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Saurabh Jain is betting on the cautious Indian investor | Stable Money
257 Plays1 year ago
Discover how Stable Money is tapping into the lucrative market of Fixed Deposits, a product widely used by Indians for savings yet overlooked by most founders. Within just one year of operation, Stable Money has already secured 10 mn dollars in funding from some of the best VCs in India. In this conversation, Saurabh shares how he figured out the whitespace, why he believes hiring a Chief of Staff early is crucial for founders and the key factors behind their rapid growth.
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Read more about Stable Money:-
1.India’s first digital fixed-return investment platform Stable Money launched
2.How Stable Money is shining the spotlight on fixed deposits | Simply Save
3.Stable Money launches first fixed deposit marketplace
4.Digital fixed-return investment platform, Stable Money, unveiled
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Transcript
Introduction to Stable Money
00:00:00
Speaker
Hi, I'm Saurabh Jain. I'm co-founder of Stable Money. We are a fixed income investment platform based out of Bangalore.
00:00:19
Speaker
In the very crowded fintech space, stable money is a startup that is focusing on a very basic and amazingly overlooked product, which is fixed deposits. The fact is that a lot more Indians use FDs to save their mutual funds or equity. It's a product that does not need any consumer education or hard sell. And there is a category of consumers who do active balancing of their FDs based on which bank is offering the best rate of interest.
Stable Money's Funding Success
00:00:44
Speaker
It is this unique insight that nets Saurabh Jain to build a fintech platform for this type of customer and within just one year of operation they have already secured 10 million dollars of funding from some of the best VCs in India. Stay tuned for Raksha's freewheeling conversation with Saurabh as he talks about his learnings as a first-time entrepreneur and then while working with some of the best founders in India before finally starting up again with stable money.
00:01:19
Speaker
So sort of you are a serial founder and you've been in the startup ecosystem for quite some time.
Saurabh Jain's Startup Journey
00:01:26
Speaker
Take me through your journey of becoming an entrepreneur. I was in Geneva for one of the assignments for a couple of years. And when I was at Fractal Analytics, they sent me to Geneva for a couple of years and it's always dreamed to be in Switzerland.
00:01:41
Speaker
And I think for one of the visits, I came to India and started meeting some of my friends. And there I realized that everybody will talk about how's their life in Geneva. But then I realized that nobody is talking about me. Everybody is talking about some of the friends who are starting up.
00:01:59
Speaker
Some of the friends were part of the tiny old team or the housing.com team, like Ola team. And their stories were so exciting, what they do. And I was getting a lot of shwomo. I landed in Geneva and decided I have to come back. And that's how, and within, I think within 45 days, I was back in India. So resigned from there and landed a job in tiny old to get back to the startup world.
00:02:27
Speaker
And that's how this started. Obviously, I left tiny hour within just three months of joining and started by one company. But the story came more from the former piece. Interesting. And IIT Bombay has a very strong founder community, which has come out of it. So I guess the examples were very, very evident for you. And also, I mean, you tend to think that if this guy who I knew in college can do a startup, then I can also do a startup.
00:02:57
Speaker
Okay. So you joined Tiny Owl and you left in three months. What was the reason? Was it that you were not feeling satisfied at Tiny Owl or was it that you were bitten by an idea which you had to pursue? See, Tiny Owl was always the bridge towards the startup because I was away from the Indian ecosystem for a couple of years. I was not aware of how the startup ecosystem will work. So I thought I'll spend maybe a year or two at Tiny Owl. They were also growing.
00:03:28
Speaker
learn something from there and then move on to my own venture. But I think got one of my best friends to start up with me. He got convinced very early. We got an idea. So all that happened within three months. And I said, there is no reason to just hang on to the company just for the sake of duration and left it in three months. Yeah. And what was, what, what did
Challenges with Truce and Transition to Swiggy
00:03:52
Speaker
you build?
00:03:53
Speaker
So we built a company called Truce, which is True Price. The idea is that this whole agricultural supply chain, everybody talks about that there are so many inefficiencies in between. So we said that we will procure from farmers and delivering it to the restaurants. It was a B2B kind of a business. Farm to fridge, not farm to fridge kind of a thing, but a B2B.
00:04:18
Speaker
So, we were helping all these big restaurants and like what we called as a Horeka segment procure at a cheaper price and a better quality because this industry has a lot of transparency issue. They don't know what is the real price.
00:04:34
Speaker
and also farmers are not getting the real price for that. So we started building that first working in the Maharashtra segment where Nasik and all of that area has a lot of farming, agriculture and produce from there getting it to Bombay and then delivering to some of the restaurants in Mumbai and then scale it to few more cities after that. Did you raise money for this?
00:04:57
Speaker
We did raise around, let's say, 600K dollars at that point in time. And we raised from some good engines like Titan Capital, Kunalisha. Then some of the early VCs at that point in time, 314 was very early in those days. Bnext was very early in those days. I think now they do larger checks in the bigger companies. But we were the early few companies that they had put a bet on. So yeah.
00:05:27
Speaker
And I guess the IAT Mumbai ecosystem would have helped in terms of being able to connect to investors and also in terms of credibility building.
00:05:37
Speaker
I think that's been helping even till date. It's very easy to reach out to some of your friends or people that you know to help you connect to any founder or any VC. And that point in time as well, I think that was the major thing. Somebody has connected us to Traction founder Abhishek Goyal from the IIT network only. And he was the first one to say yes to us. At that point in time, I think Traction was doing angel checks as well.
00:06:04
Speaker
So, and that's how it all started. And then not only for the VCs and the idea, just hiring and everything that ecosystem helps a lot. Okay. Interesting. So what, you know, what were your learnings from building truths? It obviously did not work out and that's why stable money, but was it wrong market? Was it timing was bad? Was it?
00:06:32
Speaker
like, you know, not raising enough funds, or what was it? Because India put something which other companies have done, right? Farm to restaurant and farm to retailers. So why did Truce succeed?
00:06:47
Speaker
Well, there are two, three reasons and I'm still able, not able to figure out that was it us, was it the timing or was it the industry? But I'll tell you all the reasons, right? First is in this agri supply chain, I think we realize that there are a lot of efficiencies, but I think one thing we completely missed specifically in Indian ecosystem, that in this whole supply chain,
00:07:10
Speaker
there are a lot of people, a lot of middlemen who add so much value at such a low cost. And just to give you some example about this, let's say for example, we had to build a team and a warehouse where all the vegetables will come in and then we do a sorting and grading and then we distribute it to the restaurants. Now you have to employ people and then you have to do ESIC, PS, everything for that, run it like an organization.
00:07:38
Speaker
But this is done in an APMC in Bombay Vashi at a 20 rupees per hour cost, where these vendors will do it at such a low cost. And there are multiple such examples in the ecosystem. So if you have to do it,
00:07:56
Speaker
like a very proper organization, I think it will still cost you and the value that you wanted to add will not be passed on either to the farmers or to the end consumer. So that was one major learning about the problem statement.
00:08:10
Speaker
Second is how we operated as a founder. We were the first-time founder and me and my very close friend from IIT Bombay, we started this. When we started building the team, we were very cost-conscious that this is the requirement, hire somebody, find the cheapest resource to do that.
00:08:30
Speaker
And because of that behavior, initially we were very proud of what we were doing. We were running an organization at such a low cost and such agility and frugality, very small office and all of that. But then what happened is when things start scaling up, we realized that the team is not scaling fast, right? Because they were just supposed to do that work and they were maybe capable of doing just that work.
00:08:56
Speaker
And because of that, me and my co-founder had to chip in at so many places and we got sucked into that. And honestly, it feels very good when you are busy, like just going from one call to another call, one place to another place and keep running.
00:09:11
Speaker
But then we missed out the complete tangent that we gain Zomato as companies are scaling so fast. That means restaurants have started adopting to the technology. And if they are doing it for the front end, they will do it for the back end as well. And we couldn't capture that and just switched on from this idea to something more on a B2B side, which is procuring
Swiggy's Expansion Strategy
00:09:35
Speaker
from farmers and giving it to the vendors rather than giving it to the restaurants.
00:09:39
Speaker
And because of this, we had to shut down, move to Swiggy, but one fourth of our GMV company at that point in time got acquired by Zomato and become what Hyperpure is today, which is one of the three verticals of Zomato. And we declared that, that we didn't stick to the problem statement at that point in time.
00:10:05
Speaker
But yeah, I think there's a mix of these few pieces that have happened which led to the final fate for Truce. When you say one-fourth of the GMV was acquired, are you saying that you sold it or are you saying that they captured that market?
