Magic Bus Ticketing is an offline ticketing system that makes use of SMS and USSD services to allow commuters to interact with bus drivers in African cities and access relevant information regarding the local public transport. By dialing a shortcode on their mobile phones, users are able to see when the next bus is coming and how much it will cost, pay for their bus fares using mobile money, choose their pick-up and drop-off destinations and, in the near future, pre-book seats.
The start-up’s aim is to optimize the public transport system (shorter waiting times, lower fares, standardized schedules) and ultimately connect commuters to bus drivers – to the benefit of both parties.
The company currently operates only in Nairobi, but plans to expand to the rest of east Africa by 2018.
Leslie Ossete (22), one of the four co-founders, briefed How we made it in Africa on starting Magic Bus and how the company plans to, as Ossete put it, become “Uber for buses”.
1. How did you finance your start-up?
We participated in the Hult Prize, the world’s largest student competition for social good. Out of 25,000 applicants worldwide, we ended up being one of six finalists competing for US$1m in seed funding. On September 20th of this year, we pitched at the Hult Prize finals which took place during the Clinton Global Initiative in New York, and won. Prior to winning the million, we raised several small investments to finance our pilot. We are currently open to strategic investments.
2. How will Magic Bus use the $1m you’ve just been awarded?
Well, with $1m, we will be able to extend our services to the rest of Nairobi, mainly spending on three categories: tech development, marketing, and training.
3. What risks does your business face?
The industry we operate in is extremely informal and quite chaotic. The bus system has unreliable timetables and is highly cash intensive, which increases the risk of corruption. This status quo is hard to change as it requires a complete change in behaviour, especially from the bus operators. Hence, one of the risks we face is simply related to the market. Another major risk has to do with network. As an offline application, we are heavily dependent on the local network capacity. When the network is down, this affects our ability to make profit. We are working on providing alternatives to the market, to make our service accessible 24 hours a day.
4. What has proven to be your most successful form of marketing?
We have used different kinds of marketing strategies, ranging from social media to outreach events – at universities, for example. However, I think that what has been most valuable as a marketing tool is one-on-one conversations between bus operators and commuters. This type of interaction builds trust and brings credibility to our initiative. In fact, during our pilot, we equipped bus operators, drivers and conductors with flyers to pass around in the bus as well as at the bus stop, and trained them on how to promote our services effectively to commuters. This approach drastically increased our number of users – people dialing our shortcode to check relevant information regarding their bus transport. Basically, successful marketing relies a lot on human interaction.
5. Describe your most exciting entrepreneurial moment.
The Hult Prize is a year-long process, and we initially participated at our local campus Hult Prize event, where we lost against a competitor at our college. To guarantee a spot at the regional round, we re-applied online with a reiterated idea. Our first idea was to bring more buses onto African roads and with all sorts of benefits on board – from WiFi to bike racks. After conducting intensive research on scalability and issues in public transportation, we realized two things: On the one hand, software solutions tend to be more scalable than others, and on the other hand, the problem in transport was a logistical one. So our new idea was tech-based, and with it we won the regional and global finals of the Hult Prize.
6. What has been the biggest mistake you have made in your start-up, and what have you learned from it?
We operate in an informal system, where it is often easy to work with partners and employees based on informal contracts and verbal conversations, particularly in the African context. However, that does not guarantee positive results, accountability and liability. Throughout our journey, we have placed high expectations on informal partners. What we realized is that without formal contracts and regulations, we are likely to end up disappointed in the quality of work provided.