Jay:  My guest today is Hussain Elius, CEO and co-founder of Pathao. Pathao is one of the fastest-growing technology companies in Bangladesh, providing on-demand ridesharing services, logistics, and food delivery on its platform. The company has grown today to be one of the most successful ride-hailing companies in Bangladesh, handling over 2.5 million transactions as of February 2019, making it the number one provider of two-wheel rides in Bangladesh. So, Hussain, welcome to the show.

Elius:  Thanks, Jay. Great to be here.

Jay:  Yes, I’m happy to have you on. I’ve read about your company before, but the thing is I don’t know much about Bangladesh at all. I believe you’re probably the first founder on my show that’s from Bangladesh, so I’m excited to have you on. Hopefully you can give us a little bit of background of yourself and also the country because I’m interested in what the environment and the macro backdrop is there.

Why don’t we start with an introduction of yourself as a person, as an entrepreneur. Where are you from? Where did you study? Where did you grow up? And how did you become an entrepreneur?

Elius:  Yep, awesome. And thanks, Jay, for having me on the show. It’s very exciting to talk about Pathao and Bangladesh. I’ll start off with a little bit of info about myself.

So, I was born and raised in Bangladesh. I grew up here. I started to work here. I have all my friends and family over here. Even before Pathao, I started a few other companies over here as well. I was trying to find something which had a product/market fit.

I started with making us the Spotify for Bangladesh. This was back in 2013. And it was a very good product. It was a product to be proud of, but in 2013 in Bangladesh, we were graduating out of dial-up. So, we just had the 4G being rollout in 2014. So, having a streaming service did not make a lot of sense.

After that, we found a few other companies, which doesn’t feel like companies now because they were just so small back then. We were trying to do something with ride-hailing, but we used tuk-tuks instead. And we used feature phones instead of smart phones because most of the tuk-tuk drivers did not have smart phones. And we did a carpooling service, but we only had one car.

So, we tried a few things, eventually came and launched Pathao. And at first, we also struggled Pathao. So, Pathao in Bangla actually means “sent.”

Jay:  So the word “pathao” means “send.” I see. Okay.

Elius:  Yeah. So, we were doing e-commerce deliveries because e-commerce in Bangladesh was just starting up in 2015. And that was a very, very interesting time because this was a time when, suddenly, within a very short period of time, between, I think, one or two years, the smart phone penetration in Bangladesh doubled, 4G rolled out, and more people had access to cheap and sometimes unlimited internet. And people’s GDP had also grown. I’ll come back to Pathao, but a little more information about Bangladesh itself.

Jay:  Yes, yes. Please give us some of the backdrop because I think that a lot of the audience might not be as familiar. I know myself, personally, I’m not as familiar. What’s the economy like right now? You mentioned a few things like 4G hadn’t rolled out yet when you started your earlier ventures. So, give us a little bit of the backdrop. I mean, it’s basically the landscape that you were working with, or against, if you will, when you were trying to build these companies. Right?

Elius:  That’s a question that I get a lot, on Bangladesh itself.  So, Bangladesh starts and ends right in the southeast Asia. So, in one side you have Myanmar. On one side you have India. And right in the middle you have Bangladesh, which doesn’t really get a lot of the attention it deserves.

But it is one of the fastest-growing countries in the region. It is growing between 7% to 8% year over year. It’s growing faster than Vietnam, faster than Indonesia, even faster than India and China now, with a population of 170 million people, making it the 8th most populated country in the world. And over 18 million of those 180 million people are daily internet users.

So, this is a very, very exciting time just because in the population, the demographic, the median age is 26. So, what that means is that we have a very young population, which are getting introduced to technology for the very first time. And all of this are happening over the last four or five years.

So, when I created that Spotify for Bangladesh, although that did not work out because in 2013 we did not have the product market fit. But right now, in 2019, there are four different services which provide basically the same streaming service, and they’re all growing properly. 

And what the growing economy and the young population really means is that more and more people have more disposable income. So, there’s a projection that by 2025, we are going to double the emerging middle class from 22 to 44 million. And this 44 million people will have a disposable income north of $5,000 a year.

