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Streamlining Trade Finance | Ramaswamy Iyer @ Vayana Network
274 Plays3 years ago
Digital Lending is having a substantial growth in India, with several start-ups availing loans to small and micro-enterprises that often get denied by banks and NBFCs.
In this episode of Founder Thesis, Akshay Datt speaks with Ramaswamy Iyer, Founder and CEO, Vayana Network – an electronic network that provides easy, digital access to low-cost financing to every enterprise, from large corporations to MSMEs.
Ram is an alumnus of IIM Ahmedabad and had an experience of over 20 years of entrepreneurship before starting Vayana Network. His vision was to create an ecosystem where financing is embedded in a transaction - where it becomes automatic, convenient and almost invisible in any B2B trade.
Founded in 2017, Vayana is now India's largest 3rd party platform for Trade Finance and has a network of over 50,000 clients and 2 million processed transactions in over 600 cities in India.
Tune in to this episode to hear Ram speak about his vision behind providing financial services to both large and small corporates.
What you must not miss!
- Behind the name “Vayana”
- Ram's journey before Vayana
- Vayana’s tie-up with distributors
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Transcript
Introduction and Zencastr Promotion
00:00:00
Speaker
Before we start today's episode, I want to give a quick shout out to Zencaster, which is a podcaster's best friend. Trust me when I tell you this, Zencaster is like a Shopify for podcasters. It's all you need to get up and running as a podcaster. And the best thing about Zencaster is that you get so much stuff for free. If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link, zen.ai slash founder thesis.
00:00:27
Speaker
That's zen.ai slash founder thesis.
00:00:32
Speaker
Before we start today's episode, I want to give a quick shout out to Zencaster, which is a podcaster's best friend. Trust me when I tell you this, Zencaster is like the Shopify for podcasters. It's all you need to get up and running as a podcaster. And the best thing about Zencaster is that you get so much stuff for free. If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link, zen.ai slash founder thesis.
00:00:59
Speaker
That's zen.ai slash founder thesis.
Meet Ram: A Journey in Fintech
00:01:04
Speaker
Hey, hi, this is Ram. I'm the founder and CEO of Winer Network.
00:01:20
Speaker
is no denying the value of credit or lending. While in a developed country like the US, the value of credit is 200% of the GDP, in India this number is just around 50% of the GDP. This is proof of the massive opportunity in lending in India.
00:01:37
Speaker
And while many founders are fighting for a share of the lending pie, very few would understand the levers behind running a successful lending business like our guest does. Ramaswamy Aayar, or Ram, is the founder of Vayana Network, which is in the business of supply chain financing, which means lending to businesses either selling or buying from other businesses. Ram is a serial entrepreneur whose first FinTech venture was eventually acquired by a global company.
00:02:06
Speaker
He started Vayana Network with the maturity and wisdom of two decades of entrepreneurship behind him.
From Engineering to Consulting
00:02:12
Speaker
And this is evident with the very first principles approach that they have taken towards building a large lending business in the space of supply chain financing. Listen on to this masterclass full of invaluable insights on starting up, lending at scale and staying hungry.
00:02:28
Speaker
So I was not interested in any of the standard stuff of an MPA school because I still have this guilt conscience of having left my engineering. So almost everything I did was in the engineering field. So I was probably the only guy in summer, I didn't go to any of these SMCTs or banks or anything else. I went to a manufacturing plant off the coast of Bombay.
00:02:46
Speaker
on the soft floor. So I was quite intent then. So it kind of kept me, I think, a little different from everybody else in the sense of where we are heading towards to. But when I did my placement, and I think that was the other interesting thing that happened. So I was actually trying to get a job in Godridge and Voice because of engineering. And I said, fine, let me get there. And there was this consulting phone that guy came in with wearing shorts.
00:03:16
Speaker
So when I went to meet him, he was like, you know, awesome. And he said, you know, Danny, well talking, he asked me what my rank was. I said, you know, somewhere in the suburbs.
00:03:26
Speaker
And he said, you know, I mean, couldn't you have done worse? And I said, oh, this is finally a guy after my own liking. And I decided to join that firm on a women of fancy. I'd never heard of this firm. And it was a consulting firm. In those days, nobody knew consulting firms, you know, it was called Anderson Consulting. Now it's called Accenture and all that. But you know, that time it was unknown.
00:03:43
Speaker
And I called up my parents to say, look, I've got this job in this consulting firm. They said, you know, I mean, after two years, that's all you managed. You know, you had a job in Tata Motors and now you have to go and join some, you know, 12 man or 20 man company, unknown company.
Cultural Challenges and Learning in Consulting
00:03:54
Speaker
So, you know, that was my first idea of myself that I was willing to kind of stray beyond, you know, what everybody expected out of me. And then I spent 20 years in, you know, this consulting firm, learned a lot. I mean, again, very, very good years. But I also came into this.
00:04:10
Speaker
Oh, everything, everything. On my third day, I was presenting to the board of a very large Korean company in India, an international Korean company in India. I was third year out of B-School. And the sheer effrontery of it, and the sheer nonsense of this. And I was very pleased at that time. And later on, when I looked at it in life, I said, what gall area? I mean, to go down and tell people who had spent 20 years doing their stuff, what good things they could do better,
First Steps in Entrepreneurship
00:04:34
Speaker
whatever. Shit.
00:04:34
Speaker
So anyway, so I came there and I did a project in Kota, Rajasthan. So I actually was there before this whole Kota factory started. And I actually worked in the company where I did consulting work in the company that actually spawned the Kota factory. And the first time I had an effigy burnt of myself and all that because I'd gone to actually figure out how many people could be thrown out of work.
00:04:55
Speaker
So very interestingly, my boss and everybody else left me alone. So as a 24-year-old, I was in Kota. I didn't summer facing a bunch of crowd that really thought that they could have my head off.
00:05:11
Speaker
Yeah, it was famous. And in the summer, I guess it doesn't take much to get people upset. So I used to get previously very nice butter parathas and all of that stuff. The moment they heard I'd come to look at how many people to give it, suddenly the breakfast would disappear. My car would break down. So that was fun, actually. I enjoyed it. And then they sent me one, about 10 months to Stockholm.
00:05:34
Speaker
So that was, I think, probably the turning point of my life in the sense of looking at it. Because I went at that time when it was winter. So it was about 23 hours of darkness. I mean, that's what Scandinavia is. And it's very depressing. And I had nothing but work. And I would just sit down and think, this is what I'm going to be doing the rest of my life. I was really pissed off.
00:05:55
Speaker
So a friend of mine put me in touch with a small software company that was this, I think just about kind of done an IPO, but very small in Bangalore. And, you know, it was a small little bungalow in Koremungalai, I remember, or a small office. And I went and met these six founders who were kind of middle aged guys. And I came from Accenture, right? So which meant I was as full of this arrogance.
00:06:16
Speaker
And this is a very, very ordinary looking, you know, middle class, South Indian, you know, people were sitting out there on the table and they're asking me questions and all that. And the senior was guy got in, suddenly got someone came to the room and told him something and he pulled me and dragged me with a lot of bleed to some broom closet where there was a router with some flashing lights. And they said, we have the first guys to get a v-sap link up, you know, and we sat in those days getting a link up. You know, it was great. So.