00:10:25
Speaker
No, no. So I'm saying that at point in time we were doing around 75 lakh to one crore kind of a GME every month. Right. And then we shut it down. We returned the money to our investors and got moved to Sweetie. But then three, four, five months after that, like a smaller GMB company was eventually acquired by Zomato. So, so I think that's the piece. Like if we would have continued for some more time, I think things would have been better.
00:10:54
Speaker
Interesting. Interesting. And Hyperpure does this exact same thing, like fast food, restaurants. Yeah. I think it makes all the more logical sense, right? Because see, the biggest problem when you do such kind of a business is working capital because restaurants will pay you after 30, 40 days. If you want a great pricing from the farmers and a good procurement from them, you'll have to pay them upfront or immediately after the procurement.
00:11:21
Speaker
So then there is a working capital issue. The only place are the companies who can solve that, who has restaurants money. And Swiggy and Zomato have restaurants money up front, right? So that's, it makes a hundred percent sense to like build this as a business where you can extract more margins from the same business. So yeah, very logical. Interesting. Interesting. Okay. And the Swiggy was like an acquiesce kind of a deal. Like how did the move to Swiggy happen?
00:11:51
Speaker
So when we had raised our first round at that point in time, because we raised this entire 600k into two rounds, that one in time Harsha had pinged and Swiggy was also maybe just few years into the business. He said he wanted to chat and understand how we do the business. So we had a brief chat that point in time.
00:12:10
Speaker
But when we decided that, okay, this is the money left and for our kind of expertise and a business and the tech, whatever limited tech that we have built, who are the logical companies? And because Harsha and I were connected initially, I honestly reached out to him saying that this is what we are doing. We want to explore and do the acquisition.
00:12:31
Speaker
And that's the time we got into the meeting with the goal of an acquisition. But eventually the priorities for them, because they had raised a larger capital at that point in time, maybe at a billion dollar valuation. And the focus was on growth and not to digress from food delivery to some other businesses. So they said that, OK, we will not be able to do the acquisition because this is not the priority for us. So you guys come and join us. So our team was anyway small. So we joined the Swiggy team at that point in time.
00:13:00
Speaker
And the thought was that this business will get built later, but because the growth was happening so fast, that at least for the next three, four years, even today, maybe Swiggy is not into that business right now. Interesting. And what did you do at Swiggy? How did you contribute to the growth?
00:13:22
Speaker
So when I joined Swiggy, my focus was to lead the growth charter and we were doing 1 lakh order per day at that point in time. The idea is to hit first 3 lakh order milestone and then eventually a 10 lakh order milestone.
00:13:37
Speaker
I was initially part of the center planning and performance team, which works with all the different city teams, see what are the campaigns to be done and how do we drive growth for them. So enabling the bridge between the city team and the HQ team. But then when Vivek Sundar had joined as a CEO, I was asked to be the chief of staff to him.
00:13:59
Speaker
And that's the time we started picking up a lot more growth initiatives. And one of the biggest growth initiatives at that point in time was scaling cities from 10, 15 cities. It was there to make a pan India presence like 500 plus cities.
00:14:15
Speaker
And that is the main charter that I led there for almost nine months where we scaled it to five 30 cities, Swiggy's presence. And we were where we were launching seven, like one city every seven months to launching seven cities a day. That is the kind of scale that we have, captures a larger team around 300, 350 people.
00:14:38
Speaker
Yeah, so that's the second stint as we began. In the third stint, I was heading the P&L of these, what we call as emerging India at that point in time, the all the newer cities that we had launched, like in terms of how do we try and grow in those cities. Okay, interesting. There are two different questions I have here. Let me start with this.
Transition to Navi and Growth Strategies
00:15:03
Speaker
I am guessing that 80% of the revenue would still come from like the top 10 cities. The remaining 490 cities would together contribute 20% of the revenue. Am I right in that understanding? Yeah, you're close by. I think I believe I also don't know the numbers, but yeah, I think 20-30% would be. Yes. Okay.
00:15:25
Speaker
Does it make sense to go into 500 cities slash towns, burn so much money? I mean, why not? Is there enough market beyond tier one and maybe let's say another 50 tier two cities?
00:15:45
Speaker
Yeah, see, the first question is very valid that why spend so much money to do this. And that was the goal that we had, that how do you scale it to so many cities with the minimum cost? And I'll give you some examples of that. We launched a few cities like tourist cities, like let's say, UT, where the focus was not to keep the city on forever. We will operate only during the
00:16:10
Speaker
peak season in that city so that city had no office, anything. There are a lot of cities that we had launched where there is no physical presence of Swiggy. We have onboarded the restaurants, we have onboarded the delivery boys completely digital because these people have heard of Swiggy a lot. So the cost of launching a new city goes down drastically because at that point in time, Swiggy has done IP and branding and everything. So all people were aware of
00:16:38
Speaker
Another very interesting example is when the IPL campaign happened, we had a lot of people across multiple cities downloading Swiggy, but they saw that we are not presenting our city.
00:16:51
Speaker
We started calling those people from those cities and saying that, hey, we are coming to your cities. Can you help us with the list of 25, 30 restaurants, which are the important or the big restaurants in your cities that you would like to order from? And that's how we collected the list of restaurants. And then we started speaking to some of these people online. They have heard of us. So it was honestly done at a significantly lower cost.
00:17:12
Speaker
There were cities that we had planned through people who had a very big distribution network for a FMCG product into those cities. Because they have such a high presence, they worked with us and we scaled some of those cities. So the cost-wise, we were much better. Second is also in terms of potential. I think there are a lot of good cities which are adding to a significant revenues that come from that. For example, you took Neshwar Katak.
00:17:40
Speaker
These are some of the cities when we launched, I think maybe it's the 30th or 40th city that we had launched at that point in time. But now is in top 10 cities, hopefully for the food delivery business. So some of these stars have come from that. And third is it gives you a lot of brand value and see if there are any other potential businesses that can happen. So not maybe food delivery.
00:18:04
Speaker
but a grocery or, let's say, transport or genie kind of a business, Danzo kind of a business. Can that work? So there are some cities where the food delivery business is small, but other businesses are slightly bigger. And then, let's say, dine-out come in and all these come in. It makes a lot more sense to have your presence in those cities. And also, at that point in time, Zomato was feeling very, very fast, right?
00:18:33
Speaker
So nobody will lose out the business to the competition just for the sake of cost. So I think at that point in time, that was the call that we'll also go and scale faster. Did Zomato also hit like a 500 kind of a number?
00:18:50
Speaker
Oh yeah, they did. So this Ola, Uber and Zomato, whenever at peak times they will all know how things are happening and everybody will compete very fast. So I think we were also very neck-to-neck in terms of launching the cities. So the city launch for Zomato used to happen and then hours used to happen and immediately for Zomato. So that's how it used to happen.
00:19:13
Speaker
Okay. In hindsight, I mean, okay. So maybe the first hundred or the first 200 cities would have made economic sense. But beyond those hundred, 200 cities, do you think it was a good call to continue to expand to 500?
00:19:30
Speaker
I believe it was still a good call to expand, maybe not to 500, but 300, 400 definitely is a good number because Zomato is running in those cities, Swiggy is running into those cities and clearly those cities are profitable.
00:19:46
Speaker
Right now, the question is whether not spending energy at that point in time and then putting that energy somewhere else could have given you a better outcome. We don't know, but today those cities are profitable. So yeah, maybe today, at least for me, and I don't know these businesses for the last four, five years now, it is still a good call.
00:20:06
Speaker
Okay. Interesting. Interesting. Right. Yeah. I guess you don't want to lose out to Zomato in a city which ends up being profitable. And it's hard to know before you actually go to the ground, whether a city will be profitable or not. So you have to take those bets and do those experiments and to discover which are profitable cities. Okay. Understood. Interesting. Okay. So what next after Swiggy?
00:20:36
Speaker
So he was happening all well going on road and I was almost like let's say maybe I think 30-32 months in Swiggy. Just one fine day I got a call from Navi from one of the HR recruiters. I'm saying that his Sachin is looking for a chief of staff and I was shocked like first I've never interacted with Sachin towards a professional career and how it is lagging on to me.
00:21:03
Speaker
But I think they had a very clear requirement that anybody who's from a premium college who has done a startup and has done a chief of staff role in the past. And four or five years back, chief of staff roles were very, very limited. I think now everywhere there is every company has a chief of staff. We are a very small company. We still have a chief of staff. But so at that point in time, there were very few who would put into this criteria. And I had done that chief of staff role at Swiggy.