So, again, very, very exciting time for the country. However, I think because, again, you have two giants on two sides. You have India on one side, which gets a lot of attention, and you have southeast Asia on the other side, and Bangladesh isn’t technically an ASEAN country, so it gets lost out even though the metrics are sometimes better than Vietnam, which is the most comparable country. Or the growth is higher than India or Indonesia.

Jay:  So that’s a pretty good background you gave, Hussain, and I appreciate that because, like we alluded to, not a lot of people have a good understanding of Bangladesh and the opportunity set that is there. You know what I mean?

It often times gets grazed over for Southeast Asia, or like you said, India and China. And you just mentioned that Bangladesh, in fact, has greater growth, from a GDP perspective, from the economy’s perspective, than either of those two giants. But I think a lot of people automatically try to go for India or China because that’s where they think the opportunity is. So, because of that, here is your opportunity.

So, you said that the population is 180 million, is that right?

Elius:  Yeah. So, it’s 170 or 180 million people, depending on who you ask.

Jay:  Right. And Dhaka, is that the capital and the largest city?

Elius:  So, Dhaka is the largest city, is the capital, and it has 20 million people. So, Dhaka itself is one of the densest cities in the world. It’s denser on a per kilometer basis than Jakarta or Hong Kong. And like any growing and emerging city in a developing country, Dhaka itself has its own problems.

So, Dhaka’s biggest problem is, of course, traffic because more and more people from outside of the city are coming in and living in the city. And the infrastructure really hasn’t caught up. So, the idea of how Pathao evolve is a function of the city itself — the density of the city, the population of the city, and the poor infrastructure of the city.

Jay:  Right. Okay. So that was how you, I guess with your experience and where you lived and being an entrepreneur, you realized that there was definitely a pain point there and a need to be solved because of how the city’s laid out and this sort of thing.

You have several different lines in your business. Was bike-sharing the first thing or ride-sharing? What was your first venture, I guess vertical, that you worked on?

Elius:  We started off with e-commerce logistics, as I mentioned before. And what that really meant was that in 2015, you had a lot of different e-commerce platforms, e-commerce marketplaces that were coming online for the very first time.

However, all of them needed a way to deliver a package from the merchants to the customer in an efficient manner. And also we needed to provide cash-on-delivery services because it wasn’t just delivery, it was also cash collection and cash-handling services.

So, we started off with providing that, and immediately and after — this was the fourth or the fifth time I was trying to start a business. This was the first time we actually had that product market fit and found some traction because there was a need for a service like ours. This allowed us to grow. However, we did not limit ourselves over there. We quickly built other services on top of just plain logistics and became who we are today.

Jay:  So, with the early e-commerce logistics delivery, was it basically people that were shopping online? Was it more of smaller, boutique retail, mom-and-pop shops that you were delivering for? Or was it large brands that you were delivering for? Was there a specific time guarantee that you would deliver the stuff on? Or was it just basically there was not enough people that were delivering for e-commerce companies?

Elius:  So, it was the two in the middle, right? One was that it was a lot of the mom-and-pop shops, which were trying to sell first on Facebook or Instagram. The people would come in on Facebook. Instagram wasn’t that popular back then.

And they would put up pictures of items they would want to sell, and someone would knock that Facebook merchant, what we call F-commerce. They would call up the Facebook merchant, and they would say, “Hey, I want this product. Can you get it delivered?”

And then the merchant would contact us. And we would pick up the product from the merchant. We delivered it to the customer, pick up the cash, and return to the cash back to the merchant. So, this all happened in a 24-36 hour timeframes.

Eventually, we had larger e-commerce players, such as the Daraz — which was at that time owned by Rocket Internet but now owned by Alibaba — come on as a partner. But even today, most of our merchants — we have over 10,000 merchants — but I would say 95% of the merchants are still that small mom-and-pop, F-commerce shops, which we are partnering up with.

Jay:  This is interesting. So, Hussain, one of the things that I’d noticed is that, by the way that you described your service, it appears that it’s still a very cash-based society there because you described delivering the package, but then also taking the money back to the vendor, right?

