"THAT WAS JUST TOO DAMN HARD!"says Bhavish Aggarwal, co-founder and CEO of Ola, India’s largest cab aggregator. He isn’t talking about Ola’s angel funding round—Rs 1 crore in 2011—though he concedes that’s right up there as hard things go. He has since tackled a few chunkier ones: for starters, jetting around to raise another $675 million (Rs 4,264 crore)—$610 million of it between September 2014 and March 2015—pushing Ola into the rarefied world of billion-dollar startups built out of India. Along the way, there’s been the battle with Uber, the world’s most valuable startup and the Big Daddy of cab gigs; testy civic administrators suspicious of the idea of cabs on tap; the tense $200 million buyout of the No. 2 aggregator TaxiForSure (TFS); a recent allegation of obscenity against a TFS driver in Delhi; and, for good measure, a messy legal tangle containing the threat of a ban.

No, the memory that brings a grimace to Aggarwal’s face is from 2007, long before any of this. That’s when he and Ankit Bhati, just students at the Indian Institute of Technology (IIT) Bombay, set out on a bicycle tour from their campus in Powai to hilly Ratnagiri in coastal Maharashtra—a good 335 km away. They planned the trip with a rigour only geeks are capable of, trained for weeks. And around Diwali, they hit the road.

The two lads were not even 25, and hadn’t yet dreamt of starting up together one day. Bhati, who is from Jodhpur, studied mechanical engineering and is now chief technology officer at Ola. Aggarwal spent his early years in Afghanistan and Britain—his parents are doctors who were based in the two countries—did his schooling in Ludhiana third standard onwards, and came to IIT to study computer science. They met on day one, shared a mentor, teamed up at tech fests, and worked on freelance coding projects to earn some money. But both think back to that cycling tour as pivotal to where they are.

On the first day of the tour, they crossed Alibaug, 100 km away. Then, they touched Kashid, another 30 km away along the North Konkan coast, and Murud-Janjira in Raigad district, shaving off nearly half the target distance. And then they stopped. “We just came back,” says Aggarwal. A day later, they were on a bus back instead of their bicycles, “but we never tell anyone that”, says Bhati, laughing.

The episode is a reminder for the two: Turning back isn’t an option this time. Not after ‘Ola’ became a byword for urban transportation in India; opened up a whole new world of choice in one-horse towns like Bokaro and Dindigul; built a team of over 6,000; and rose to be the country’s most valued tech startup after Flipkart and Snapdeal—all in the space of five years.

Much of this can be credited to Aggarwal’s product nous and, more important, his instinct for scale. Ask startup watchers anywhere in India to name the digital entrepreneurs they think will remain standing amid the inevitable detritus of also-rans. The first two names are easy: Sachin Bansal, Kunal Bahl. Aggarwal, who is 30 this month, is firmly nudging that list.

Shradha Sharma, founder of the startup news platform YourStory and one of the most sought-after mentors in Bengaluru’s startup circuit, has known Aggarwal from the time he was just another zealous product guy pitching his idea. “He would stand in my office all day, showing the early version of the Ola app to anyone who cared,” she says. “He chose a business that is not for the fainthearted, and never gives in to pressure. I’d say he is among the five most driven entrepreneurs in India, any day.”

Sharma says Aggarwal’s standout qualities are “ambition, aggression, and focus”. Investors love those traits. Startup scouts from Tokyo-based SoftBank and New York-based Tiger Global have locked horns in hot sectors like e-retail (Flipkart vs. Snapdeal) and online house search (CommonFloor vs. Housing). But they seem happily agreed on Ola, and are co-investors in the company. (They are also co-investors in Kuaidi Dache, a leading Chinese cab aggregator.) In May, Ola also became a part of Ratan Tata’s Internet investments, joining the likes of Snapdeal, Chinese mobile sensation Xiaomi, and payments leader Paytm.

Ankit Bhati, Ola’s CTO, says the inherent value of Ola’s platform is that it supports experimentation.
Ankit Bhati, Ola’s CTO, says the inherent value of Ola’s platform is that it supports experimentation.