00:21:28
Speaker
So I said, why not? I would love to talk to Sachin. I was not very keen at all at that point in time. And then I was telling my parents that this is the call that I've got from Sachin. I'm not aware of who is Sachin. It was very difficult for me to explain who is Sachin. So I told them Sachin is like a Modi of startups. So anybody
00:21:53
Speaker
who has been into startup world or has done something good. Somewhere Sachin has a role to play. So I thought it will be good to meet him. And then I met him. I met the team. I realized what is the vision for Navi and all of that. Got very excited and got through as well. And then I thought it's a good thing for me to do that. And that's something actually that has always helped me.
00:22:22
Speaker
Leaving Geneva when things were going well to come back to India, there was some difficult patch but it all is fine. Then joining Swiggy, I was very comfortable with Bombay. I just had a kid. It was very difficult for me to move with parents and wife and kid to Bangalore.
00:22:40
Speaker
So one year I was alone here, difficult time, but in hindsight, it's a good call. I thought maybe there is a pattern. So I thought it's good to jump into FinTech. I have no experience of FinTech. And working with Sachin, maybe it could have an exponential benefit. So I took that call.
00:22:57
Speaker
a lower regret move because if things were not working I would have anyways come back to Swiggy. So joined as the chief of staff there and the initial few months were difficult for me to settle down because every person has a different style of working versus Swiggy versus Sachin was a different to understand that. But then that gave a lot of exposure and the time at Navi was
00:23:24
Speaker
really exciting. So that's how the switch happened. And if I have to go back and see all these things, I would have made the exact same moves I've done. Okay. Interesting. Can you zoom in a bit on the chief of staff role?
00:23:41
Speaker
Yes, Chief of Staff at Navi was very unique because the expectation from Vivek was that I get involved in some of the key projects, do that execution end-to-end and then hand it over to the respective teams depending upon the outcome that we have from that. So it was a lot of involvement and I'm more of a doer than
00:24:03
Speaker
just tinker and working with the stakeholders. But when I moved to NaVi, Sachin was very clear that I don't want my office to be the bottleneck. There are enough people who are supposed to do the work. The decision making should happen faster, so the buck should not stop at me. I think they should keep doing what they are doing.
00:24:24
Speaker
So it was just more of a stakeholder management and seeing if there are any bottlenecks there which we can solve for. So that's the thing. And then Sachin is also very hands-on, so he was involved in everything. So managing that was critical and I was also not coming from that background of FinTech. So for me, every meeting was a new learning. So I was not contributing so much.
00:24:47
Speaker
And there were a lot of acquisitions that were happening at that point in time. There was a DHF and insurance acquisition that we were doing. There was a lot of other work than the core business that we were supposed to do. So I was involved in that. But then that gave me a very good idea from
00:25:05
Speaker
a high level in terms of how some of these fintechs work and specifically lending, because we had started lending just at the peak of wave two of COVID. It was a very difficult call, but how the product shaped up and how the teams were managed. I think that was a great learning. So that was the chief of staff kind of a rule, and that gave me a very good understanding of how Sachin also operates. So the best part is if you know how you're executing works,
00:25:34
Speaker
is when you move from a Chief of Staff role to any other business role, I think it makes this very, very clear for you or very, very efficient for you because you know what is expected out of you and how the person works, right? So that doesn't give you, so you have a lot of push in terms of how you want to operate. So I think for me, going from the Chief of Staff role to the CEO of Navi Mutual Fund,
00:25:58
Speaker
I think I could do much better in the newer role just because I know Chief of Staff too, Sachin before that. And I guess typically a Chief of Staff role does open up a leadership role for people at a fairly young age, right? Like somebody who's spent a couple of years in Chief of Staff, has the trust of the founder and can get into like a CEO role at a fairly young age.
00:26:22
Speaker
Yeah, because you have so much FaceTime with the founder or you're executing, and otherwise you can make certain mistake, but because you don't have so much FaceTime, you can't correct some of those things. But you have so many, so I had a long rope as chief of staff with Sachin, so made a bunch of mistakes as well, realized, corrected it.
00:26:45
Speaker
And it's very visible for the founder as well to see that improvement happening. So that builds a lot of trust. And that's why the movement from chief of staff to a larger business role happens much faster. And to me, I think it happened in just seven to eight months. And it's very, very unexpectedly. Just one day Sachin said that, hey, acquisition is done. And why don't you take up the role as a CEO of nothing mutual finance? Yeah.
00:27:15
Speaker
Amazing. As a founder, how should one think of a chief of staff? Like when should a founder hire a chief of staff? What should they hire for?
00:27:25
Speaker
I think there are two major parts. First is you want to just do the program management after the things and you want somebody to be part of everything so that that person can connect the dots across the multiple meetings, multiple initiatives that are happening and keep building a bigger picture for you. I think that is a good time to have a chief of staff.
00:27:49
Speaker
Another good time to have a chief of staff or the kind of person to have a chief of staff is where you have worked with somebody, have a lot of trust and value, a lot of feedback from that person to having by your side as a chief of staff and keep brainstorming with that person because you can't do that with everybody in your team because just the time constraint. So I think these are the two reasons for which I think you should have a chief of staff like initial for almost
00:28:17
Speaker
Till two months back we had no chief of staff because I was also very actively involved into things that are happening and there were honestly not so many things that were happening.
00:28:28
Speaker
But now because there are so many things happening and you're realizing that the team size is slightly bigger and it's difficult to communicate everything that is happening, I think having somebody as a chief of staff could help. Also, our vision to get chief of staff is have somebody early who can see this entire journey and then at the later stages can get into the business role.
00:28:54
Speaker
as well, right? So you also start building your talent pipeline where you first get somebody as a chief of staff, spend time with that person and then move into the business role as per the capabilities. Well, that's an interesting perspective on why a founder should hire a chief of staff early. Amazing. Okay. So what was Navi's vision? Navi's vision
00:29:21
Speaker
So Navi's vision at that point in time was to become a bank, like a new age bank where, like if HDFC has to be built from scratch today, how will it look? It'll look very tech enabled, very customer focused, depending upon the needs of somebody who is using Zomato, Swiggy, Ola, Uber, and so many apps, right? So that's the vision that Navi had when we started.
00:29:52
Speaker
Okay. And the way they wanted to build it was through a mix of acquisitions and organic. What all acquisitions has now been done till date? So now we had acquired an NBFC through which they have done the banking, applied for the banking license. Now we had acquired a single mutual fund and DHFL insurance. All this is public info.
00:30:14
Speaker
So the pieces of a bank are savings and lending, largely speaking. And of course, like facilitating payment transactions and so on and so forth. So probably the facilitating payment transaction piece is not there so much because they don't have a banking license. But lending is through the NBFC, savings is through the mutual funds that they've acquired. Insurance is, again, somewhat savings related.
00:30:40
Speaker
I think Navi had that benefit of capital that you can start thinking of a bank from day one rather than waiting for the license to come in and then slowly start building it over the next five to ten years.
00:30:58
Speaker
Sachin's vision was to do a lot of things and front load a lot of these activities. And we could afford at that point in time. So that's why some of these acquisitions also happened. And Sachin had his capital from the Flipkart exit to invest here. So I don't think they've raised external capital, have they? Nothing. That is in some very strategic investments.
00:31:26
Speaker
Okay, understood. Do you think Jio Blackrock will kind of do what Navi's vision was? I don't know about Jio and Blackrock, but honestly, there are very, very few people in Akshay that I've seen who are so customer-backwards, right? Not everybody thinks about customer so deeply how such things.
00:31:52
Speaker
So that will always be the benefit that Navi will have or whatever that Satchin does to understand the ping pong and build it very simply for that customer. People will catch up but it will always be a catch up game.
00:32:10
Speaker
against Sachin. So I think he will have that benefit for Sean. Obviously, GEO BlackRock has a lot of benefit in terms of the reach and the brand value. So yes, and the capital. But I think customer backwards thinking is what I believe is the biggest mode for Sachin.
00:32:34
Speaker
What does this customer backward thinking look like? Give me some examples of how you saw it in action at Navi. And you know, how does that become a mode?
00:32:43
Speaker
Yeah, so I'll give you one best example. So at Navi, we were doing a brainstorming on what should be the 10-year vision for Navi Mutual Fund. And as a CEO, we were putting a lot of data together in terms of how it happens. And we realized that the rate at which
00:33:04
Speaker
FD has 250 million users and mutual fund after so much of a campaign, it's still at 30-35 million users and very few of them are active because people are trying and then they are churning.