00:06:42
Speaker
I came out and they said, oh, this is funny. I mean, they looked at what these guys are really kind of getting excited by. And that was, by the way, Infosys. And then the gentleman who kind of was, with glee, pulled me up with Mr. Narayanamuti. So I came out and I said, oh, this is cool. And then I met, Nandan was not there in that meeting. And then I met him later in Bombay. And then, but he said, why don't you go to US and become an Infosys there? I said, no, I don't want to go to US and all.
00:07:08
Speaker
And I said, fine. And I finally got the last, my last project in Axanjar was in Divas, in Madhya Pradesh. Yeah, yeah, awesome place. I mean, you know, I mean, if you're into music, then Kumar Dandar was very famous. But anyway, and again, I spent three months there and I was used to corporate culture. I saw corporate culture at its best, right? You know, I mean, everybody fighting with everybody and all that stuff.
00:07:30
Speaker
And so when I came out on, I remember still the date, February 14, 2000, no 1994, Valentine's Day, I just quit. I just quit. Nothing.
00:07:44
Speaker
I think, no, I didn't have an offer. I didn't have anything. I didn't know what I was going to do. I just, so our office was in Kavpareid and I walked down. I remember us to Ford, you know, which is a mini RV station. And I just walked down that entire distance must be about four, five kilometers, just thinking, you know, just random thoughts. And then I called up an engineering friend of mine and said, you know, what are you doing? And he said, I'm designing perfume bottles because he was a product designer. And I said, you know, why are we doing this? Why don't we do something? He said, okay, fine. I'm bolder. Why don't you come home?
00:08:11
Speaker
So at four o'clock in the afternoon, I reached home, I reached his place, in the bedroom we sat and thought, and we said, let's make point of sales advertising material. Don't ask me why, you know, but we just wanted to make point of sales advertising material. And, you know, two people who had no clue of their industry, nothing, but we wanted to make point of sale. A third friend dropped by and gave us a name for the company.
00:08:29
Speaker
So between 4 to 7.30 in the evening, we were done with our initial idea. We were done with this. And none of us had a clue that we were actually starting something. We just thought that we were on another thing. And it was called SNR, simple and real, simple and real solutions for the world, some nonsense.
00:08:49
Speaker
And then I told him, look, no problem. We can just go through all this wonderful companies are consulted with. They all love me because they have seen me present. I can walk into the chairman's office and we can get business. And that's when I realized within two months, that's all nonsense. Without the visiting card and without that premium brand, you come for nothing. It was fun.
00:09:09
Speaker
Yes, printed items. So printed items, we were, we were, you know, we, I, you know, I, I did from kafpare to fort, right? I passed a lot of those smuggled stores. You should have these all these fancy stores, they're still imported items, you know, in fort. And I was thinking about what kind of material they could use to market. So that's when I went and talked to this guy and said, you know, why don't we make some very fancy pops, right? Things that come out and do stuff. And he was a product designer. So we said, okay, let's do something. So that's how the idea came about, very honestly. So anyway, so we went and then rented a laptop.
00:09:37
Speaker
And those days the laptop used to cost a rent of 5000 rupees a month. And this guy gave us a laptop, first two months, you know, I had some savings, this guy had some savings, we could pay it off, third month we had no money. And he started calling us up. So that's the first time I got used to collection calls.
00:09:53
Speaker
Right? And, you know, the landlines. And these two, three months, you were just trying to get customers. Yeah, absolutely. So I was going and talking to a bunch of people, both of us are going and talking to a bunch of people. And my parents was trying to tell everybody in the family that he's on a sabbatical. It's just six months before he gets a new job because they were kind of embarrassed, right? I mean, so I know all that happened in that time. So then anyway, the sky started pestering us for returning the money or the laptop.
00:10:23
Speaker
So we then went, so this guy had, my friend of mine had done some work with aircraft maintenance in US. So we went and those times the airlines had just come up, right? All these new airlines had come up and there was this wonderful airlines called East West Airlines. And it was, it was actually supposedly very dodgy airlines. I, you know, we don't know, but you know, we went there, told this guy, look, I am from, I'm Ahmedabad. This guy is from, you know, double post-graduate from US, blah, blah. And we are interested in doing, predicting for you when your aircraft should be maintained. And he had two planes, right? At that time.
00:10:51
Speaker
And this guy said, fine, wonderful. Why don't you give me a proposal? So we went out and typed out a proposal. You didn't have a computer and printer that time. So he went and typed out a proposal, came back to him. And we had quoted him some 30,000 rupees, I remember. And he said, no, I just want two. And we said, oh, shit, now we have to make it 15,000 rupees or something. And he said, no, no, no, it should be at least 60,000 rupees. So that was the first time I realized that the software world is enormous.
00:11:17
Speaker
So then both of us did no programming. They had no clue of what to do. So I roped in another friend of mine who was then working in Citicorp. And that's how we started. I mean, we just, in IIT, we had a friend who had a room and we started coding stuff there. It didn't work. And after the advance, we couldn't deliver that software. That's a separate thing. And then I started walking down. So this friend of mine, we rented an office near Bombay Stock Exchange.
00:11:43
Speaker
And then I was walking down Armament Circle, if you remember that, you know, near the Asiatic Library and all that. And there was this bank that was there, which is quite well presented called ABN Abro. So I just went into the bank with nothing, just went very, very Dutch style, you know. And so I went into that bank and I said, General Manager, Kumilna. So he said, okay, General Manager, one by time. In those days, you know, people could walk in. So I walked with that guy and said, look, we are all these IMA guys and, you know, IIT Bombay guys, and we have started something together. Is there any project we can do?
00:12:12
Speaker
So he gave us a project and the city cop friend of mine, when he looked at the project said, this is the most happening thing right now in the industry called cash management, blah, blah, blah. Let's do this.
00:12:22
Speaker
So, by then, we were four of us as co-founders. In another front of ours, I just dropped in one day and said, I was doing a train. I heard you guys have started, so I want to join you guys. No, I mean, this is how it was created. Was he a techie? Yes, he was a techie. Among the four of us, I think he was the real techie and also the sharpest. You know, one guy was like me at Ambran, you know, quite
00:12:44
Speaker
chilled out in life. And my main friend was a Gujarati. So he actually knew Danda. So we decided, four of us, what do we do next after having got this project? So we went to Marin Lines, those triangle pods you have. We sat there, and that was our first strategic meeting. And for some reason, I was very vociferous in saying that we won't get into body shopping. Those days, that was the big thing for our IT firms. We would send people out and do labor arbitrage and all that. I said, nah, nah, nah, this is not intellectual enough. We should do our own product.
00:13:11
Speaker
And it was a lot of debate and we decided to do that. And that's how my first company was born. I mean, technically 1995 is when we decided to do it. And actually
The CashTech Venture and Successful Exit
00:13:21
Speaker
1994. And 1994, I also went and met the small bank that had just started, college DFC bank.
00:13:26
Speaker
And at the good fortune of meeting all of those guys who founded the bank right then. Okay, Aditya Puri. Yeah, yeah. So, Mr. Puri just asked me one question. He said, what do you want to do? And I said, I want to do this, this, this, this. He said, He said, transaction business. He said, you will get sorted out.
00:13:46
Speaker
So 27 years down the line, I'm still in the Chiller business. You know, I, you know, that's one advice I took on very, very honestly. And I said, you know, I'll be in the Chiller business. And so, you know, so that's how that old journey started. And, you know, we went in 99 and that time was the peak of, you know, what we are seeing now. You know, a lot of people wanted to give you money. She got money from Warburg Pincus. You know, I mean, it was awesome. And, you know, and we went out and we said we're going to spend a year there and we had no clue what we were doing.