So far, Ola is repaying the love in spades, if you believe a SoftBank earnings report. It says Ola’s share “based on available or estimated data of registered vehicles” is 80%, with Uber’s a paltry 4%. (The report also says radio taxi pioneer Meru Cabs holds 12%, but most think it will be a sideshow in the war between Ola and Uber.)

You could, of course, argue that every such estimate comes with an equally imposing counter. For instance, to Ola’s claim that it does 750,000 rides a day, Uber says it is set to hit a million rides in the next six to nine months. (Ola’s view of Uber, whose latest funders include India’s Times Internet, is standard: “India is a very different market and a templated approach won’t work here, be it in transportation or anything else to do with logistics.”) Then again, you could point out that “rides” is a rather vague proxy for a company’s real health to begin with. A bit like the opaque “gross merchandise value” quoted by e-retailers, which has raised a lot of eyebrows recently.

However, on this there is no debate: With a network of over 200,000 cabs in 100-plus cities, Ola has a handy lead in the cab aggregation business. If all Aggarwal wants to do here on is build a cab empire for the ages, he has to put his head down, keep doing whatever he has done to get here, do it better, and pray—SoftBank’s hulking claims notwithstanding—that he can keep Uber at bay. The big assumption, as it is with all tech startups, is that at some stage his company will actually start making money.

But that’s not Aggarwal’s style. “Bhavish is pure aggression,” says Bhati, echoing an increasingly common description of his co-founder. “He is always dreaming of where next Ola can be, and how fast we can get there. He is impatient at all the right times.”

Paytm founder Vijay Shekhar Sharma has taken his five-year-old payments company to e-commerce.
Paytm founder Vijay Shekhar Sharma has taken his five-year-old payments company to e-commerce.

OLA TURNS FIVE IN SEPTEMBER. In startup years that’s plenty old, and sure enough, Aggarwal is getting impatient. His next mission: swiftly launch a series of new businesses, each piggybacking on Ola’s well-oiled technology platform. Think of a consumer goods giant, say ITC, which uses the distribution muscle of its cigarettes business to push soaps and biscuits.

If the plan works, Ola could metamorphose into India’s first mobile conglomerate; in fact, it has quietly dropped “Cabs” from its name. But if it backfires, it will be a cautionary tale for India’s bullish venture-backed private companies, accused by naysayers of chasing high valuations rather than building solid businesses.

The first push beyond cabs came in March, with Ola Café, a food delivery service. (Uber started testing a similar service, UberEats, in the U.S., Canada, and Spain last year.) This is a massive market, estimated at $15 billion, featuring cash-rich players like Foodpanda, TinyOwl, and Zomato. Ola is partnering 100 restaurants across some 30 localities in Bengaluru, Mumbai, Delhi, and Hyderabad, and to differentiate itself, it will only offer a restaurant’s most popular dish, say Spaghetti Kitchen’s chicken penne pasta. At any given time, the menu will have five items, each sourced from a different restaurant, and the options will change every 20 minutes between 12 noon and 10.30 p.m. Ola will charge a commission for every order.

In early June came the second launch: Ola Store, a grocery delivery app covering 16,000 stock keeping units, in partnership with local kirana stores and chains like Namdhari’s Fresh. (Again, Uber started Uber Essentials in the U.S. for essential household supplies last year.) This is another sizzling market, slated to be worth $5 billion by 2030, and Ola’s competition include early mover BigBasket, newbies like Grofers and PepperTap, and, slowly, Amazon. Ola is training drivers and delivery boys for these two businesses, although the exact modalities are still on the drawing board.

Then in July, reports surfaced about a shuttle bus service that would aggregate tourist and chartered buses. There was also chatter that the company is considering carpooling, logistics, and e-commerce, but it denies anything concrete in these areas.

Finally there’s Ola Money—a closed mobile wallet that accounts for bill payments for 40% of all Ola rides, and counts Sachin Bansal among its fans—which can potentially become a full-fledged payment platform underpinning all the different ventures.

