After scaling up to a few cities, startups in the mobility space such as bike-sharing platform Bounce are now taking steps to reduce cash burn. The Bengaluru-based firm has trimmed its monthly cash burn from $7 million as of December to $5.5 million in the last month, according to two people familiar with the company’s operations.
In a bid to further balance expenses and revenue, Bounce has increased the security deposit amount while charging the user a higher cost per kilometer travelled, added the two people cited above.
The security deposit amount has jumped almost 3X to Rs 299 from Rs 100. Moreover, for every ride, it now charges Re 1 per km and Re 1.7 per minute. Earlier, it used to charge Rs 0.5 per minute.
Now a rider also has to pay a minimum amount of Rs 21 after booking a ride — which was not the case previously.
“Bounce has been controlling its burn since the beginning of this year,” said one of the people cited above, requesting anonymity. “Inflation in fares and an increment in security deposit amount are also part of their effort to ramp up revenue against a towering burn rate.”
To create a long and sustainable business model, it is important for a company to find a way to scale its business with increasing revenue and be profitable. And often, the journey towards it begins with a cut in expenses and giving up the discount model.
While the company did not respond to Entrackr’s queries regarding monthly burn, revenue and average ticket size of each ride, a Bounce spokesperson said, “Through the introduction of deposits, we want to imbibe accountability in our customers so that they use the shared Bounce scooters with more responsibility.”
The company further confirmed that it is seeking sustainable growth.
“Yes, profitability is definitely on our roadmap, but the strategic focus remains to expand the reach of our progressive, inclusive, and affordable solution to more and more citizens,” added the spokesperson.
Responding to Entrackr‘s story, Bounce revealed that the company is almost profitable in Hyderabad and Bengaluru is getting closer.
Bounce offers dockless scooter rentals on kilometer basis. The company has also increased pre-defined amount (about Rs 1,600) for wallet top-ups, which is non-refundable.
Bounce raised $72 million in Series C round in July 2019 with a mandate to chase growth at all cost from its backers.
Consequently, the company’s scale kept growing month-on-month in the second half of 2019. The firm clocks a little over 2 million rides a month, but the average ticket size is as low as Rs 65-70, according to people familiar with the company’s operations. This comes up to a revenue of $2 million per month.
While Bounce’s monthly expenditure rose multi-fold post its Series C round, the company spent Rs 86.91 crore during FY19 for operating revenue of Rs 13.86 crore. It’s worth noting that the firm’s total expenditure and losses will be in several hundred crores in the ongoing fiscal.
Bounce is a well-capitalised startup and has no dearth of capital as it raised $105 million just a few weeks ago. Nevertheless, the company has to improve its revenue and shrink monthly burn since investors, including the likes of SoftBank have been advocating sustainable growth.
Besides improving unit economics, Bounce also requires bringing accountability amongst users. Its scooters are usually seen abandoned on the streets of Bengaluru — sometimes damaged and broken. If the company doesn’t contain costs caused through these instances, Bounce will be inflicted with severe bruises as it scales.