00:14:29
Speaker
experts like to kind of understand when the inflows of cash are coming in and when their outflows are, so that they can start managing their cash properly, right? Ultimately, that's all that runs on, right? I mean, all this profit-profits are accounting treatment, right? So, cash comes in, comes in, and because a typical large corporate has many subsidiaries across many parts of the world, you want to make sure the cash is at the right place, right? And earning the right amount of money. So, you really are looking at how do you manage cash?
00:14:37
Speaker
Your business was like a cash management software for banks.
00:14:54
Speaker
And because even now, it's very difficult to move cash from one country to the other and all that. So you have to put in a lot of rules. It's actually quite a complex piece of operation. And we surround the software for that for the banks. And a lot of the foreign banks actually became our customers.
00:15:08
Speaker
So the software would map out the redemptions of this much ado on this date. So by this date, we need this cash here to meet those redemptions. And this is the average daily cash, which comes in and stuff like that. It is basically what they call treasury management. So you kind of figure out cash. And in India, for example, you had this big problem of outstation checks in those times. Today, I don't think your generation will even remember it.
00:15:30
Speaker
And there's a big thing in float, right? I mean, people would give you a check today, knowing that only in five days, it will kind of come through. And you could discount the check right away. So, you know, so you are in that business because you would get cash faster. So if it's basically for an FMCG company like, say, in Dusan, you would get checks from all your distributors, right? And you would want the money upfront. So, you know, you would work with Citibank or Standard Chartered or one of these guys. So, so we worked with a lot of banks there.
00:15:53
Speaker
So this was like a pure fintech business in a way then. You had these bank partners who would do the check discounting and you would acquire the FMCG customers. We only supplied the tech. So good old model, right? License map, we used to get money and we used to run it for them, but there is no office. So traditional product business, that's what we knew that time and we sold it. And then 99 Warburg gave us money and we said, let's go to US and sell it. So I went to the US.
00:16:21
Speaker
And of course, 2001, whatever it is, and we discovered we had no money. And what also strangely happened at that time is that we were shortlisted by all the large US banks as one of the best providers of the software. But then they were also worried that we didn't have a balance sheet. I mean, we were looking like any point we could kind of close down. So they picked up this guy who used to come second, a US Israeli company, and said, look, you have the money, he has the software. Don't get out of this room before you hammer out the deal.
00:16:50
Speaker
Right. So that's how this, you know, so I sold my first company because of this, you know, I mean, so in 2004, I sold it off. It took us two years to kind of hammer the deal out. And then I stayed on for three years. With that Israeli company. Yeah, it was awesome. You know, I know a lot of people when I did this deal told me Israelis are tough to handle, right?
00:17:08
Speaker
And I think as Indians, they probably are the easiest community to relate to. You know, there is this constant feeling of, you know, being persecuted, being very aggressive and being very assertive and but still being very family oriented. Right. I mean, so it is just a basic thing. And I love it. I mean, you know, I am really I know whatever I learned, I learned a lot in those three years when I worked with them as an employee.
00:17:34
Speaker
And they really took good care of me. I mean, no doubts about it. But I learned how to actually acquire later on from them. The guy who acquired me, he said he had only one mantra. He said, I want to make you successful. That's my job. And that struck me as one thought that whenever I look at other entrepreneurs and look at them to join Vayana, I think that's the line I always remember. That's what my job is.
00:17:54
Speaker
So anyway, so 2004 to 2007, I stayed on. Was it substantial exit that you got when the acquisition happened? Decent. Decent. Decent. For us, it was a survival issue. I don't think it was a question of really selling for the largest or something. We had a great product, but we didn't have money. So, you know, I had to kind of give it off.
00:18:10
Speaker
When you joined that Israeli company, you were then doing sales for them? I was actually in strategy. So, you know, I mean, they basically knew that at some point I would leave because, you know, I struck them as someone who would not be patient. And at the same time, he wanted to keep me close to him. So I actually spent a lot of time in Israel and London and some time in the US. And he said, just guide me on what we should do. So, you know, as I kind of did three years of, you know, work with the board, it was a publicly listed company. So I got a lot of chance to see how publicly listed companies work and all that.
00:18:40
Speaker
and you know the team was great. So I did that and I enjoyed it and you know I got a lot of time to go to Tel Aviv and you know Israel and it's a beautiful country I would advise everybody to go there. But anyway so I did all that and then you know so there was this one business that we had started back in 2002.
00:18:55
Speaker
called supply chain finance. And essentially what we said is that, obviously, when you buy and sell all these companies, they need money upfront, right? If they sell, they want money upfront. If they want to buy, they want to give
Founding Vayana Network
00:19:06
Speaker
it late. And because it's all out of cash management, you need to give credit to kind of get the money in and out. So they trade credit card and they wish to supply software.
00:19:14
Speaker
This is the extension of our cash management piece, which is held to banks. And I was, I love the idea. It came from a friend of mine who had come from AB in Abro and he made it. And, you know, I was delighted with that idea. I thought this is the biggest thing that should take off. So in 2006, seven, I went to all the banks where we had installed it and we had quite a good installation set. And I found out that everybody had paid us a lot of money, but no transactions are flowing to it. Okay. And that's really where.
00:19:42
Speaker
Yeah, because it was, you know, chiller than that. Right. So, you know, I mean, so it's a Hindustan liver supplying, invoicing, let's say one lakh rupees to its dealer. How do you do credit for one lakh rupees? Yeah. And that was only for 10 days, 15 days, 20 days. Right.
00:19:57
Speaker
So if you are a bank or something, you would like to give big credit loans for long periods of time. Nobody actually was interested in it. So they would do a few transactions just to keep their customers happy, but really not get into it. So I said, look, I mean, this is interesting. Why don't I look at this as a service business?
00:20:18
Speaker
where I will actually make these transactions happen. So one of the things that I was looking at at that time was a card business, you know, the MasterCard Visa business. And I said, as a strategy for this company, for the Israeli company, and I said, you know, why don't I make supply to Infinites like cards? You know, I mean, standardize it, make it, you know, because in card code, you know, how to productize it, right? In a card, you know, a 4-inch plastic, a cost machine, you know, I don't know how to make it.
00:20:40
Speaker
So the mechanism was standardized. If you can make it as simple as this, then it won't matter whether they take the money for seven days or 15 days or 30 days, everything can be digitized. So that was the idea I walked out in 2007. I actually want to do with this really company, but they couldn't kind of do a structure for me. So I was very clear I had to run it. So then I came out again, 2007 I just left. I came out back to Bombay and then I started talking to a few friends and I started pitching this idea. And one of my friends was part of the founding management team of HDFC bank.
00:21:09
Speaker
So he was interested with that idea and he started talking to me and he said, why don't we do this together? So in 2009, we put it together with another couple of colleagues joining us, one from US and one from London. And we put this together and I called it Vayana because in Sanskrit, the Vayan word stands for leaving.
00:21:28
Speaker
You know, so I said, you know, this is a network, right? We will leave together the Hindustan Leavers, their stockists, their distributors, those distributors also buy from P&G. And we will ride our way to glory. You know, that was the idea.
00:21:46
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion-dollar businesses. Just search for the Founder Thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts, and subscribe to the show.
00:22:07
Speaker
Did you envision the debt on your books or was it an NBFC play that you will extend the money? Or was it an alliance with banks and you will do the lead generation and onboarding?