Things are still very fuzzy, and it is hazardous to guess how any of these will pan out, but an early pattern is emerging: While Ola Café is just another button in the main Ola app, Ola Store, which has the potential to morph into a full-fledged e-retail platform, gets a separate app and logo. The company says that the new businesses will have separate operations, but the technology platform will remain centralised.

On the face of it, Ola has no choice but to offer more services and increase wallet share, given the small pool of Internet users in India who spend money online: a mere 39 million out of the total Internet user population of 300 million, according to Barclays Equity Research. No one will discuss this on record, but an investor tells Fortune India that while Flipkart may have 84 million web visitors, “I go with the 50 million to 60 million range, assuming not all visits are unique.” A serial entrepreneur adds that while many buyers are lured by heavy discounts, “conversion for convenience”—the holy grail for consumer Internet companies—“is still negligible in India”.

In the cab business in particular, breakout growth is almost impossible: Goldman Sachs says India’s car rental market will reach $1.4 billion by 2030, a pittance compared with $16 billion for air bookings and $18.6 billion for railway bookings. Even if you believe that the market estimate is conservative, the ticket size of a cab ride is obviously the lowest across these categories. Ergo, Ola, with a valuation of $2.5 billion, cannot be content with just cabs.

Info Edge founder Sanjeev Bikhchandani created an online conglomerate <br />
of classifieds businesses.
Info Edge founder Sanjeev Bikhchandani created an online conglomerate 
of classifieds businesses.

While the revenue from new launches will be incremental, there’s a far more urgent reason for Ola to do more: keeping drivers happy. Till now, the battle to acquire drivers between Ola and Uber has been all about throwing more and more incentives. (Ola acquired TFS as a hedge.) At the peak of competition last September, incentives were rampant: Uber $10 a ride, Ola $7 a ride, and TFS $2.5 a ride. But as the party winds down—fleet operators in Bengaluru and Delhi say Ola is discontinuing or cutting incentives while Uber isn’t—the only way to hold on to drivers is to help them get more trips and reduce idle time. “For us, it is a great way to solve utilisation,” says Pranay Jivrajka, chief operating office and senior vice president of operations at Ola.

Aggarwal says Ola is in a “network-effects” business. The more customers it signs up, the more it can reduce fares, in turn bringing in more customers. But without loyal and engaged drivers, this virtuous cycle, and indeed Ola’s ambitious expansion plans, will come to nought.

Not everyone is convinced that the time is right. Rishikesha Krishnan, professor of strategy and director at Indian Institute of Management, Indore, says investors in Silicon Valley still reward focus on the principal idea. “It will be interesting to see whether the thinking among investors is changing in India.” There’s also the view that if Ola’s strategy is to outmanoeuvre Uber by spreading out wide, it’s not a particularly wise one. “It is better for a well-capitalised company to build dominance in its core business first,” says a consultant with a leading global advisory, “especially if it has Uber as competition”.

But Aggarwal says he was clear from the very beginning that Ola’s core business is not cabs: It is mobility. “We didn’t see this as a taxi business at all,” he explains. “We started with the idea of a customer who thinks ‘I will never buy a car.’ What do we need to build for someone like that? We need cars to be made available in 5-10 minutes.” Now that Ola has ticked that box, he says it can become “the largest company in the business of on-demand consumption”—or instant gratification. “People want their food delivered in half an hour—can we give it to them in 15 minutes?” Aggarwal’s benchmark is Domino’s Pizza. “They have solved hunger [through fast, hyperlocal delivery],” he says. “That’s why they are the country’s No. 1 food-tech company,” he says.

Ola’s employee count went up 800% year on year as of March 2015.
Ola’s employee count went up 800% year on year as of March 2015.

Aggarwal’s choice of food and grocery delivery is a no-brainer; both are large markets built around the idea of transport. He has also experimented with movie tickets, IPL tickets, and Diwali gift deliveries. But it’s an experiment days before we went to press that offers a sharper clue into just how wide he is planning to fan out: From 11 a.m. to 4.30 p.m. on a Sunday, Ola ran a first-of-its-kind fashion-delivery tie-up with Myntra, allowing users in five cities to book a makeover by a personal stylist through the Ola app.