00:33:26
Speaker
And we went deeper into that and realized that the biggest problem about mutual fund is the complex city. People don't understand the mutual fund really better than what is a blue chip mutual fund, what is a asset allocation mutual fund, what is a different segment mutual fund. Because which talks come in and who decides who takes a call and all of that is very difficult for the customer.
00:33:53
Speaker
I said, Kia, we want to build something which is very, very simple to understand. And when it comes to market, people understand the index really better. And that's how we got into that we will build only index one.
00:34:08
Speaker
The fund that is very easy to explain to somebody why it is doing what it is doing right now. That if Nifty is up, your fund is up. If Nifty is down, your fund is down. But Nifty over the last 10 years has given you a cagger of 12-13%. That's what you should expect. Keep here for a long-term period. We don't get into the nitty-gritty of who is the fund manager, what is he thinking, and a lot of these meetings and sessions with the customers and the distributors. He said we'll not do all of that.
00:34:36
Speaker
We'll just build this. Now the second question is barrier to entry.
00:34:41
Speaker
that currently 50 rupees is the barrier to entry. 500 rupees is the barrier to entry for a mutual fund SIP. And this has been defined by the mutual fund companies. He said that I don't want this. I want somebody to try with 10 rupees a mutual fund. And that's how then we introduced that we'll do passive funds. And then we introduced that you can invest in Navi mutual funds at 10 rupees.
00:35:07
Speaker
And that has, that has been a very big hit, uh, for Navi Lecha Fund, that now people are investing with 10 rupees, try, build trust, see that money growing, and then start putting in larger and larger amounts into them.
00:35:22
Speaker
So I think, and this is one of many, many examples how he's been thinking there are examples in insurance and examples in lending, but we've been closer to the mutual funds and these are a few of those things how he thought about customer backwards and not thinking business. Because if you think very honestly, you don't make significant money in passive funds.
00:35:45
Speaker
because the expense ratios are so low. You make major money in the active funds, but the strategy was different because the idea, the vision is to become vanguard of India and not be just one of the slightly profitable mutual funds that exist.
00:36:02
Speaker
Okay. Interesting. So instead of focusing, like a lot of businesses want to optimize processes and you know, so they want to do things which are like quick to execute and irrespective of what is the customer convenience. Like the business convenience is generally in mind first. So Sachin has the opposite approach of customer convenience first and the business will figure out a way to make it work. Interesting.
00:36:31
Speaker
Yeah. And he has done that, right? He has done that at Flipkart where the larger business was eventually made where they introduced COD, which is very counterintuitive at that point in time. So, if you solve for the customers, you will be able to build a larger business out of that. And like Navi Mutual Fund has scaled from almost 0 AM to maybe 2,000 to 5,000, 6,000 crore AM very fast. Where does that put it in the rank of mutual fund companies?
00:36:59
Speaker
Oh, I don't have. Is it top 10, top 20? No, I think top 5, top 10, but yeah, definitely in top 50. Okay. Okay. Okay. Understood. So, you know, for people who don't understand some of the terms that you use, like index mutual fund, active mutual fund, passive mutual fund, how a mutual fund earns, what is Vanguard? Can you just do like a one-on-one on that?
00:37:27
Speaker
Sure. Yeah. So mutual funds are of two types. One is active and one is passive. Active is the mutual fund where which stocks to buy for that specific mutual fund is being done actively by an individual, which we call as a portfolio manager. So there is a portfolio manager who decides that for this specific mutual fund, my bet is on these stocks. I will buy it at this particular time. I'll sell it at this particular time, right? So that is that individuals call.
00:37:56
Speaker
that has been used and then whatever that those stocks that he bought or sold or she bought or sold is the returns is the return passed on to the customers. So that is actively managed. Passively managed where there is no active portfolio manager who is deciding which stocks to buy or not. It follows an index. An index is like 50-50 index where top 50 market cap companies of India
00:38:23
Speaker
are part of that index one in a certain proportion. And then as that index moves up and down, the return of your funds will also go up and down. So if some stocks gets into top 50 or exist top 50, that's when you buy or sell that particular stock. So it has been passively managed. It is how the index move is what you move. So you don't rely on individual's capability or decision making to give you the returns.
00:38:52
Speaker
And that's the easiest way to run a fund. And because it is passively managed, the cost of managing that fund is low versus an actively managed fund because there is a person whose cost is also added to that fund.
00:39:09
Speaker
And generally, how mutual fund companies earn is whatever is the cost of managing that fund, right? That is first, you get it from the customer. Plus, there is a profit on top of that, right?
Founding Stable Money and Vision
00:39:24
Speaker
That is being added. So what we call the cost of managing fund plus what is the commission that mutual funds in there? Together, it is called as an expense ratio. That is very low in passive funds versus inactive funds.
00:39:39
Speaker
So using expense ratio is not a fixed number, but it's something fixed plus a profit share. That is how an expense ratio is. So funds which are performing well will have a higher expense ratio by default because profit share will come in. So it's decided by the mutual fund because they can afford to charge higher because they know that they are giving significantly higher returns to the customer consistently over a period of time.
00:40:03
Speaker
And there are some who keep it low because whatever they are charging comes out of the profit that the fund is earning. So if they charge more, the customers will get less. If they charge less, the customer will get that much more.
00:40:18
Speaker
And tell me a bit about Vanguard. Why did Navi want to be the Vanguard of India? Why is Vanguard a big deal? So Vanguard is the largest mutual fund based out of the US. That was the first mutual fund who introduced the passive and passive investing into the US.
00:40:39
Speaker
which at that point in time was very scrutinized that it will not give result. But over the next 10, 15 years after the launch, I think that is the most profitable has given the highest returns to the customers and people have switched from the active funds to the passive funds.
00:40:55
Speaker
So a lot of inspiration across the globe about how the passive investments operate, or maybe to India as well, has come from the learnings of Vanguard. But the only thing is Vanguard also operates as a significantly smaller cost.
00:41:10
Speaker
But the scale is so huge is that you start making money. And the idea for us to be the vanguard is that it's very difficult to take that call in a short term because you will not be profitable as you will be with running an active funds. But if you are able to capture the largest pool eventually, I think that's where it will start making sense. And all the profits that you have foregone over the last five, 10 years, I think you'll start making that within a few years.
00:41:41
Speaker
How does an index mutual fund build market leadership? Because every other company offering an index fund is offering the same product. There is no product differentiation as such. So how does one fund build market leadership over another fund? Yeah, see, I think this is a very interesting question that we were also
00:42:04
Speaker
discussing a lot internally that if, because everybody has an 50-50 index fund, how will you create the differentiations? So I think the first differentiation that we had was on the cost, that we will be the lowest expense ratio in this. So we will almost charge zero to the customers for operating or running that fund, right? So that gives us a significantly a good marketing tool or a good go-to market, saying that we'd be the lowest. And all the index funds are same.
00:42:31
Speaker
So why invest in a particular fund who is charging you higher, you invest in other fund who is charging you the lowest, right? So that's being the strategy and that's still continuing. And some of the pieces like- What is the expense ratio for Navi's versus others? Navi expense ratio when we had launched was around I think six to seven basis point and that point in time the next best, yeah, 0.06 and the next best at that point in time was maybe at 30 or 40 basis point.
00:43:01
Speaker
Okay. Five X difference. Okay. Yes. You know, before this episode, I did run a search on a couple of investing apps, like ET Money and a couple of others on Difty 50. Most of them were not showing Navi on top. I think there is a
00:43:19
Speaker
Uh, bias towards longer running funds because they like show you three year returns. So, so funds which don't have the three year return to show, uh, don't show otherwise all index funds are the same. So there's no reason for an app to recommend one over another. Uh, but I think just that having that legacy was probably helping the other companies to come up on top.
00:43:41
Speaker
Yeah. And that's what I think, actually that you will see that after the few more years, I think now we will start ranking top across all the channels. And the other strategy, I think other than the cost was how do you introduce the newer funds? Like for example, we were the first one to get Vanguard to India. And how you do that is you take a Vanguard fund and you create a fund of fund on that.
00:44:04
Speaker
So what it means in a layman term is if I have to invest into a Vanguard's largest fund, which is all US market, which invest into all the US stocks that exist. I can't do that. But now, Navi has created a fund of fund where you invest in that fund with your Indian rupees. And Navi will in return invest that into a Vanguard fund.