Elius:  Yeah. That’s exactly what it is. It’s a very cash-based economy, and it is still an awkward struggle because the payment infrastructure is still very poor. Only maybe 1% of the people actually has a credit or debit card. And maybe 3% or 4% actually has a bank account. So, we are in a very under-banked country.

Jay:  So, did you have any challenges when you were dealing with…any time you deal with money, there’s issues of trust. I imagine there’s some sort of banking or financial regulation that you might— I don’t know. Even if I was a mom-and-pop seller, and you were just a start-up, there must be some fear that “Hey, maybe Hussain’s going to pick up my stuff, and I’m never going to see the money back.” So how did you overcome these sorts of struggles?

Elius:  I feel like at that point in time, there was a lot of competition because there was a need for this. So, there’s a lot of people who are coming into this market, and that’s exactly what had happened. Some of these e-commerce logistics players were basically move the product, did deliveries, and then ran off with the money.

However, what we did was we just built on the trust that the merchants placed on us. There was no regulations. It’s still cash based, so there is a lot of risk. But we just made sure that whatever product we delivered, and customers get their money on time. The merchants get their money on time.

That is one of our key, North Star metrics, our key KPI. And the reason that we were able to grow to the extent that we were able to grow is because we kept that consumer trust. So right now, even though the delivery market is very fragmented, we are the largest e-commerce delivery partner in the country.

Jay:  That’s pretty exciting. And then the deliveries themselves, were they using vehicles that you purchased initially, basically with your own money, to begin the business? What is the transportation culture, so to speak, like there?

Because I know that certain part of southeast Asia, there’s a lot of motorcycles, mopeds, this sort of thing. Other places, it’s all larger vehicles, vans. And then some more, maybe second or first-world cities, they have actual people on bicycles being bike couriers. So I’m interested— what is the transportation culture like there in Bangladesh?

Elius:  Because deliveries is a very low-margin business, what matters is how fast can you scale it and at what extent can you scale it. So, what we did, was we used bicycles for deliveries. Bicycles were cheap. They were fast. They could weave past traffic very quickly.

So, bicycles was the main way how we delivered for maybe the first 12-15 months before we even graduated into motorcycles, because they’re faster and, to be perfectly frank, a little more humane. Because when you’re on bicycles,  you’re basically asking people to carry packages on a carrier, like 20 cases on a bicycle every day.

After 12-15 months, we were finally able to afford and move into motorcycles. And that’s the time when we also started experimenting with ridesharing.

So, this is a good time to actually talk about ridesharing in general and how that actually started. The average speed in Dhaka is 7 kilometers per hours. It’s faster sometimes to walk. So, I used to do this. I used to—from my home to my office, it was a 7-kilometer journey. And what I used to do was I used to take a rickshaw. You know pedal rickshaws?

Jay:  Rickshaw, yeah, sure.

Elius:  So, Dhaka is one of the only cities still in the world who still has pedal rickshaws. So, I’d take a pedal rickshaw to the bus and take the bus to somewhere near the office where I got dropped off, and then took another pedal rickshaw back to office. And that took 1 ½ to 2 hours every day, just one way, traveling one way. And the road infrastructure was so poor because there was a lot of road construction going on in 2016, that I had to take multiple buses. Sometimes I had to get dropped off in a bus, then walk a little bit more and get another bus, and then take that. I find it very hard to articulate this to a Western audience how bad things can be. But that’s what actually made something like the Pathao two-wheeler ridesharing really get some traction.

So, the reason that we started this interaction one was yes, the problem was big. The people needed a way to get around — a fast, cheap and efficient way. But the other problem over here is that, unlike Vietnam or Indonesia, there was no motorcycle-taxi culture.

So, what we had to do was we basically had to build a new category of transportation, which is the two-wheeler taxis. And at first, that presented its own challenges because people, again, we didn’t really have a brand at that point. We didn’t really have an app or anything like that.

All we did was we bought five motorcycles, which from 12:00 to 5:00, they were doing deliveries of packages. And I had a Facebook group. I had a WhatsApp group where my friends would message me and say, “Hey, Elius, I need a ride at 8:00 in the morning from my home to my university. Can you pick me up?