00:22:25
Speaker
So when I looked at the business, the MBA training, it is a huge business. I mean, the opportunity is huge. And I said, look, if I become an NBFC, I would not be able to cater to the entire business. I would cater to the fringes of it. And I saw this old creation of the network far more valuable than being a book play. So that was really what I thought too. And I said, we will not be a bank or a NBFC in this business. We will allow everybody else to come in.
00:22:55
Speaker
And I'll go back a little bit later on to why I structured it the way I structured it. But you know, I would also talk about some of the mistakes we did, right? So 2009, here I am, you know, I would come out of an Israeli, you know, US stint, made some money, feeding very top of the world. And then my partner was a successful banker, he feeding top of the world and said, yeah, why should we start from scratch? Let's go and acquire a company.
00:23:16
Speaker
Right. So we said after 2009, let's go and acquire a company. So we went and acquired a company Chennai. How did you grow that Chennai company? I did a lot of work on the product side. My co-founder, Keach, did a lot of work on the introducing them to banks and everything else. He knew all the bankers, right? We kind of grew that pretty well. You know, of course, within 2012, when the crisis hit, right, the Middle East crisis, to 2012 to 2014, they went through their, you know, brief throw.
00:23:41
Speaker
But, you know, but otherwise, I think it was always a well-run company. In fact, its management team, when we took it over, continues to be there and doing very well. So I think I did a lot of work on product with them. I used to be taken as an exhibit one whenever they went to a banker because, you know, I was obviously the founder of CashTech, so people knew me. So I did all of that. And basically, I would say I did a long stint of doing nothing.
00:24:05
Speaker
But this Vayana thing was going on, we actually had 10-12 people who were working on the Vayana idea. And then we were doing stuff together, we did a few transactions here and there, but we never got into it till 2017 when I finally took it out.
00:24:18
Speaker
And I said, I'll be a shareholder. So 2017 is when Vianen Network got created. And also one of the interesting things was I knew this VC firm called IDG. Now it's called Chirate. And I knew PCM and Sudhir from 1998. So in between, we had talked about this idea.
Maintaining Entrepreneurial Hunger
00:24:41
Speaker
So when in 2017, I took it over, they agreed to fund it.
00:24:44
Speaker
So that's how I raised my series A, I guess, for those guys. And that's really the journey of Vayana started really from 2017. So originally the name Vayana was started in 2009. That became a company called Clefin, which is doing exceptionally well. And then 2017 is when I started Vayana Network. So it's a kind of complicated tale. And I think a lot of lessons learned in that, but don't take on something that you have no idea about. I mean, that's my simple thing that I have figured out. And especially don't assume that you know a culture.
00:25:12
Speaker
I think part of the reason is also that, unlike most first-time founders, you had money. One of my constant things I have told myself, and I actually have ensured I don't have too much money, and I'm not joking, I'm not making it, is that I think I lose my anger. So I'm speaking for myself, right? So if I had a lot of money in my bank and I didn't have to worry about it, I think I would lose my excitement for life. So consciously, I've decided that I would cut down my lifestyle and also not have too much money because I'm very terrified that I will lose my
00:25:42
Speaker
you know enthusiasm or interest and I you are very right you know so when you went and so that 2007 to I think 2004 to 2009 when we had I had money is when I realized you know I lost my mojo right and I really think that I should have you know if I had just run it all my money off or large portions of it off I might have been better.
00:26:03
Speaker
But I did that after 2009. So by the time I started in 2017, I was back to where I started in 94. I mean, depending on my wife. Then I depended on my parents and then I depended on my wife. But we kind of got to a point where I think, you know, I need that, and you need that little shaft in the... You need to have your back against the wall too.
00:26:26
Speaker
then generally you really are on the top of a game, if you can be. Otherwise, there's no point. So that's one big learning I took away from there. Other than all that life experience, there's one more experience that I think really taught me well for life. And it's a very interesting experience. I never get tired of telling this. So back in 91, I went on a safari trip in Kana in Madhya Pradesh with a friend of mine. And we took an ST bus to Nagpur.
00:26:51
Speaker
to come back from Nagpur back to Bombay. And the ST bus was being driven. That time they used to have regular buses to Nagpur, if I remember, right? And every one hour or something there should be a bus. And we caught one bus. This guy was slow, man. You know, I mean, he was driving so slow, I could see even bullock carts overtaking us. You know, I mean, I mean, you know, the moped, whoopets, how am I able to ride there? Hey, you're better, you're better than me, you're better than me, you're better than me, you're better than me.
00:27:16
Speaker
And then I saw buses that started after us also coming ahead of us. I said, this is Zidaf Yar, this is Kiau, where I am. And then we reached Napur, and when I got out of the bus, and I was kind of relaxing a bit, the buses that went ahead of us came after us. And that puzzled the shit out of me. I said, maybe those guys got off and something. So I went to talk to our driver, old man, and I asked him, Kiau, why, my son, why are you here? Why are you here? Why are you here?
00:27:45
Speaker
Meri Lin Pejalarata, e no bakilog e Lin Se o Lin Jarete, me Meri Lin Pejalarata, Meri Lin Sub-Sachata, doagyeon.
00:27:52
Speaker
And that, you know, I think a lot of people now talk about direction is more important than speed, right? And this guy articulated the perfect version for me, you know, and, and I think that really set me, you know, kind of on my path ever since that, you know, it's very important to know the lane you're going in, you know, then the speed can kind of be slow, blah, you know, I should just be careful for the lane you're taking in. So I think that was a longer thing, I think struck me. You know, I think those are two lessons that have remained with
00:28:19
Speaker
How do you practically implement
Exploring Vayana's Business Model
00:28:21
Speaker
hunger? Did you decide not to take salary? 27 years I've been an entrepreneur, I've taken salary for 7 and a half years. A lot of times it's not because I didn't want to take a salary, but we didn't have money to take a salary. You know, you paid out everybody and said, oh shit, I'm going to take a salary. So you kind of scrounged around. I think what also helped me is that, obviously, a great credit to my wife. We all came from similar levels. So our lifestyle was also very
00:28:49
Speaker
So it is not like we needed to do a lot of things, right? And kids and everybody, all of us were kind of in that value system. So I think that helped a lot. But frankly, what I've discovered is that if I spend more than two lakhs a month, then I consider it a red sign, red alert.
00:29:04
Speaker
So then I know how to manage all kinds of problems, errors in life. Right. So, so I think that, look, I mean, everybody has their own mojo. It's not that you have to starve yourself or you have to kind of do that. But I just found this helpful because I know I'm inherently lazy. So I'll just not do it. So I think that was the thing. So anyway, so I know that's how I kind of started. Why don't you work in gusto?
00:29:32
Speaker
So why now was like your solo founder or from a running perspective, I was the only founder. I am the only founder actually. And you know, so that's really the journey that I came into wine and network with you. What was your go to market like tell me about that actually setting things up and you know, getting the first few deals in.
00:29:50
Speaker
I think when I started back in 2009, looking at the market and in 2017, not much had changed. It was very interesting to me that most banks really looked at supply chain finance or financing the supply chain, as you should rightly call it, a very low priority in their scheme of things. Because it was too much work for too little. So essentially, the only reason they did it is because their customers wanted it. They did it almost apologetically.
