There are local issues also. In Lahore, for instance, bus fares are capped at 15-20 rupees, a rule from the last century. It’s hard to build a competitive business when you are blocked from raising prices by some archaic legislation.
However, the government's inaction in developing in-city transportation has inadvertently created an opportunity for BusCaro to thrive. I would guess you wouldn’t need BusCaro in Zurich.
The other issue is the macroeconomic conditions in Pakistan. Just to illustrate the point: 60% of the country’s exports are generated by the textile industry, and a third of Pakistan's textile factories have closed their doors in recent years. As a result, 700,000 people have lost their jobs. Since driving to and from work is the main use case for the service, it’s not great for BusCaro (taking aside the fact that people losing jobs isn’t great in general). But that also means that people may choose cheaper modes of transportation, and BusCaro is among the cheapest options.
When it comes to the company’s goals, BusCaro plans to break even in the coming 6 months, and by the end of 2024 to start expanding outside the home market. With 40,000 minivan and minibus drivers operating around the country and
BusCaro capturing less than 1% of that, there’s ample room to scale, to say the least. Only in the cities where the company operates are there 7-8 million passengers who may want to use the service.
BusCaro is a very peculiar type of company in that it shouldn’t exist. Governments should ensure that people’s transportation needs are covered, and public transportation should be a safe way to travel. But in many places, private companies are the only way to solve problems that shouldn’t exist.