The big opportunity is to replicate that template and become a last-mile partner to all kinds of services, such as in-home medical care, a booming market that can reach $15 billion in India by some estimates. Or hyper-local home services, a sector that caught fire last year with over 70 startups opening shop, per research portal Traxcn.

Many like Raja Hussain, the ex-Silicon Valley co-founder of Chennai-based mobile app marketing startup Airloyal, see a clear imprint of Valley-style aggression in Ola’s moves. “You want to send out a strong signal to the market, and then focus your best resources to grow your user base,” he says.

Raghunandan G., who sold TFS to Ola, echoes that. “If you try to sell a standalone service in India, it takes time to generate volumes,” he says. “But imagine all the services you can get into once you have a captive audience. Merchants will work with anyone who give them reach.” Equally, entrepreneurs like Bansal, Bahl, and Aggarwal want to be ready before a disruptive force like 4G opens up all kinds of markets. Being unprepared is not an option in the face of competition from Amazon or Uber, known for conquering new markets at lightning speed.

Affinity for speed is the reason why sectors like online retail, search, community content, and messaging have been the dominant investment themes in the U.S. and China, with transport and payment rapidly emerging in recent quarters, says a Bengaluru-based venture capital investor. “The valuation frenzy in India is driven by the race to find the four or five leaders in each of these themes,” he adds. So while Amazon and Flipkart battle it out in e-commerce, Paytm tops payment, and Ola is seen as the leader in transport.

Ola’s grip over mobile gives it a big edge in this race. Aggarwal and Bhati sniffed the opportunity early, in 2011, when they built a mobile website over a weekend to see if users would book taxis on the phone. The response was encouraging, and in July 2011, it was ready with a consumer app, which it branded aggressively. In contrast, Flipkart was busy building its marketplace model; it started focussing on mobile only in the latter half of 2013.

The early start means Ola is one of India’s few high-scale mobile Internet businesses, a list that includes Zomato and entertainment ticketing company BookMyShow. It claims that 99% of its bookings now come from the mobile app, and it will accept bookings only on the app from September. That’s a vital step in a country where mobile Internet users account for 65% of the online population, against 30% in China and 22% in the U.S.

The mobile bet will yield bigger returns as and when Ola expands its fleet in the non-metro hinterlands. Currently, such regions account for only 10% of its cabs. But with mobile commerce expected to be a $19 billion bounty by 2019 according to market research firm Zinnov, predicated on a consumption boom in tier II and tier III towns, that number might change.

Phanindra Sama, who founded India’s first online ticketing company redBus in the pre-smartphone era, says mobile is also a game changer in managing productivity. “We had to hire a 20-member team to convince bus operators to come to our platform. There was an elaborate backend to deal with customers.” But with smartphones, inventory procurement and customer care can happen with much less resources, and in real time. Sama adds that Ola can launch multiple services because “it has the distribution”—and the routing algorithms—to predict and optimise the use of its cabs.

The foray into autos givers Ola's hyperlocal plans added muscle.
The foray into autos givers Ola's hyperlocal plans added muscle.

If Ola can master this model, it would have created a whole new kind of company. Think of it as a conglomerate tailored for the burgeoning on-demand economy, which can rapidly expand into scalable businesses off an agile technology platform. “The inherent value of Ola is that platform,” says Bhati. “If it cannot support experimentation, then it’s not much of a platform.”

A caveat is necessary here. A classic conglomerate is often made up of businesses that are unrelated but feed off the parent brand. Take TCS, Tata Chemicals, Tata Motors, and the Indian Hotels Company, which are part of the Tata group and took decades to build. “In the digital world, Amazon is a great example,” says Krishnan of IIM Indore. It started with e-retail and moved into videos (Amazon Prime), devices (Kindle, Fire), and cloud computing (Amazon Web Services). Seen through this lens, Ola would appear to be merely diversifying, that is, extending into related businesses.