And I would dispatch a motorcycle, a good manual. And that’s how at the end of the day 00:21:08 people would go back home as well.

So, it was very manual. It was very call center based at dispatch. We did not really have a lot of bikes, but that’s how we actually got started.

And that built us community because it was, again, in a Facebook group. It built a community around it. Back then, Facebook was the internet. People would go to Google and search for Facebook because they’re thinking that that’s the internet. And it was very important that we help build the community that really propelled us to grow later on.

Jay:  Okay. Excellent. And so that was how you basically started the ride-hailing service. So, you had the e-commerce delivery, ridesharing, and then what else do you have on there now?

Elius:  Yeah, so I explain going chronologically, 2013 was when we started the e-commerce deliveries. 2016 was where we were experimenting with ridesharing in a call-center basis. 2017 is when we finally launched our app. And immediately following, it blew up.

People were talking to other people, were able to share the app. There was a referral system. More and more people were talking about it. And 2017 was an interesting year because all we did was we just tried to keep up with the growth.

So, January of 2017, where we did maybe 200 rides a day, or less than 200 rides a day, by December of the same year, we were doing over 50,000 rides a day.

Jay:  Wow. That’s incredible.

Elius:  So, it was a lot of hustle, a lot sleepless nights, a lot of fire drills, just trying to onboard more drivers, training the drivers, making sure that the app doesn’t crash because it’s handling so much load. But 2017 was the year we were able to establish ourselves in the market and build up brand around our product.  It was the same year we launched our car service, our four-wheeler service, and the year after that, we launched our food delivery service. 

So right now, we have two wheelers, four wheelers, food delivery, e-commerce logistics, another perk called Parcels which is on-demand logistics, which works sometimes like a UberRush or a GoSend from GoJek. And we just launched our loyalty program yesterday, and we’re also gearing up to launch an e-commerce platform by the end of this year.

Jay:  Wow. That is quite incredible. So you would say that sort of the hockey-stick moment was after you built the app, and basically you were able to reach basically a whole lot more people outside of that little Facebook community because people could just download the app and then all of the sudden, they basically were onboarded onto the platform.

Elius:  Exactly. They onboarded on the platform, ordering was easier. You don’t have to call someone and explain to them where you had to send the bike, and where you need to be dropped off. Everything was automatic. The app really allowed us to scale.

Jay:  Right. That’s a very cool story.

Elius:  Yeah, and I think that’s not all ridesharing is, really. It’s not a pure tech business or a pure tech play because there is a real-world component to it.  You can run ridesharing without any tech. But it doesn’t scale. It only scales when you have technology like this.

Jay:  That’s right. So, another classic case of using the power and the leverage of code and the internet to scale your business indefinitely.

Tell us a little bit about your team there, the Pathao team. Do you have any co-founders? How many employees do you guys have now? How many bikes do you have?

Elius:  So, at this point—so beginning of it, I started with my co-founder, Adnan. Adnan is the CTO. And in all the projects that I’ve mentioned before, Adnan was always involved, driving the technology, building up to that, and all of that.

Right now, our team is quite large. We have over 500 people across all functions. So, you have the technology, product, design, operations, marketing, all of that inclusive. So, we’re a pretty big team now. However, we try to be lean and more and more we’re focusing on product and technology-centric solutions to solving operational problems instead of just throwing people at problems.

Jay:  Sure, yeah. And the company now, I’ve read, is worth more than $100 million, so that’s—congratulations, that’s incredible. What’s your fundraising been like? You guys have had a couple of rounds, including an institutional price round. Who are some of your investors that have been supportive of your growth?

Elius:  We had a couple of investors. One of our most prominent investors is Go-Jek. They invested back in our Series A round, and they have been a very supportive investor. We also have had Openspace Ventures, which is a Singapore-based VC, also very supportive, as well as Battery Road Digital Holdings, which is our seed investor and has participated in every round we have had. So over time, we have raised over $35 million.

Jay:  So, Go-Jek, for those listening, you’re probably familiar with—I think they’re Indonesia, right? They’re also a very similar service as what you guys do, on demand. I know they have ridesharing and payments and food delivery.