00:44:31
Speaker
So, the uniqueness on the products is critical. So, we had filed for 17 very unique funds or themes at that point in time. We introduced EV as a theme and we introduced Vanguard Total US as a theme. We introduced, I think we were working on Total India also as a theme. So, I think uniqueness on the products.
00:44:52
Speaker
can also help you because there are a lot of people who have belief in certain segments of the categories. There are a lot of people like us who believe in EV as a segment eventually. So how do you get a portion to invest in some of those things? The best way to do that is through passive investment.
00:45:11
Speaker
Okay. Okay. Although that again brings in subjectiveness, right? Because the EV fund would not invest in all EV companies. Someone would take a call that these are the top 10 EV companies we want to invest in. Yes. Yes. Okay. Okay. Okay. Interesting. Though I guess that's more for a slightly more involved, engaged investor, latest investors for them. The best is to just invest through an index fund.
00:45:39
Speaker
Yeah. Yeah. So that's why Nifty 50 NASDAQ, S&P, total US, I believe will still be the largest AM funds. How much is the expense ratio when you are investing in like say the NASDAQ or the total US because there'll be some cost of currency conversion and things like that, right?
00:46:01
Speaker
Yeah, so the cost of currency conversions will remain for every foreign funds. But there are certain rules and I don't remember the exact rules that whatever is the expense ratio of the base fund, you can't charge 2x of that. You can't charge more than 2x of that. So that leaves you with whatever you have to give to that. And in that remaining one, you have to manage all your expenses. And there are certain fixed expenses like RTA cost and all of that cost.
00:46:31
Speaker
RT is all the registered transfer agents like Kfins and Kams who manage this portfolio and ensure the redemption purchase are happening seamlessly. These are the back-end operations for all the 32 venture funds that exist. The investment part or the investors? No, they manage the operations part.
00:46:54
Speaker
Operations of what? Of investing or of onboarding investors? Onboarding investors, ensuring that their databases and everything is there. Allocating the NAB, calculating the NAB, what is the NAB of that. And then showing the returns if somebody redeems, ensuring that redemption happened at this rate. So calculating the total value, basis, nav, and transferring that amount. So there is a lot of operation works and these are larger companies.
00:47:21
Speaker
on Kfiran camps. So there are certain fixed costs. So eventually, and that's why there is very less leeway if you do a fund or fund. And that's why nobody was doing Vanguard. It's not something new that we introduced. But because there is no scope of earning anything there, nobody was doing it.
00:47:42
Speaker
Okay. But again, the bet was that we can take losses for a few years. Eventually it will be large enough to become profitable. At scale, it will be profitable. Yeah. Okay. Okay. I understood. Interesting. Okay. So what next after? What made you want to move on from Navi?
00:48:02
Speaker
So I think having seen Swiggy and Navi is where the realisation came where that as a founder, for the first time founder that we were at, we made a bunch of mistakes, we were not doing things right, we didn't evaluate the market really well.
00:48:20
Speaker
We didn't build the team really nice. And there's always that urge to go and start something and not do the same mistakes again. And I think that became stronger and stronger after seeing Harsha and Sachin how they operate.
00:48:35
Speaker
So I always wanted to do that. And doing this stint gave a lot of confidence that maybe this is a good time. And you always should start when you are at high of your confidence. And personally as well, I was at a good place. My son was a seven-year-old. So at least I can take a two, three year putting little hard work into this. So I thought this is a good time. There is no point of delaying this.
00:49:04
Speaker
The only question was the investment market was not at its peak, so raising funds could be difficult.
00:49:11
Speaker
But that also means that people like us who are little frugal can build a sustainable business for a long period of time and some of the good talent will be available at a cheaper cost. So keeping some of these things in mind, I spoke to Sachin and said that I wanted to start something of my own and we then took some time to close what I had to finish and then left
00:49:34
Speaker
Navi at around July 22 with almost no idea what I wanted to do, but I wanted to do something in FinTech having seen Navi Mutual Fund so closely for such a long period of time. But exactly what to be done was not very clear.
00:49:50
Speaker
So, but I'm also that person who has in the last 13-14 years have not taken a break, right? The day I left Geneva and landed in Bombay, the day I joined, similar happened between Swiggy and Navi and similar happened between Navi and now. That the next day I started going to a WeWork and started thinking about what I have to do next because I can't sit idle.
00:50:11
Speaker
So yeah, I think that was the reason why I honestly left Navi without a very clear idea in mind, because as I've seen in the past or have heard is that you will not have a very strong or concrete idea that you have to work on. It will always keep changing, right? So don't wait for that idea to come to you and then you leave. I think you'll have to take a move sooner than the idea hits you. And tell me the journey of discovering the idea, the market, the product,
00:50:43
Speaker
So I left in June and then started looking at the first task was to obviously reach out to the folks or the mentors that have always asked for and started talking about how to build, what is the market, how is the market right now and what are some of the open ideas, what are some of the learnings that they have worked on that has not worked and I clearly figured out that
00:51:06
Speaker
In India, FinTech has a very good potential. There are a lot of opportunities that are there. And even if you pick up a very small segment in India that itself is such a large audience that you can build a business just on that. So FinTech gives you that opportunity very quickly. And obviously there are a lot of solutions on the credit side that has been built. There are a lot of solutions on the payment side that is built.
00:51:36
Speaker
So that makes it all the more easier. And second is I've started looking through my notes of my customer calls through Navi Mutual Fund and realized that what has come out of that and what can be built through that. And that's where I think I realized that something on the wealth or the investment side could be an interesting piece with a clear caveat that in a wealth business, whatever businesses have been built,
00:52:02
Speaker
Either they have built a very dhanda business that caters to very small audience, but you make large commissions out of that. To do it at a scale is a little challenging because the commissions that you earn is significantly lower, but the cost that you incur to acquire a particular customer is significantly higher.
00:52:21
Speaker
So, sometimes the cost doesn't justify the lifetime value that the customer will bring to the company. And that's where a lot of companies fail and we were cognizant of that fact. And in that, mid of those things around September, I spoke to my co-founder Harish, who is a very dear friend from college. We have known each other for now, let's say 15-17 years.
00:52:43
Speaker
In a college time, we had run a very small venture just to earn some pocket money at that point in time. I reached out to him. He's also from a hedge fund, so very close to the Indian markets. And he was also at a time where he said that maybe we can start something. That was a very quick call for us that, okay, let's start something.
00:53:02
Speaker
I'm talking to him first to finally getting him on board and to eventually going and raising funds was a 15-20 days affair. It happened very quickly for us. And the idea was to build something on the website. The only question was, what will be the go-to market for you? Because that go-to market will define at what cost you'll acquire the customer.
00:53:25
Speaker
And that's where we realized that despite there is a lot of focus on the stocks market and the merchant fund, there is a larger segment in India which is still very, very risk averse. Who is not prone to these stocks in the merchant fund kind of a thing, even if those products are very simplified right now.
00:53:45
Speaker
These people will neither try this because their focus is that this is very hard-earned money. I don't want to put into this money because they have built that wealth over a period of time. And there is so much fear of losing that money and going back to those times when you had no money, that these people will never decrease. And that's why you will see that the lakhs and lakhs of rupees are shifting to the deposits and the savings and gold are the real estate because they have seen that this is the safest asset.
00:54:13
Speaker
and you will have a lot of liquidity here. Or people who have tried stocks and mutual fund just to try and then because of the market, the nature of the market, they have seen some negative returns out of that and quickly churned.
00:54:26
Speaker
and gone back to their natural appetite. And he said that this is a very interesting opportunity to capture. And because so much innovation happened on the mutual front of the stock side, the whole fixed income vertically has not gone through so much of product innovation. These are still happening in a very traditional way.
00:54:49
Speaker
There is still a lot of openness around how the breaking works, what are the charges, and how the FD rates are calculated, and what is the best MP to invest into, or similar around gold or any other fixed-income asset.
00:55:04
Speaker
We said that this is an interesting wild space to get into. And in that specific piece, fixed income is all the more critical. Fixed deposits or FDs is very critical because there are two, three tailwinds that we see.
Simplifying Fixed Deposits with Stable Money
00:55:19
Speaker
Today's interest rates are at its peak.
00:55:23
Speaker
people can still earn nine, nine and a half kind of interest rates on FD. Second is the insurance for FDs has gone up from one lakh per FD to five lakh. And there has been a lot of noise from RBI, from influencers and everything that are now insurance is five lakh. So people are aware about those insurance.