00:30:14
Speaker
So it is very easy and it still is actually quite easy to go and get business. It is not tough, you know, because what really happens is that everybody is interested in the big guys in the business. So, you know, they are interested in Maruti, they are interested in an Hindustan Deaver, they are interested in BlackSew or whatever it is. Is your customer Maruti or the vendors of Maruti? It could be very good point. You know, so the guy who pays us is our customer. If that is the definition, then it has the banks.
00:30:41
Speaker
So they are my customers, because they are the ones who I connect the pipeline to and bring water down the pipeline, just transactions, right? So there are three party system, what we call anchor. So that's your Maruti, Hindustan liver, whatever it is. And then there are the counterparties, which could be suppliers or distributors, coming to both sides of the chain. So these are the smaller guys who are forced to either give credit to Hindustan liver, or they are forced to pay immediately when they buy something from Hindustan liver, because the bargaining power of levers or a Maruti or a Wanda is very, very big.
00:31:12
Speaker
So they need cash, right? So basically, we have been working together, so you can extend money to them. And for a bank or for anybody else, leavers or a Maruti say something, that's fine, right? So that's why the business kind of focused really on the well-known names, the big guys whose reputation was curling and all that. And therefore, then they didn't care who these other guys were.
00:31:35
Speaker
because the banks only focus on that and among even the business that they did, they only focus on the large guys because they were not interested in doing this. So, if you were a Hindustan lever with let's say 3000 distributors and you would have 20 banks with you,
00:32:14
Speaker
And that happened on the supply side as well. So if people really focused on what is the immediate big guys that they could do, low-income, whatever that they want to call it. So if you went to an Hindustan liver CFO or a Maruti CFO, you would always find that bulk of his business was not covered. So you could always offer that. So that was one thing that was there. So that is, I think, one coverage thing. Second thing to remember is that it's a short-term credit business, because people don't want money for one year. They want money for 16 days, 20 days, 30 days, 45 days.
00:32:30
Speaker
they would all together cover 100 distributors, the top 100, right.
00:32:41
Speaker
which means that they have a decision point at least 6 to 12 times a year or more. So, every time before they decide to get it financed, they can decide to get it financed. So, it is the equivalent of a consumer saying credit card, credit card, cash and credit card, correct? And similarly, for an supplier or distributor of Maruti, they will say, I have got money enough in my bank, so why should I take a loan? I will not take a loan.
00:33:08
Speaker
So this really upsets the bankers because when they give credit, they want it to be stable and lying there so that they can plot their interest income. It doesn't fit into anybody's pattern. Their cost of doing business is too high. Why? Because they don't know whether it will come again or not. So this entire, what's called the utilization and coverage, which is the biggest problem even now in the industry. That hasn't skipped away.
00:33:34
Speaker
So when I looked at this business, this is what was told to me, right? I mean, if you can improve utilization coverage, you have an ability to be serviced. But then when I went out, I realized two other big problems. I think one is that India may supplement access to credit, access to credit, you know, the semi-credit gap and all. Actually, bunk a mess. You know, people have access to credit. Now, it may not be the credit you and I recognize. It may not be the credit that we are used to, like going to a bank. It may be credit that we are used to, like going to a bank, but maybe at rates that are unaffordable.
00:34:04
Speaker
but there is access to credit. The problem is you don't have access to affordable and convenient credit.
00:34:13
Speaker
If you went tomorrow as a consumer and said I want a personal loan, it is not like you don't have access to credit. You may not be able to service it because you may not be able to pay off that kind of interest. So, effectively the point is that you need affordable. The only problem you always need to solve 99% of the time is affordability. You have to answer that question.
00:34:36
Speaker
Second is because this is short term credit regularly used. It has to be done in a manner that that fellow doesn't think about it.
00:34:43
Speaker
Because, you know, it's one of the interesting things I noticed in credit card world is that it is muscle memory, right? I'm still talking to my friends. I know what will come next. He's got a trusted machine in front of me. I have to put four OTP number and then I don't even pay attention to it.
00:35:07
Speaker
It's what I call muscle memory. I've done it so many times. I said that, how do I bring that into the B2B world? Now, B2B world is actually very complicated. Because one of the big problem is that everybody raises invoices the way they want to raise invoices. I suppose standard, I don't know. But if you use it, you can't use it. You can't use it. You can't use it. You can't use it. So I say invoices are standard.
00:35:29
Speaker
If you are a buyer, who accepts goods and decides that you will pay, it's all different by industry, different by company, different by process and everything else, right? So it's not an easy thing to standardize at all.
00:35:48
Speaker
And so we figured out, like, how do we kind of tackle this problem, right? If I want to make it muscle memory, I want to make it so predictable and so consistent. It doesn't have no difference at all. You know, the guy should raise the invoice and he should get money. If he gets the invoice, he should get paid. And then we discovered that the only solution is to not standardize.
00:36:08
Speaker
So, we said we took a completely different thesis and said that as long as the computer was generated, we will write the programs to parse it. So, we figured out that most people who use a computer know only three things. They know how to email, they know how to print and they know how to save a file.
00:36:30
Speaker
You know, if you really think about it, there are only a few things that you can assume universally is true. We said our entire verbs will use this. So you told me before this podcast that this thing is getting recorded on my machine and the internet goes away also, this podcast will remain.
00:36:50
Speaker
Think of the same thing. I created an invoice on my machine. I save it on my machine. I don't care about the internet is on or not. Whenever the internet is there, you'll get uploaded. And then we wrote a bunch of very, very cool programs. We don't call it machine learning or anything. It's just very smart programs written by very good guys, which can pass the shit out of anything. Right? I mean, so it could pass out.
00:37:15
Speaker
That document and the data, we would send it to the buyer. Now at the buyer's end, we were saying, OK, how do I know when is he ready to pay? And then we realized every accounts department.
00:37:37
Speaker
Correct. So everyone focused on only the things that they were used to. I didn't have to go and teach them. They put the stuff they were used to. They didn't have to change anything for me. And the bank was only interested to know that there was a invoice and the invoice has been accepted by the buyer. And then if I have given a credit, I will give credit, right? I'll credit the accounts. So that's all that is all that is a magic to this. The magic is to actually be invisible.
00:38:00
Speaker
The magic is not to have a YNA in between. The whole idea was really focused on the fact that people should not think about you if you want them to use you.
00:38:34
Speaker
What's the beauty of Dropbox? Anybody who is a Dropbox will tell you that they keep on saving files to the Dropbox and because, you know, they don't even think about which file to save or not to save, they just keep saving. It's available on all their devices. Correct? It becomes a very muscle memory. Google Drive is not muscle memory.
00:38:41
Speaker
That was a simple philosophy we had. How do you get the invoice without an upload on a website?
00:38:57
Speaker
But it's a lot of work. These just said you'll be dropped box here. And you obviously install some software which does the thing. It's like a driver. It's like a driver, right? I mean, that's it. So it's invisible. It stays in the background. You don't, and we don't take any data off your machine. I wish I'd learned all those clicks, but we don't. We just take the files you intend to give us.
00:39:22
Speaker
But it's an opt-in. So that's the beauty of this, right? It is not an opt-out. So actually, when he decides to put an invoice in my folder, he's saying, I want to get financed. If he doesn't want the invoice to get financed, he will not put it in the folder. Simple. If someone puts an invoice in that folder, does the money hit their bank as soon as the
Automating B2B Finance
00:39:40
Speaker
process is done? Or do they still further do some sort of opt-in?