Speaking of that, what’s your competitive landscape like? Because I imagine that the same…you saw this opportunity. I’m sure you’re not the only one that saw the opportunity, given the infrastructure and the backdrop. There must be other players out there. Obviously, it’s probably difficult for someone like a Uber or a Go-Jek to come in themselves, so it does make sense for them to invest into a local player. Are there any other local players out there that are close competitors of yours?

Elius:  I think so. Because we have so many different categories, and we have geared ourselves to be a super app and a platform, there are competition in every sector. So, if I were to say there’s ridesharing, so Uber is actually here, and Uber is competing with us on both two wheelers and the four-wheeler segments.

On food, we are competing with Food Panda and also recently launched UberEats.  In the delivery sector, there isn’t a lot of the international players, but there’s a few local players over here, such as eCourier or Sundarban Courier, which we’re competing against. E-commerce, you have Daraz or Ajkerdeal, which is a local player. So, category wise, there is a lot competition.

Jay:  Yes, and so I guess the cat’s out of the bag. Everyone sees that there’s a huge opportunity here. Tell us a little bit, Elius, about your future plans. It sounds like you’re literally on the brink of—well, you’ve already exploded within Bangladesh, the city that you operate there. Are there other cities within Bangladesh, other than Dhaka, that you are in? Do you have any other further plans to expand, potentially to other countries?

Elius:  That’s an interesting question because we are actually not just limited to Bangladesh. We also launched in Nepal last year. And so in Bangladesh, we operate in five cities. We operate in Dhaka, Chittagong, Sylhet, Gazipur, and Narayanganj. And in Nepal, we also operate in Kathmandu, which is also a very, very interesting market in itself.

So, what we are trying to do over 2019, as well as 2020, is a deeper country-wide expansion. Bangladesh has 64 cities, and we are in only 5. So, we’d like to obviously take our product everywhere. We also want to commit to a better operational and product [inaudible 00:31:41] so that we can provide a better quality of service to our customers and our merchants.

As I mentioned earlier, we just launched our loyalty program, and we hope what that is going to do is tie up all the different verticals together. So, let’s say you are a power Pathao rides customer. And so we want you to use Pathao Food. So, our loyalty program is going to allow us to one, promote other verticals as well as increase our retention of our customers.

And the last thing, the end of this year, we are launching e-Commerce, which we’re very excited about because we have been working with the e-commerce industry for the last four years. We have been doing deliveries for them. We understand all their pain points. We have signed up over 10,000 merchants at this point. However, we want to establish a more deeper relationship with them.

So, having e-Commerce in our app is going to allow us to do a few different things. One is giving more visibility of this mom-and-pop Instagram stores to our 5 million users. And also allow for easier payment options because the deliveries right now happen through Facebook or Instagram. The only way to receive payment is through cash-on-delivery. But within the platform, we can also promote other non-cash ways of doing these transactions.

Jay:  Yeah, I find that very interesting because I think that’s, again, a concept that’s probably foreign to many people that haven’t been to Bangladesh or maybe the western audience, in addition to not understanding how poor the infrastructure and logistics and transportation is, is this concept of cash-based system.

And I think that’s something that we take for granted in the West, but it’s a real thing. And so, I think it’s going to be pretty interesting to see how your country develops the digital payments, which direction they’re going to go with that.

If they’re going to go with credit cards and that sort of thing, or are they going to leapfrog and go straight to something digital currencies, cryptocurrencies. I think that there’s an opportunity there for them to just adopt something that might actually even be better than the traditional digital payments solutions. So, it will be interesting to see.

I just have a couple more questions for you, and once again, Elius, thank you for your time and sharing the story. I think that it’s fascinating for me and I think the audience is going to find it very interesting, particularly because the company that you built is doing just so extremely well.

So the first question that I have for you is given the backdrop of Bangladesh and how you see the economy continuing to grow in the next five or so years, if there was an entrepreneur out there that was specifically looking to build a company in Bangladesh, and you having experience having a few start-ups that you had before, is there any areas that you would specifically recommend for these aspiring entrepreneurs to look. What are the places that need disruption right now in Bangladesh, or in the next five years?