But Krishnan points out that this homogeneity is true of even a pioneering, listed Internet business like Info Edge (flagship Naukri.com launched in 1997), which is recognised as a bona fide conglomerate with interests in education (Shiksha.com), executive search (QuadrangleSearch.com), matrimony (Jeevansathi.com), and real estate (99acres.com). Most of these businesses were built on the same core domain: classified ads. This holds good for other early starters, including People Group (shaadi.com), which built real estate portal Makaan.com (sold to PropTiger), and Consim (BharatMatrimony.com), which started IndiaProperty (hived off as a separate business in which founder Murugavel Janakiraman has a small stake). Krishnan says this is where Internet companies are different from, say, the Tatas, and closer to ITC’s model of building a conglomerate of contiguous businesses.

There’s another, unobvious parallel rooted in history. Many of India’s bellwether conglomerates were born as the only way to outgrow the production caps imposed across industries during the licence raj. Dwijendra Tripathi, retired professor of business history at the Indian Institute of Management, Ahmedabad, writes in The Oxford History of Indian Business that the Birla group, for instance, steeped in textiles and composed of 13 major companies in 1947, had swelled to 200 companies by 1985. Similarly, the licence raj saw the Bajaj group grow from sugar mills to electrical appliances and two- and three-wheelers. The limitations on growth that Ola is facing with India’s small base of online buyers—and the pressures on it to break free—resemble those odds.

With Ratan Tata on board, it is tempting to assume that Ola is getting a crash course in conglomerate building. But Anand Subramanian, senior director for marketing communications at Ola, says most of the company’s discussions with Tata have revolved around “the future of mobility, and how Ola can impact it. We also delved into the kind of socio-economic impact this would have on driver entrepreneurs.”

THE TROUBLE IS, Ola’s grand plans have coincided with big challenges in its bread-and-butter cab business. First: tackling a regulatory can of worms that has lain open since the alleged rape of a female passenger by an Uber driver last year. The incident, which ended up revealing that cab aggregators cannot be regulated using the existing frameworks for radio taxis, led to the spectre of a blanket ban on aggregators. While Uber has been hit the hardest, Ola too is battling a possible ban in Delhi for running diesel cars in contravention of rules.

Subramanian says as a self-regulatory move, the company is investing in driver training, verification, and extra layers of GPS tracking in its cabs. It also engages regularly with road transport officials and state transport ministries. “We want to be proactive in industry practices as regulations for the digital economy take shape,” says Subramanian. The digital economy is currently a blind spot for the government, as evidenced by its reported troubles in even locating the Uber office in the National Capital Region after the rape. “The government shouldn’t notice Ola for the first time because of a bad incident,” says Pallav Singh, CEO of TaxiForSure and senior vice president (operations) at Ola.

Ola's app-only move can help it switch to a leaner backend.
Ola's app-only move can help it switch to a leaner backend.

Then there’s the question of retaining drivers without incentives. An independent fleet operator in Bengaluru says, “Both Uber and Ola have brought in customer convenience, but drivers joined them only for the incentives. The moment that stops, drivers leave.” To compensate, Ola is helping drivers with medical and accident insurance and has tied up with State Bank of India to offer them car loans, but “many drivers are moving to Uber because it is giving better deals,” says the operator. Uber also offers lower fares than Ola in many cities. However, Subramanian says Ola has at least a two-year advantage because of its headstart over Uber.

When Singh discussed the new ventures with drivers in January, they were surprised. “Their questions ranged from ‘Why are you doing this? Ola is a taxi service, isn’t it?’ to ‘What’s in it for me?’” Ola’s effort is to get drivers more engaged and loyal to the brand. But that might be a tall order, given old habits.