00:39:43
Speaker
Nothing, nothing. They put it in, same day they get the money. Usually same day, sometimes one or two days later, depending on all the programmers, but that's it. So the moment they put it in, and assuming internet is on, that file is taken away by us to our cloud software and on Amazon, we will then pass it, convert it to data, send it to the buyer. And typically the way these programs are structured is that the buyer, because they are repeat orders, will signify acceptance.
00:40:06
Speaker
that he will pay, right? And then when he signifies his acceptance to pay, we will take that old electronic data and give it to the bank where we are connected into the lending system. So if limit is available, the money will get credited to the account. Simple. So it's exactly up to credit card's work. Credit card, when you have a card, the merchant does a pause machine, and there is an account of the merchants. The, somewhere, P.J. says, say, a MasterCard, Visa, banks, issuing bank, requirements.
00:40:35
Speaker
That's all. That's exactly what's going to happen. Okay. So how does the limit get decided? Like you said, if the limit is available. The limit is simple. So in supply chain finance, the key thing to understand is that you are never financing the borrower. You're financing the traders. It's a profound statement. This is like figuring out the strength of the marriage between the buyer and the seller.
00:40:59
Speaker
And saying that, is this trade important enough for them that both will ensure that the money gets repaid? Simple. So where does that happen? It happens when, first of all, you have had a supplier or distributor for a long period of time. You are used to them. They are used to you. Second is that both depend on each other.
00:41:28
Speaker
They will stay together, right? I mean, simple. So I think that is the second thing. Third is that the brand should be something that is important, right? I should not be able to switch easily. If you look at Colgate toothpaste, then there is a market for it irrelevant of whatever happens in the life, right? So that the brand pool is very important thing. Lastly, a market already created.
00:42:01
Speaker
And that credit always did work. We call it the white model, vintage, interdependence, brand and full and existing credit. Because you know, both of them will work together to return. It's like, you know, financing a house.
00:42:24
Speaker
And if you finance hours to a couple who have been married for five years, people will tell you that the mortgage will always get repaid. Because they invest. Both of them invest their feelings into it, right? So the same thing is of financing a trade opposed to financing the borrower. Of course, you look at the borrower, but that's secondary to the trades. So the trick really is that once you understand the trade, then you can say that everybody who does the same type of trade can get financing. The trick in this is not to do one by one.
00:42:53
Speaker
So it is not like Akshay and Ram ki bhich mein ju danda chal ram finance kar hai. Akshay te boht loom ki sath danda kar kar kar kar hai. Mein hai Ram ki sath danda samajli hai toh mein Ram jisa aur kitne lok akshay kar kar kar hai. So today I will finance all of them. Because the trick also in this structure is to make sure that Akshay then looks at me as a one-stop guy to reach out to everybody in his network. Correct? So the whole idea is to scale it up like a network. Now the interesting thing is, Ram hai, yo akshay sein i kam kar tai, dushom kus hai di kam kar kar tai.
00:43:22
Speaker
So Ram got introduced by Akshay, but now Ram, I have to figure out, Ram, you know, you keep on building this up. That's why it's a network. You can't stop only at Akshay and Ram. You have to go Ram, Arjun, whatever, you know, Karan, Arjun, because there is a pattern to this.
00:43:46
Speaker
If I am today Kirana Dukan that is selling Hindustan liver stuff, but I'm also buying from BNG, I'm buying from Nestle, I'm buying from ITC and I'm buying from Balaji Wafers. The trick is to really figure out is that if I am willing to do is financing of this Hindustan liver, I'm willing to do is Balaji Wafer also.
00:44:06
Speaker
But once you do that, that's when you can really build up this business. That's how we have become the largest. We do about 2,500 crores a month of financing by just doing this stuff day in, day out. It is not technology. No, all that is all okay. It is that I turn up every day in the same way and do the same shit every day. Consistency is the biggest thing that people forget in life.
00:44:36
Speaker
Right? And you're used to that entire thing that you will walk in, you will get the cup, you will walk out. People love consistency. And the trick, my competitive mode is that unlike all my startup brothers who every day wake up in the morning and think of something new, I'm perfectly okay with thinking the same thing.
Consistency in Supply Chain Finance
00:45:06
Speaker
It's boring to have competitive mode. It's like, you know, it's like, you know, it's like, you know, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like, it's like,
00:45:17
Speaker
Sorry, I'm part of the scenery now. So you can't take me out. How do you do onboarding at scale? Because now this model which you explained to me, the four things that you look at, the vintage vibe you said, sorry? Vibe. That seems like a time consuming thing to figure that out. How do you onboard at scale?
00:45:36
Speaker
Yeah, I see, look, I mean, you take an industry, right? And when you map out an industry, let's say you take cement as an example. So cement make it a player's maximum budget, but a player who's given both, but a budget. So cement industry, the model roughly same as subject, right? I mean, it's not like someone is doing totally different from there.
00:45:54
Speaker
So when you start mapping out that industry, you realize a pattern. What happens in the industry? So when you look at that industry, you actually get a very good idea of how that model works. Then when you go and talk to one of the players and the player says, look, I want my distributors to be financed. He actually gives you a lot of data.
00:46:18
Speaker
Right? Because you need to make an a priori understanding of whether you can finance or not. Right? So before I give a proposal, I need data. So when I look at the data, I'm able to churn it through and figure out exactly in the streaming cam model. Right?
00:46:34
Speaker
So, really a basic set of principles when you apply, you can very quickly create the vibe model. That's a very, very easy model to create. Because you know, Cement, Cement is a contractor. Most important thing is the contractor's relationship with the retailer.
00:46:51
Speaker
It is not your, you may see any number of ultra tech ads. It's very unlikely you're going to tell your contractor ultra tech. So the trick is to figure that out.
00:47:07
Speaker
So, all you have to figure out is what is the competitiveness, why do people keep on selling it. So, UltraTech as a company, for example, has a long-standing relationship with distributors. I think family businesses, you know, people have remained. So, it's a very, very strong network. So, that data allows you to onboard all distributors of UltraTech. And second is that, look, I am like LinkedIn, right? I don't go and do business with someone who comes cold into my doorstep.
00:47:32
Speaker
So, UltraTech has to bring those distributors to me. I will not go and talk to each of the distributors. So, there is a simple LinkedIn referral scheme. So, UltraTech has to bring those distributors to me. I will not go and talk to each of the distributors. So, there is a simple LinkedIn referral scheme. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me. So, UltraTech has to bring those distributors to me.
00:47:50
Speaker
Essentially, that distributor business is like a BNPL, like buy now, pay later for distributors. Everything in life is BNPL, boss. I mean, you know, people who use BNPL as if it's something new thing that's come in. I mean, that's how everybody has bought everything. I mean, you know, first time you use a credit card, you did BNPL. The vendor part of the business is not exactly BNPL. Like there you are like, or it is BNPL, but vendor is bearing the cost. Somebody is going to bear the cost. In the traditional BNPL, we had some pension model. So the guy was selling was the guy was paying the money for the interest for it.
00:48:20
Speaker
In a lot of new BNPLs, it is actually the guy who is buying who is going to pay the money for it. I think the model of who pays for it is all dependent on the bargaining power. The question is that ultimately everybody is buying now and paying later, except the cash and carry business, where you have to buy now, you have to pay now, everything you have to do now, but everywhere else you have to buy now, pay later. I think the fundamental construct is very simple that when you have referred relationships, it's easier to take a call on credit
00:48:48
Speaker
because you can understand the strength of the relationship as opposed to something new. So we cannot finance the equivalent of a tinder. I'm shadi.com. We can finance, but you know, I'm long-lasting relations. So, you know, someone comes and says, I have no requirement for loyalty of my suppliers or distributors. I can change any of them every day. I will not finance it because nobody's going to be interested to figure out whether I got repaid or not, right?