00:55:44
Speaker
Third is a lot of these banks who got the small finance bank licenses in the past, or there is a high need of deposits for such banks. And they have built the technology that is required to reach out to the customer. So we said that this keeps us in a very nice space where nobody's focused on fixed deposit. Can we create a very nice or unique position for our self with that? So with that thought process,
00:56:10
Speaker
We started stable money and the first product was fixed deposit. We launched the product in the month of August, 2023, but the idea we started working from January. So a simplistic way to describe stable money is the way you have, let's say like a ET money for mutual fund investments, you have stable money for putting your money into FDs.
00:56:38
Speaker
Yes. Okay. While you say that the product has not innovated much and it's a complex, opaque product, so on and so forth, but honestly, as a lay customer, if I am using any of the new age kind of banks, like say an ICICI, which has an app, it's just a couple of taps on the app to put your money into an FD. Why is the experience broken?
00:57:09
Speaker
Yeah, so I'll tell you a couple of examples. First is there are 50 lakh searches happen on Google every month just to find out the rates of empty. And it's not easy, even if we are having, like I personally work a bank with HDFC to find out what are the empty rates of that banks.
00:57:30
Speaker
It's a very cumbersome process. I'll have to go to net banking and that is when there are multiple tabs and figure out what is the highest interest rate today that is available. Second is I don't know when the rates are changing and how I should switch. I still don't know that my FT is earning the highest interest rates or the lowest interest rates that's available.
00:57:52
Speaker
If you have to break FD at certain point in time, it's very difficult for the most complex process to understand how the FD rates or your returns are calculated when you're prematurely withdrawing the FD. If you want a certain liquidity, then why do you put the entire money into a five-year FD, then you will have to break that FD and that will not give you the best returns.
00:58:18
Speaker
So though it's the India's favorite asset class and so many FDS are there, right? It's still there are a lot of these small nuances that we understand about let's say mutual funds or stocks that we don't understand about FDS. I think those are the reasons why we thought that this needs to be solved. And then second is on the tech side as well.
00:58:39
Speaker
If you have to open FD at any of the bank, you'll have to go and maybe open savings accounts with most of the banks first. And then we all know managing that savings account is a complex process because every time you file for the returns and everything, you have five, 10 savings account without even realizing that. And that's why a lot of people don't
00:59:00
Speaker
do this. So we have solved that through tech. We have solved very easy liquidity through technology. So yeah, though this is a very well-known product, or we believe that we can do a very quick transactions onto our app, but there is still a lot of inefficiency that exists. And I think to you and me, Akshay, this doesn't
00:59:26
Speaker
what do you say, come very naturally because our focus may be, or maybe our focus also is more on the mutual fund and the equity side that you would know today we are sitting and how much you have earned or lost in your mutual funds today because we opened that app quickly, see it. But we do that with FDs, right? But the segment that we are talking, they are so managing FDs actively.
00:59:50
Speaker
that for them, so many nuances that we spoke about are very, very critical. And that's what we identified. And when we tell them that, OK, this is what the highest-interested FD is, this is how much you earn extra when you break your FD and reinvest at a higher-interested FD, they see a significant value in that.
01:00:13
Speaker
Interesting. Interesting. Okay. So what are the ways? So I understand one big value at which you mentioned that if as a lay investor, I was to find the bank giving the highest rate of interest, I would necessarily need to open a savings account there first. And that process is cumbersome time taking.
01:00:33
Speaker
the additional cost of managing multiple accounts, et cetera, all of that comes in, which I've seen my father do. My father is like your exact TG. He will never invest in FDS, but he, sorry, he will never invest in mutual funds, but he invests in FDS and he does active management. Like once every three to six months, he will change where he's put his money because some other bank had a better offer and he knows which is the best bank and which bank gives you some senior citizen, better interest rates and so on and so forth.
01:01:01
Speaker
But yeah, he has multiple accounts and multiple banks to leverage best rates and so on and so forth, which you have removed that necessity and you are able to direct money directly to the FD without a person needing to. So the onboarding has to come a lot easier.
01:01:17
Speaker
How have you made the other things easier? Like you said liquidity, you've made that easier. What I understand, you're also saying that rebalancing is also something which you have automated. So just tell me a bit about these things.
01:01:32
Speaker
Yeah. So for example, on the liquidity piece, anybody who books empties onto our platform, they'll be able to redeem that FD and they'll know exactly what is the penalty that has been charged to those customers and how much you will earn or how much you will lose if you prematurely withdraw. So that gives complete information and you can do it with a single tap onto the app.
01:01:53
Speaker
Second is, in terms of rebalancing or moving this, I think there is limited scope because we don't have access to the existing accounts of the customers. But what we give is an information. Let's say if I know that, hey, Akshay has an account in ICICI, I will keep him updated about when the rates are changing in ICICI. You'll be able to track FD onto our platform where we can tell you, saying that, OK, even if you break your FD in ICICI and reinvest in ICICI, you'll make so much more.
01:02:22
Speaker
So giving that information to people and putting all these 200 banks onto the platform where we tell you the rates was the biggest power that we saw we could enable for our customers just with the information. Okay. Interesting. How did you build the backend for this? How do you allow people to invest in any FD without them needing to open a savings account?
01:02:49
Speaker
Yeah, so there are three, four types of accounts. There's a current account, a saving account. There is an FD accounting, but it's a Soviet account. There are three, four, maybe slightly more. So this feature was always there, but obviously, banks wanted to do it with the savings account first, because then you are able to build a deeper relationship with that customer.
01:03:10
Speaker
With some of the banks where the deposit needs are higher, we have done the integration to make sure that, let's just focus on FDs and trying to get a deposit and not a savings account right now. So that's the tech integration that we have done with the banks. And now you will see that that's been a trend also happening that it access bank as well. You can open an FD without a savings account and there are
01:03:38
Speaker
multiple other banks which are opening this as a feature because the focus is more on getting the deposits not opening the sales.
01:03:45
Speaker
I want to dive a little deeper into the backend of this. I'm assuming for mutual funds, there is some easy centralized way for a new app to come and start distributing mutual funds of all fund houses. Like how does that happen? So in mutual fund, there are some entities who gives these APIs where you don't have to go and do it individually with the mutual funds. Like RTA's, both KFING and CAMS give you pipes.
01:04:12
Speaker
to do that integrations, then there are some other tools like BSC star and few more who also are built onto these RTS who can give you these pipes to you. The best part is because the entire operation flow of money and the flow of mutual funds happens through the RTS, which are just two in the industry. It is very easy.
01:04:37
Speaker
But when you do it with the bank, every bank has a different integration and that takes a lot of time. And that's why you will see that, let's say, whether it's a new bank or anybody or credit card, all of this being done with those specific banks or all the fintechs.
01:04:57
Speaker
You can't do it with multiple banks and the same cases with us as well. That if we have to onboard, let's say, more banks onto our platform, we'll have to do a compliance check with each of the banks separately. We'll have to do the integrations with each of the banks separately and those integrations also varies.
01:05:18
Speaker
because everybody has a different ways of doing these integrations plus purchase, reductions, applicability, payment, everything is very different for these banks. But then that's what also makes it a mode that you do these integrations so that it becomes very difficult for maybe the next set of people to come in and do that.
01:05:44
Speaker
You said you have access to 200 banks as of date, like you can show the interest rates of 200 banks. Yeah, we show the interest rates. Have you integrated with 200 banks? So we are more like Google for the FD rates for these 200 banks where we get the data about these 200 banks either manually or through scraping or their websites.
01:06:07
Speaker
that we update real-time onto our app, but there is no integration. This is more like maybe the bank bazaar days, which still does it for 10, 15 banks and shows you the rates. It's more like that.
01:06:23
Speaker
And how many banks have you integrated? We have currently integrated with two NVFCs and three banks. We are in process of integrating with four to five banks more. So maybe in another six to eight months, we'll have 10 banks lying on the platform.
01:06:45
Speaker
And these are like the small finance banks or even the large banks? Oh, these are a mix of small finance banks, large banks and the mid-tier banks as well.
01:06:56
Speaker
Give me some names, like a year down the line, what names could we possibly see? So in the top tier banks like HDFC, ICIC, CCOTOC, these type of banks, we're trying to get some banks from these range. And then there are middle tier banks, which are maybe, let's say, the Federals in the same, yes, banks of the world, which is the middle tier banks.
01:07:18
Speaker
And then there are some 12 small finance banks. So that list is there. So we're trying to get a few banks from each of these cohort to be on to the platform. Okay. Okay. Understood. Is 10 a large enough?