Elius:  So, as I said, Bangladesh in a very interesting inflection point right now. So, more and more people are coming online right now, fueled by cheap smart phones as well as cheap data. And there’s more smart phone users just happening across all segments of the population. So, it really opens up a lot of doors.

I think the first level of disruption that is happening is offline-to-online industry. So, we are ourselves have actually — think about it — we are not really doing anything new. What we are doing is providing transportation. Even before us, people needed transportation. People had options. We are just providing a digital form of transportation, making things faster, cheaper and efficient.

I think food delivery is another one. People could have ordered food by calling up the restaurant. We just allowed for more of an access to it. So, I think offline-to-online is where we will see that the first wave of customers coming in because these are people who just been looking for making our current industry or current sector more digital.

So, I think that’s where we see the most of it. However, that being said, you really need to identify what the market really is. I would say that for our success, it wasn’t just finding the product market fit because the product did not exist before us.

There were no bike taxis in Bangladesh. So, in Indonesia, there were bike taxis, so Go-Jek was able to launch over there. In Vietnam, you had the Xe Oms, so bike taxis made sense. We had to create a category. There was an [inaudible 00:37:59] but it made sense because the problem was so big that it needed a new solution. It needed a solution that wasn’t there. But we got lucky. I would say we got lucky. I would say that hey, if anyone else is coming to the sector to take a look into the market itself and really, really identify what are the pain points, and build a good product.

And I think the other, I think the success comes if you can build a good product for a big enough problem.

Jay:  Yeah. Do you feel like the entrepreneurial/start-up scene there is growing? Is it getting better? Do you see a lot more entrepreneurs that are trying to solve these big problems?

I know that different cities in different countries have different culture around this. Some cultures are less supportive of entrepreneurship, but it sounds like there must be a pretty good start-up scene there, especially in Dhaka, right?

Elius:  It’s growing. It’s starting up, right? And you need a few—at first, it’s very hard to build start-ups. And suddenly, it’s not. So, when we started, it was very hard to build start-ups because the infrastructure was really not there. It was, as I said, it’s just the internet was just becoming affordable, but four years later on, internet is affordable. It’s a present tense and not a “it’s going to be” future tense. 

So, now you have a lot of different start-ups which are popping up, a lot of different accelerators, and also VCs are starting to take notice that there is a market, and it’s a market where there isn’t a lot of competition. It is a market where their macros line up. The population is interesting. The growth is interesting. And this is a market that is under-capitalized compared to its neighboring countries. So, more VCs coming in means that more start-ups are succeeding, and they have more capital to play with.

Jay:  Absolutely. And it also helps to have success stories, such as your company. So, the more successful companies there are, there’s more seasoned entrepreneurs like yourself that can help mentor and give back to the community as well. So, it’s a virtuous circle.

Elius, thank you so much for your time. Just a final question is basically where can the audience listeners find you or follow you or learn more about Pathao?

Elius:  Yeah, so I have a website, hmelius.com, H-M-E-L-I-U-S dot com. It has all my contacts and everything. I’m usually very active on LinkedIn and Instagram, so that’s where people can follow. Also, our website, pathao.com, P-A-T-H-A-O dot com is also always up to date and we keep it up to date with more of our product launches and our service updates.

Jay:  Great. And is the LinkedIn and Instagram, are those your personal profiles or the company’s profiles?

Elius:  So those are my personal ones.

Jay:  Okay, so what’s your Instagram handle? And I’ll get the listeners to follow you.

Elius:  It’s E-L dot V-I-S-T-A, el.vista.

Jay:  El.vista, okay. Got it. We’ll put that all in the show notes. Thanks again, Elius. It was good hearing from you and thanks for sharing the story and giving us a little bit of education as well on Bangladesh and the economy there.

And look, we wish you the best of luck at Pathao and your future success. It sounds like you guys are solving a huge problem and doing a very good job at it. So, thank you for coming on the show and sharing your story.

Elius:  Absolutely, and thanks, Jay, for having me here. This was a pleasure.

Jay:  Definitely. Take care.

Elius:  All right. Bye.