It also has to find a way to deal with hostile taxi unions that see cab aggregators as a threat. In July, taximen in Mangaluru protested before the city administration, alleging Ola was trying to monopolise the business. In fact this is one thing that unites it with Uber, which has been flayed by angry cabbies across the world, from London to Paris to Mexico.
In the near term, Ola faces another daunting ask: filling a slew of new management roles. It can learn from Wipro, one of India’s early conglomerates, which transitioned from making vegetable oil (in the ’40s) to consumer products and industrial hydraulics (’70s), before entering the personal computers market—eventually growing it into the IT services flagship—in the ’80s. “We had to explain to everyone what we wanted Wipro to be,” recalls Pratik Kumar, CEO of Wipro Infrastructure Engineering and former group HR head for Wipro. “The top managers had to chase a new breed of talent—entrepreneurial persons who could take ownership and run. Chairman Azim Premji himself spent a lot of time hiring managers across levels,” recalls Kumar, who finishes 25 years at Wipro next year.

Ola’s journey to build a management team beyond its founders has just begun. In February Aggarwal poached Sunit Singh, head of design at ClearTrip, a company he admires for its user experience. He also snagged Amit Mathur as head of talent acquisition from VMWare to focus on tech hires, separating it from business staffing under Rohit Munjal who came from GE Healthcare. Both Mathur and Munjal report to Yugantar Saikia, an experienced hand from software analytics firm FICO. Then there’s Arvind Singhatiya, formerly of Metro Cash & Carry, who joined as head of public policy, government relations, and legal. Another star hire is Sundeep Sahni, former managing director of Lazada Indonesia, Southeast Asia’s top e-retailer.

But luring talent is a relentless, high-stakes game where Flipkart and Snapdeal have proven hard to beat. And unless Ola can build a continuous stream of leaders for the new services, things will slow down. Already, the rollout has been fraught with delays. In parts of Delhi, for instance, the Café button on the app has been promising delivery in “15 minutes” since its launch, but upon clicking, you are told that the service is still not operational.

THESE CONCERNS SEGUE INTO THE CORE COMPETENCE VS. DIVERSIFICATION DEBATE. In the startup world, the sacred norm is going after a niche rather than spreading too wide. That’s why Internet pioneers like Info Edge launched new businesses years after strengthening their main business. In an unrelated interview (see page 34), Intel’s South Asia managing director Debjani Ghosh sums up the risks. “India is like a toy shop” for tech companies given the sheer number of addressable challenges, says Ghosh. “How do you prioritise where you want to play? That’s going to be one of the toughest questions.” To be sure, Ola is not the only startup on an expansion spree. Far smaller ones, like grocery-delivery players BigBasket and Grofers, have started dipping into niches such as electronics and personal care. The closest comparison for Ola is possibly Paytm, another five-year-old unicorn. Founded by Vijay Shekhar Sharma and backed by Alibaba, it claims 80,000 users in its mobile wallet business, and forayed into m-commerce last year. Sharma says as of June, users bought goods and services worth $1.5 billion in gross value from 9,000 active merchants.

“All this was not possible in 2011-12 when investors were not pumping in money at the same pace,” says an investor who doesn’t have a stake in either Ola or Paytm. “While Paytm has been dominant in payment, its attempt to crack e-commerce was seen as a crazy move less than a year ago, but not any more. Similarly, over the next few years, one successful experiment could give a quantum boost to Ola’s growth.”

In fact investors in mature public companies seem to appreciate the idea of cross-pollinating businesses. The philosophy: It’s better to re-invest money than let it idle in times of growth. For instance, last July, when Info Edge announced that its board had approved a qualified institutional placement (QIP) worth Rs 750 crore to invest in 99acres.com, the share price closed at Rs 697. A month later, when an extraordinary general meeting of shareholders approved the QIP, the share price had inched up by 12.24%, Rs 782.51. And finally, on the date of the QIP announcement, the share price closed at Rs 888.11—a juicy 27.39% higher than July and 20.02% higher than the QIP issue price.

What does Aggarwal make of all the frenzied attempts to predict the future of his unicorn? From his boyish countenance, it is difficult to say if he takes any of it seriously. “We are still a startup,” he says matter-of-factly, “we need to do many more things.” The memory of the aborted cycling trip should keep him in line.

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