01:07:38
Speaker
Like you said, by the end of this year, you'll have 10 options. Is that a large enough offering? See this question, I think we are also thinking about that beyond a point, adding more banks onto the platform, does it have a high marginal utility is the question.
01:07:57
Speaker
or people have ranges across all the banks or the interest rates across these 10 banks, adding more banks will have interest rate matching with some of the other banks, right? So, will it add so much of value is the first question. But the counter to that is people have large amount in FDs and they want to diversify in 5, 5 lakhs multiple FDs across these. So, if somebody wants to put the... Because the insurance limit is 5 lakhs. If somebody wants to do 50 lakhs,
01:08:26
Speaker
10 banks will make sense. And somebody wants to do five lags, maybe that entire five lags in one bank makes sense. But also people have a behavior of, even if they want to put five lags, they'll put it across two, three banks. Though they know that this is safe, but they still want to make it even more safer by diversifying. So that's been the behavior that we see, but we believe 10 banks
01:08:49
Speaker
would cover us 80% and then every bank that we had beyond that will have a lesser margin of utility. Okay. So for these 10 banks, you had to go bank by bank and talk to somebody in the relationship team there or somebody in the CXO level to kind of have a handshake and then move ahead with the integration. And therefore you have built up.
01:09:17
Speaker
There are these fintech infra companies above 4.5 into like say kite, decentralized. These companies are not offering you to like avoid going back. No, no, so these companies are also, some of these companies are also building infra and we are talking to them as well to move these integrations faster so that you don't have to work upon this.
01:09:39
Speaker
See the benefit of these infra player is that it helps you go to the bank faster because they have maybe deeper relationships and they have built this already. In some cases it makes sense to you do that because your relationship will get deeper and you will not just do multiple products over and above that. So ideal is to have a mix and match of these both.
01:10:05
Speaker
Okay. Though if like a decentral kind of a company was offering this to anybody, then your board would be a lot lesser. So you would want to also have exclusive arrangements. One is this supply mode.
01:10:21
Speaker
But other is a very positioning mode that we believe is a bigger mode for us. Let's say, for example, you mentioned ET money seven of times. ET money has FDS onto the platform, but maybe not everybody knows this IND has. And there are a few more players also who have FDS. But the positioning is very different. And that's why sometimes what happens, and there are some crypto players as well that we have given
01:10:47
Speaker
who are getting into FDS right now. But even if we know that, even with that crypto player, the money, if I invest goes to the bank and I'll be 100% sales, you will not do that. Because you compartmentalize the investments very clearly and it's not anymore managing multiple apps, right? That's not the problem right now. So I think positioning will still be our bigger most unless somebody comes and builds a FD positioning.
01:11:15
Speaker
onto this would be important questions, but not more with the existing players. Okay. Understood.
Marketing and Education Strategies
01:11:27
Speaker
You wanted to do a business with low customer acquisition cost. Can you help me understand why you think this has low customer acquisition cost? To me, it seems like
01:11:41
Speaker
You will need to spend on educating customers that they can invest through an app. I mean, today everyone knows you can do mutual fund investment through a variety of apps, but for FDS, people would still go to a bank directly.
01:11:57
Speaker
So it does seem like you'll need to spend money to educate customers. I think that's the, maybe some kind of mistakes that we were also running into actually that we also had a very similar hypothesis. And I'll give you one best example. We believe in in our primary circles, everybody understands
01:12:14
Speaker
mutual fund really well. But the best behavior that we have seen during the NFO times of Navi Mutual Fund is that people have invested into the NFO for the 10-14 days. And the day we got NFO is the new fund offering, right? Any new mutual fund that gets in has a 14 days window that you can launch and you can subscribe to that NFO upfront.
01:12:40
Speaker
But the patient fund starts after the 14th of the day whenever it goes live. And we have seen people withdrawing on the day of launching the NFO, thinking that they will make gains.
01:13:01
Speaker
Right? But this problem doesn't come in FD's action. FD is such a well understood product. And I know some of the nuances that I've told you breaking this, that insurance and there are these nuances. But for a very layman term, if you go and ask anybody about FD, the only question that they have is what is the interest rate?
01:13:22
Speaker
And maybe the secondary question is the better. So that's so much it is ingrained into us that somewhere or other we have either done FDs ourselves, still have active or not actively doing right now, or somebody in the very close primary circle has done FDs.
01:13:43
Speaker
So this product is very well understood and the history is being such that there are no issues that have happened when it comes to it. There are a few banks have gone down and all of that, but very few examples of that. Well, you know, I want to kind of relate this to your first attempt of true price where you're saying right. And, uh, but then you wanted to,
01:14:12
Speaker
eliminate the middleman, build a better middleman, and then you realize the existing middlemen are already adding a lot of value at a much lower cost. So that's where I'm coming from. So you're saying FD is a well understood product. It's a mass market product. I agree with you, but the way in which people currently do FDs, you will need to spend money to educate them that there's another way.
01:14:31
Speaker
Yeah. So basically, the other way that you're doing the process, while it's very, very simple, it's very same. It's actually not different process that they have to do. The only barrier that they had to cross is if I withdraw my money, like in your case, the only thing that I have to convince Akshay is that Akshay, will you withdraw money from ICICI and invest into the bank that I have onto the platform that you haven't heard?
01:14:56
Speaker
And that is the only barrier that we have that we have to educate which to our help, there is a tailwind of DICGC insurance up to five lakhs. And it's to tell Akshay that DICGC insurance up to five lakhs makes you
01:15:11
Speaker
your money in your bank versus this bank is exactly same. Now, the only question is the interest rate. You are getting six and a half. I'll give you eight and a half. And the customers that we are talking to are so price sensitive customers. And you have seen, I'm not sure if you belong to that. I belong to tier two sitting or in the back.
01:15:29
Speaker
that every half a percent or every few hundred rupees or few thousand rupees matter. And people will still go to DeMart and people will still do certain things in a different way. Just to say that it's not that those things will make a significant delta to them. We don't do that, but these people do. And for them a half percent, one, one and a half percent, your father is a best example of that, right? To do that. And that's where we believe that it has helped us a lot
01:15:56
Speaker
to take borrowed trust from the already existing entities and just work on that. Okay. Though I think it might be maybe a one or two year more journey to prove out your thesis that you don't need to spend on customer acquisition.
01:16:19
Speaker
Right now, what is your customer acquisition strategy? How much do you spend? Give me a few numbers. What is your AUM? AUM would be the right term, right? Our AUM today stands at around 300 crores, close to that. And this is in a matter of five months.
01:16:39
Speaker
Our CAC, maybe I'll tell you the cost separately, but our CAC today stands out to one third of what it is for other fintechs who belong to some similar wealth category. Now obviously there is one reason that there are only adopters for every new product and these only adopters will come at a cheaper cost.
01:17:00
Speaker
But this kind of scheme that we have seen, I think we believe this will continue and not go beyond what we are currently matching the cost would be. The major acquisition channel that we have is what these people do. The tier 2, 3, 4 people consume a lot of content online. So YouTube and content creation has been a very, yeah, influencer has been a very big channel for us.
01:17:27
Speaker
And the other important channel that we have seen, which is still driving a lot of volumes for us, and we believe it has a lot more potential, is the referral, like sharing it with people. Let's say if I am able to convince Akshay that Akshay, this is a good way, safe way to do things. Maybe he won't do, but he will definitely go and tell his father, and his father will tell four or five other people, because this makes them feel smarter.
01:17:52
Speaker
about the investments that did. And that's what we have seen. That in referral, we have people referring it within the family in their primary circles. Because in PR2, the families are very close. Everybody talks, cousins talk, and everything. And this is one app where you can sit on a dining table and talk with anybody onto this. Not everybody will talk about grow or zero-dah because stocks which are fine, not everybody does, although don't mention about your losses.
01:18:21
Speaker
So I think that these are the two major acquisition channels which has worked for us and which we want to double down on. The next thing is how do you do it through already built channels? Like there is so many physical distribution that has happened and if we are able to build it through some of the physical distribution channels as well.
01:18:45
Speaker
Okay, let's talk online first. So you have the influencers being compensated through a fixed amount or they get some sort of a performance visa, how does that work for you? Do they get a link where depending on how much AU they generate, they get paid something or is it like a...
01:19:06
Speaker
It's a mostly fixed thing that they talk about the product, the simplicity and whatever question that people need to have and get bookings on that.
