Rivigo is a disruptive Indian logistics startup that is on a mission to change drivers’ and customers’ lives with their revolutionary business model. Let’s find out exactly how.
Over the past decade, technology has grown to heights unimaginable by the human mind. The rapidness with which it has impacted billions of people across the globe is just mind-blowing. Every industry – and by every we do literally mean every – regardless of its size now has the opportunity to create and spread value to billions of people with very little effort. And if you’re saying this cannot be true, look around you. Try to find one object that is not using technology to better your life – from the smart fans in your rooms to the smart ACs to the screens you’re reading this article on, every facet of our lives has been engulfed by technology. So why not logistics?
We know what you’re thinking – how can something as bland and simple as logistics be transformed by technology? But look at OLA and Uber – they’re also in a way logistic companies that transport people from point A to B – so why not good and services? This is the exact question that led Deepak Garg and Gazal Kalra to start Rivigo in 2014. Today, it is one of the fastest growing unicorns in India, with a valuation of $1.05 billion USD. In today’s article, we’re going to pick apart the Rivigo business model to understand how Rivigo works, what it aims to achieve, and the processes it has followed to get to where it is today. Let’s get started.
Image Source – The Dualarity Blog
At its core, Rivigo is a tech-based logistics platform that helps customers transfer loads from one point to another. It’s just like any other logistics company, but at the same time unlike any other. Where Rivigo differs from other logistic competitors is its use of IOT to communicate the location of trucks and goods, and using this to better driver’s lives (we’ll get to that in a bit).
Rivigo was started in 2014 in Gurgaon with founders Deepak Garg and Gazal Kalra facing a rather unconventional problem – why did people see truck driving as an unhealthy occupation. In fact, most people preferred to stay unemployed rather than drive a truck – StartupTalky has a rather interesting story on this. Because drivers are often away from their homes at months on end, and also believed to be associated with bad company. The founders took it upon themselves to solve this stereotype surrounding truck drivers in India and Rivigo was the result.
Rivigo’s relay logistics business model optimizes logistic routes so that drivers can return to their homes at the end of each day, while also ensuring customers receive their packages on time. About how this is achieved and how Rivigo works, we’ll get to that in a bit. But first, let’s take a look at the founders who made drivers’ lives a bit more balanced.
About The Founders
Being almost a decade deep into the logistics industry as a consultant at McKinsey & Company, Rivigo founder Deepak Garg is perhaps the most fitting person to take on the plight of drivers that had been overlooked in the logistics industry for so long. He had also been a software developer for Geometric by HCL before McKinsey, so you could say the captain knows his way about the ship.
Coming to the finance department, Gazal Kalra, co-founder of Rivigo, is a smart MBA graduate from Stanford, and has worked with the World Bank Group before jumping on to Rivigo with her husband’s friend Deepak, and the rest is history.
Together these two masterminds built Rivigo and the famous relay business model, shooting the company up to the $1 billion USD valuation that it has today. And smart people working together result in a product that creates value. But how does their product really work?
How Rivigo Works
The operating model of Rivigo is simple – customers login to their app and pick a “To” and “From” location along with their package details, and Rivigo handles the rest. This is all the work you need to do, but for the company, it only starts from here.
Rivigo matches the request with a truck that is operating along those source and target destination, and sends a notification to the driver to pick the consignment up. If the distance between the pickup and drop locations is going to take less than a day, the driver can deliver the consignment and be on his way. But what happens if the consignment has to be picked up from Hong Kong Lane in Pune and dropped at Ritchie Street in Chennai? Now here’s where it gets interesting.
If the trip duration is estimated to be over a day, Rivigo automatically calculates the distance between the pickup and drop points, looks at two or more drivers going through those points, and also searches for its physical facilities in the same perimeter. Then it notifies the first driver to reach the pickup point. The driver would then drive to the location shown in the map (which points towards Rivigo’s base/warehouse). Here the driver gets off and waits for a truck that is pointing back home.