00:49:15
Speaker
So the simple fundamental life is that's all. You just have to make sure both need each other. The moment you have an unequal relationship, you're dead. So that's all. I mean, so actually this business is roughly from an opportunity point of view, a hundred billion dollars a month in India. But this, what are you defining here? Like what level of company, like say companies which are a hundred crore plus turnover, a thousand crore plus turnover. Like how do you define the market here?
00:49:40
Speaker
What kind of companies would you tie up with for funding their distributors? Let me give you a simple stats. Okay. Very nice. Interesting stats. The power of seven. There are 700 companies above a billion dollars of revenue. There are 7,000 companies above 5,000 crores of revenue. There are 70,000 companies over 50 crores of revenue. There are 7,000,000 companies above one crore of revenue. There are 70 million companies below one crore of revenue.
00:50:09
Speaker
When you start, everybody starts with 700. The most of the number is happening between the 7,00,000 and the 70 million. Because that is the final place where things are getting bought and sold. Right. Is that 7,00,000 and the 70 million part is just the starting of the thing. That role, as I said, all banks focus on the top.
00:50:38
Speaker
between the 700 and the 7,000 or 700 and the 70,000. The real business is between the 7,00,000 and the 70,000,000. And in that business, if you can focus on it, that's where your $100 billion of requirement is there, large part of it. Correct? So that's the beauty of this old model that you have. But what we decided is that we cannot go directly and approach the 70,000,000. Then you need lots of feet on street.
00:51:08
Speaker
Okay. So fair, you know, so the idea is we have to start from one go three seven hundred will refer us to 7,000 7,000 refer to the 70,000, 70,000, 70,000, 70 million, much easier. I don't have to think about them. I don't have to introduce myself to them. They all been introduced. Second is that you start from the top. One of the nice things is that supply chains are like a long piece of rope.
00:51:41
Speaker
If you start from the top, you actually know two or three months before what is happening in the business. When it starts selling less cars, it will order less.
00:51:52
Speaker
Correct. So the trick in life is start from the top, work your way down. And what is the benefit for a Maruti? Like, does it increase the turnover or like, you know, what kind of financial benefit do they get by tying up with you?
00:52:06
Speaker
So first benefit they get is what I started my first business in cash management. So I know when I have to pay, I know when I'll receive money. So there is no, you know, there is no worry about when I have to pay when I have to receive money. So if I'm a CFO of Maruti, I can very easily say I know when I have to pay or when I have to receive. So first is cash management. Second is that I move the credit from my balance sheet to yours.
00:52:45
Speaker
Correct. So you will actually get a loan from another 30 days. I will pay you in 45 days. But that's a loan you have taken. So effectively transferred is wrong to you. This whole, you know, ability to transfer a loan from my books to your book is the other big benefit of supply chain financing. Same thing with distributor. So instead of a distributor paying after 60 days, he pays after seven days through the BNPL service. Correct.
00:52:56
Speaker
The world over large businesses focus on how to decentralize credit. What does this mean?
00:53:13
Speaker
And that's what he makes is, you know, he gives the money and the distributor has to have, but the trick here is, and the trick, that's why I keep going back to affordable credit,
Reducing Lending Costs
00:53:20
Speaker
right? Ultimately, your interest cost cannot be very, very big part of that. And that's why it's very, very important to be affordable. You know, 95% of the assets we manage in our platform are below 10% interest rates annualized.
00:53:38
Speaker
We are the only players in the market who went the reverse. We realized that there is no other way to make sure he keeps coming back again and again.
00:53:49
Speaker
In India, there are a lot of convenience apps. There are dancing parties, dashboards. There are two-click mechanisms. One-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms. There are two-click mechanisms.
00:54:12
Speaker
So look at what are the four costs in lending. First is what the bank itself borrows, at what rate it borrows. So first we go to the largest guys, because then their borrowing cost is lowest. So they will probably borrow at 4%, 5%, 6%, maximum. So first of all, that should be the cost. Second is there is a cost of acquiring customers. I mean, I don't know what the cost is, but I don't know what the cost is. I don't know what the cost is, but I don't know what the cost is.
00:54:40
Speaker
Right? Third is servicing cost. The moment I give a login ID and password to anybody, at least twice in a year, they are going to forget it. Correct? And then they want to need a support center to call up. Which means I have to have one person for every 100 guys. I give login IDs too. So servicing actually what people don't realize is that the moment you give someone an app,
00:55:18
Speaker
You know, whenever you come to India and you stand next to Kirana shop, you'll be amazed to figure out that a lot of these new age fintechs are people coming and teaching people how to use the app. The whole point is that you have a lot of service in custom.
00:55:25
Speaker
You actually need a whole servicing team behind it.
00:55:56
Speaker
That's all you need to do. I mean, you don't need to do anything else. And the trick is to keep that simple. And the fourth cost? Is the cost of credit, which is default. Okay. Like the risk, basically. A risk. Correct. Right. Because that's what, so if you tell a bank,
00:56:04
Speaker
and lastly cost of default. But you still need that person to install the driver.
00:56:15
Speaker
So the point is that we are saying, we are financing the trade, which means that both parties are involved. It is not a single party system. So, you know, the whole idea is that if you have taken a mortgage with your dad, sending his guarantor and your dad is the MD of a bank, then people will say there's no risk of giving to Akshay.
00:56:33
Speaker
You know money guarantee or we have a guarantee like say Maruti or someone in the chain, right? Someone bigger that automatically the risk reduces, right? And and so the overall idea right now, for example, we are lucky and say we're lucky. We have zero default. I amazing. I may be amazing. But you know, but ultimately the trick is like this, right? If you are only financing,
00:57:08
Speaker
You will automatically be prioritized for anything. Correct? For repayment of loan.
00:57:24
Speaker
So 99% of people are not interested in closing down their business. You know, I mean, there is 1% joy but 99% only. The trick is that only. The trick is to make sure that you are very affordable, you are very convenient and you are financing essentials. You don't finance avocados.
00:57:39
Speaker
You've got finance, cherry, ice cream sauce. I mean, I don't know if you've ever seen this before, but just to be in with the crowd, finance is going to be a big deal. I don't know if anybody can go wrong here.
00:57:51
Speaker
Actually, almost everywhere, unless a guy doesn't boil the rice, it's generally okay. So what trick is that? Do you give your bank partner some sort of risk sharing, some sort of risk guarantee? Risk is all on their books. On their books. On their books. Well, first default guarantee, a lot of intakes give that. You don't give that.
00:58:17
Speaker
So even though if I give a lot of information to my banks, I tell them you have to design the risk yourself. I mean, you're a banker for some reason, right? I mean, I'm not a banker. You are a banker. So that I think was very, very clear.
00:58:31
Speaker
Second is that what we said wrong back ago is that look, and before the Facebooks and Twitter realized it later, I wish I had met Mark Zuckerberg and Jack Dorsey and all. Our platform below, you are responsible for the content, right? You cannot say I'm not responsible for the content. So we said, look, even though banks might bring the business to us, we might get the business and it is the banks taking credit risk. If you don't think this is our money, we are going to be in shit trouble.