01:19:22
Speaker
Okay. And why did you choose that way? We honestly don't. And it's not usually that we wanted to do that. Influencers also won't do that because it's a new product. It's just five months. They don't know whether how it will work. For companies like GRO and ZERO and some other companies, it should be, the value is already proven. They know that they'll be able to drive. The brand is known. So it's also that much that people do.
01:19:52
Speaker
Okay. Okay. Understood. Your, your desired outcome would have been performance based. Eventually. Right. Right. Okay. Understood. Understood. And, uh, you would probably also be trying to do content based acquisition. Like you said, you're.
01:20:08
Speaker
doing like a search engine for FD rates. Does that contribute meaningfully to sign up? Today it doesn't because it takes time to build that and we have to build our authority and content accordingly. And what I have also seen across all the companies is that you try multiple things and nothing will work, but certainly one small thing will work in those crazy volumes. So it's also a lot of experimentation that we have to do.
01:20:34
Speaker
And we are currently in that person. There are certain things that we know it works. So we're doubling down on that, but there are certain things that we are not sure. So we're trying one piece after another. I'm guessing for the every interest rate comparison, like Bank Bazaar and a lot of these others would be competing for I was wrong. Yes. And they do much, much better than us. The idea is the how do we start?
01:20:59
Speaker
building authority and authority comes from multiple things, right? Like if the rates are updated on your platform faster than other platforms, right? If you have a larger banks than the larger list of banks. So some of these things also take efforts, but I think it has a very upward spiral that one thing we need to another thing. And then in six, eight months, 12 months, it will show significantly higher results.
01:21:25
Speaker
So we also put a lot of effort on growing our SEO as a channel, but yeah, it's still very early stage.
01:21:34
Speaker
Okay, understood. Give me examples of the offline distribution. You said that you would want to piggyback on some existing offline distribution channels. So see, there are a lot of these players who distribute financial products in the city side. Examples are insurance agent, examples are NIC agents, examples are mutual funders, financial advisors and distributors.
01:21:59
Speaker
Now, these people cater to these customer base, and obviously they cater to only fewer products. And then everything else is part of that product only, right? Or the at-risk asset, like mission fund make, which are stocks make, which are or similar products they'll keep bringing. We want to give these people an opportunity to offer a safer assets as well. Obviously, what they return from here will be significantly lower than what they want there.
01:22:24
Speaker
But this gives them to cover the entire portfolio of that customers, to have more touch points with that customers. So this is something that I have seen very closely with Mitchell Fund, our distributor, though Navi was not on physical distribution. But this is one experiment that we are willing to do in the next quarter to see how it plays out.
01:22:51
Speaker
How much money is on the table? How much does a bank share with you? So it ranges, exact numbers will also change with the bank, but it ranges between a 10 to 15 basis point to say a 20, 30 basis point.
01:23:07
Speaker
Okay. So essentially it's like a very low margin, very similar to index, I'm guessing in terms of margin profile. Only at scale would you really see. The only difference is the ticket size of these investments is much higher because people put in chunks versus let's say a 500 rupees smaller SIPs.
01:23:35
Speaker
Ah, okay, okay, okay. This 300 AUM, how much of that came in last month? We have got around 50 crores in the last month.
01:23:46
Speaker
Wow. So what are you growing at, like month on month? Month on month, we are growing at 10-15 because we are also conscious of cost right now, like how the cost bands up. And there are certain experiments that we are doing around different channels of acquisitions and everything. So it is a little shaky for these months. We just have to identify few concrete channels for us over the next quarter and then start scaling from there.
01:24:18
Speaker
Okay. Okay. Okay. And you raised funds also, right? How much have you raised till today? We have raised five million.
01:24:28
Speaker
And how much runway does that give you? See, I mean, of course runway depends on how much you start acquisition. See, as on today's spends, if we continue, I think we have a runway of 40 and a half years. Obviously, but things will change and we start skilling or we see the interest and we figure out more opportunities to build a revenue. But yeah, as of with the current status quo, two and a half years.
01:24:56
Speaker
So what's the long term vision? Is it only FD or like, you know, what do you see yourself in a couple of years? So actually we see ourselves to cover the entire aspiration, right? So this tier two people still have a larger aspirations. These people participate in conversations of retire early, I want to make so much money by this time.
01:25:19
Speaker
and they will not be able to do this just with entities. They'll have to take that journey of going from entities to better bonds, to eventually more asset classes, and then maybe eventually stocks and mutual funds as well. Why not? But we want to grow with that and keep dialing up the risk profile and keep allocating or keep managing users to move.
01:25:46
Speaker
to these asset class where they are able to grow and grow along with them over the next 10-15 years to have a very decent portfolio which spreads across the risk profile.
01:26:03
Speaker
So I'm guessing the way to view the FD business is at the top of the funnel. Like it is low margin business, but it brings in customers who invest through stable money app. And eventually those customers can be moved into higher margin products.
01:26:23
Speaker
Okay. Okay. Interesting. Interesting. Okay. Though, you know, wouldn't it make sense to like raise another round and move fast? Because this is not a very defensible mode as of now, right?
01:26:41
Speaker
I mean, with another startup with equal money can also reach where you have reached like, you know, eight, 10 banks integration, couple of hundred crores AUM. No, that makes
Future Funding and Customer-Centric Approach
01:26:52
Speaker
absolute sense. The only question that we ask ourselves before raising the fund is,
01:26:57
Speaker
if you have really figured it out because see the new investments, new funds, new people will come with a lot of its own nuances that the rejection might change if you are not clear about the directions. We want to align on certain things like, okay, these are our acquisition channels, these are our next set of products and this is how the revenue profile looks like. I think once we have that definition and that won't take more than let's say six to nine months for us to do that and we are covered till that point in time.
01:27:24
Speaker
We believe once we have that is a good time to get somebody on board because then it is just adding the fuel. We know which direction we have to operate. So you spoke about Sachin's customer backwards philosophy. Does that continue into stable money? Well, it does. I think it has a lot of influence on what we do every day.
01:27:43
Speaker
And maybe some of the recent examples that we haven't spoken out yet is the feature that we are very bullish on that we are building right now is an emergency fund. And we believe emergency fund as a concept is the next best thing that has happened to emergencies after ambulance.
01:28:04
Speaker
Emergency fund is where I think people have spoken in bits and pieces, but nobody clearly understands that, okay, why this is bid for, how much should be an emergency fund for somebody, in what use cases you have to do this and how do you use it in case of emergencies.
01:28:22
Speaker
So what we are trying to do is we are trying to put a nice feature where you can come and share some of your details about you, your family, your expenses and insurances and everything. And we'll be able to tell you tentatively that, hey, this much should be your emergency fund. And what are the features of emergency fund that they have to be risk-free because it can come at any point in time and you should not be in a case that, okay, the returns are low.
01:28:49
Speaker
This has to be liquid. Whenever you want it, you should be able to get those things. It has to be insured, right? It should not have any risk of other challenges. So with those things, we are building an emergency fund flow where people will be able to know that, okay, this is their portfolio. And some part of that has to go into FD and that part of an emergency fund, they'll be able to
01:29:14
Speaker
invest directly onto the app where we give them flexibility to do it across multiple banks, better interest rates, safer assets because of the DICS insurance and easy liquidity because they can withdraw at any point of time. So this feature
New Features and Entrepreneurial Advice
01:29:29
Speaker
is what we are building. Actually, I think it's going live sometime mid of March. So I think that's one example where we have done it little customer backwards.
01:29:41
Speaker
So this, if I understand, would be like a curated offering, like you would curate and decide allocation or like, is it? Okay. Okay. Interesting. Interesting. The way how like wealth apps have like a curated offering.
01:29:57
Speaker
decide what mutual funds depending on your risk profile and so something similar you would do. Okay. Very interesting. Very interesting. Awesome. Cool. So let me wrap up with asking you, you know, if you have any advice you'd like to share with young founders.
01:30:13
Speaker
I think the most important advice that I have seen is people waiting too long to do something that they really wanted to do. Either afraid to have that conversation with their bosses or afraid to have that conversation with their family or afraid to have that conversation with yourself that either I'm waiting for an idea or enough capital or this reason to happen.
01:30:35
Speaker
I believe you don't need enough courage to build a large company, let's say for a few years. You just need that courage to take that first step towards that. And to me, honestly, that first step or the courage that I had to gather was to have that first conversation with Sachin. I think it's been a good journey, but I have to now start something of my own. And I think from there,
01:30:59
Speaker
the direction,
Closing and Audience Engagement
01:31:00
Speaker
the path and the momentum you will get and then you will keep getting enough on the way to keep building on it.
01:31:10
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.