Once the second truck makes its way into the warehouse, the two drivers exchange positions (assuming that the second driver is driving to the city that leads home) and they’re now both driving to Rivigo’s bases in their hometowns. This is what Rivigo calls the “relay model”. And it works! So much so that the team managed to raise INR 85 crores even in the midst of a global pandemic.
Here’s a video from their official YouTube channel explaining “Relay Model”.
While this is simple for two drivers, between larger distances and multiple drivers, things can get cumbersome. Here’s where technology and IOT comes into place. Trucks signing up to partner with Rivigo have devices connected to them that communicate with one another to get location details, consignment details, any delays in arrival, and every other detail in between. This helps the app determine which trucks need to connect to each other, and which driver to assign to which truck, dumbing down the whole process to just a few signals here and there. This is how Rivigo works to bring value to its customers, without negotiating the work-life balance of its drivers. But how does this impact Rivigo as a company? Let’s take a look at Rivigo’s revenue Sources and find out how Rivigo makes money.
Rivigo’s Revenue Sources
Rivigo at the moment only has one revenue source, and it hasn’t publicly given out much info regarding the exact profits it extracts from its customers per transaction, we have a fair estimate, based on the general charges by a logistics company.
How Rivigo makes money is through its transaction fees, that it adds to every transaction made through the Rivigo app. This fee is anywhere between 10-12% on any given day, but some reports suggest they may go up to 20% as well. The app has three loading modes that customers can choose from.
- Prime: Used to transport a full truck-worth load (typically from factories to factories)
- Zoom: Mid-sized commodity/load transportation
- Green: For transporting food and other perishable goods that need to be maintained at certain temperatures.
Depending on the mode customers use, and the distance, a fare is calculated, and profit percentage varies accordingly. Rivigo’s clients include over 2000 companies – ITC, Suzuki, Flipkart, and Hero Motocorp being some of them – so you know they don’t mind paying big bucks to get what they need delivered.
Rivigo thinks this model is sustainable for the long term so it’s sticking with it, since a lot of transport companies use the same method, and it’s working for them as well, so why change a working formula?
The formula has fetched them millions in raised money and a $1 billion USD valuation so it does sound stupid to just throw all that away and try something new. And investors like that their money is in safe hands. This is perhaps why existing investors like SAIF and Warburg have put in additional money into the company in 2020. And it’s not just SAIF. Rivigo has managed to keep close to all of its investors roped in and still going strong after six years. Let’s take a closer look at the numbers and try to find out why.
Rivigo’s Investors and Funding
Rivigo made the news in late 2015 when it first raised an undisclosed amount from Trifecta Capital as Debt Finance. It quickly turned that around by raising another $30 million USD from SAIF Partners. The saga continued well into 2020, with their latest funding round raising close to $12 million USD from SAIF Partners, taking them just north of the $1 billion USD evaluation. You can read all about the various Rivigo funding rounds at Crunchbase.
While all the money coming in is good, what scares us is the amount of debt financing the company has taken. In 2018, the company took in a whopping $43 million USD as debt finance, and that is a big deal. Yes, debt financing will ensure that the company stays in Deepak’s and Gazal’s hands, but putting company’s assets down to burden a big loan on their shoulders is a huge task. Hopefully they’ve come out of it unscathed with their more recent fund raising rounds, but if the risk was worth it or not, only time can tell.
Note: If you’re interested in learning more about Debt Financing, checkout this article here.
Keeping the financial situation aside (we’re sure Deepak and Gazal are smart enough to know what they’re doing), Rivigo’s case study has brought us newfound respect for the company. It is a great startup and is genuinely solving a problem, and making money in the process. Businesses are about making money. Entrepreneurship is about solving a core problem – and the duo is a standing testament to the latter.
Deepak Garg and Gazal Karla have built a truly unique product unlike any other in the market, and led the way for more innovation in an otherwise “boring” sector.
They have smashed the stereotypes surrounding drivers in every possible way, and have managed to build something that both the customers and the business equally get value out of.
And in that respect, we truly love and appreciate ❤ Rivigo. It is truly an ideal model for anyone looking to understand how a business is built, and what they need to do to stand out from the crowd (Hint: you need to solve a problem).