00:58:56
Speaker
I came from a generation which had Myspace before it got Facebook. And Myspace people got turned off because of the kind of bad crowd that came in. They allowed everybody to come in as opposed to a Facebook. So the advantage really is that you have to be responsible for the content. Make sure that the transactions are happening as clean as possible. Then the banks recognize that you are a responsible partner.
00:59:20
Speaker
Because banks, last thing they want to do is lose money. So they will keep on giving you more money. Don't you do underwriting? Like don't you run algorithms and recommend this is the interest rate? Or does the bank do that? Because that would be your value at night. Even if you go 10,000 a year, the bank doesn't need to get into that. Look, if you take a credit decision, you have to take the cost of credit.
00:59:41
Speaker
of going bad. There is no choice about it, right? I am not some santama that people will just listen to me without expecting me to deliver on the outcome. So I have to, when I tell them something, they expect it to happen. The moment I say I have an algorithm that will tell you whether this credit should be taken or not, they'll say, okay, bad, will you put in some money?
01:00:00
Speaker
You can't be the Oracle game without putting some skin in the game, right? So the trick in life is to tell them, look, I'll give you all the information. But how do you solve the bank's transaction cost problem then? Would $10,000 come in? No, $10,000 will come in. If $10,000 comes in, the trade will come in. If you don't have money, if you don't have money, if you don't have money, if you don't have money, if you don't have money, if you don't have money, if you don't have money, if you don't have money, then in this mind actually the risk is already gone.
01:00:21
Speaker
So banks also have like automated decision making with you. Like they will say, Vayana. They have a portfolio decision. We used to represent it as a portfolio, right? We used to say, look, I mean, at the end of the day, this guy is selling chapels, let's say. They are returning back the money to him.
01:00:49
Speaker
So take the entire 40 and create a business out of it. It's a portfolio concept, right? It is not a single, single borrower. And that's a trick of supply chain financing. If you can do that, then that's when you can make it very good. So bank just takes a one time decision of setting a limit and setting a rate. Correct. And but every year they'll review it and all that because that's what banks are supposed to do. But yes, it's a one. It's fundamentally a real good validation of key is shaadi achaikini bus.
01:01:14
Speaker
If there are no markers in your life, you know, a joint account, you know, you don't have to do that. You know, and all that, you know, that all go to determine a good marriage or, you know, not a stable marriage. You know, I won't say good marriage. Same thing goes into this. You give the markers to them, they know, okay, this Danda is going to go ahead.
01:01:32
Speaker
And you also raised capital for Vienna. So what was that fund raised for? And how much have you raised so far?
Growth and International Expansion
01:01:40
Speaker
So we have raised totally about, including this round, we would have raised about 43 million. So we have raised, we raised 8 million till last year. And then this time we went for a big one. But primarily because the way to look at this business is that one, lots of it are becoming regulated, right? Not as an NDFC, but just
01:02:00
Speaker
Even today, for example, a payment aggregator, you have to have some reserve capital. If you want to set up trades, you need some capital. If you want to set up some international trade exchange, you need capital. They are all part of what you call regulated entities, which require some regulatory capital. That's one reason for doing it. Second is that we are looking at making sure that once I start working with Akshay,
01:02:20
Speaker
If I really want to make sure that Akshay doesn't leave me, I have to do all his trade. Which means I need to have all the products. So people think supply chain finance is just two products. It is actually about 16-17 different products.
01:02:39
Speaker
So you really have a flavor for every trade, what kind of trade you're doing. So mineral water, office milk, that trade is very different from if you're buying nuts and bolts to let's say you're buying engines. You might say everything is buying and everything requires credit. They are very, very different, right? So you need different products for each of these markets. So when you start assembling that, you obviously would want to kind of build a lot more products so that you can kind of assemble all of that stuff.
01:03:04
Speaker
And lastly, of course, the idea really is that there's nothing in this business that is India specific. I mean, world over is the same problem. The relationships, like your relationship with Maruti and HUL, that is what you would need to crack in every market which you want to enter. Look, I mean, the 700 number right at the top and right at the top, right? In a country like US, probably 70,000.
01:03:27
Speaker
or 7,000, whatever is that number. But it is not huge. It is not like going and saying, I'm going to cater to a billion people. It is still a very, very isolated set. And fundamentally, once you understand the sector, you can find the people who know the right people there to kind of get it done. That is not an issue. But what is interesting about the sector is that whether you go to US to the largest company, you go to Walmart, they will still need some supply chain financing even today. There is no part of their business that is covered by fully.
01:03:57
Speaker
And that's the interesting thing about this business.
01:04:00
Speaker
You know, that's why another 20, 50, 100 Vayanas can come in and everybody will find the business to do because there is no corporation that has got 100% of its supply chain. And therefore you always have a gap. And therefore you can always fulfill that gap. And the nature of the product doesn't change. It is like credit card in many ways, right? I mean, one of the reasons why credit card is so portable is that whether I use it in New York or here, and yes, you are in New York, I don't use OTP. I mean, I don't punch those pin numbers, but you know, but the fact of the matter is that my experience is not very different.
01:04:27
Speaker
It's pretty much the same. So the idea is the same. So we would like to kind of make sure that at least from India's perspective, exports, imports, cross-border, we kind of cater to all that. And to cater to all that, you need to be in the other side of the country, right? Because we need to know the buyers also and the suppliers also. So I think that's the other reason why we would be eventing for a raise of money.
01:04:46
Speaker
And of course, this is a good time to raise money. Yeah, absolutely. Right. You have to do that. I think we have kind of been a very predictable compounding model. So I think we have had a lot of interest even the surround was composed with very quickly, very fast.
01:05:10
Speaker
And also by people we knew before. It is not like we came in with all new people. How has that loan book increased over the years? Like you said today you're doing 2,500 is your loan book size. Cumulative credit I had done say till March of 2019 was about $2 billion. The cumulative credit today is $8 billion.
01:05:29
Speaker
So despite having a COVID in between, I think we've still kind of grown very well. And it is interesting because it's an interesting business because it is predictable to a very great extent. I really can build this business easily rather than having to go and find a fresh business every time.
01:05:57
Speaker
Yeah, so the trick is that the trick in this business, I think the nice interesting thing is that and if I am building like a network, then I can really over comes in, I can actually grow a lot with that person. Our own calculation shows that if I do $1 with Akshay today, he can expose me to another $15 of business.
01:06:14
Speaker
Here, Akshay being like the larger entities or... No, actually any entity, it doesn't matter. So let's say Akshay was a Kiranawala. Right?
01:06:37
Speaker
So you really, one guy can expose a lot of value to me just because I started with him. So to me, every action is important. It doesn't matter whether you're large, small or anything. You will uncover for me other relationships that will allow me to link faster.
01:06:54
Speaker
Like, you know, taking this example, like say a Kiranawala is buying from Hindustan lever, and then he's also buying from say Balaji. And so he'll put that Balaji invoice also in the Vayana folder, and then you will see that I don't have a relationship with Balaji yet. So then let me go and talk to Balaji. Is that how you do it?
01:07:10
Speaker
So actually, you know, in the Kiranawala's case, it's actually very interesting. So it doesn't happen that way. Because first of all, it's called my Dropbox, which is a computer. So the only thing that we use is QR code. See, we believe in using technology that the guy understands. So thanks to all this phone pace, Bharat base, and all the pace in the world, everybody understands the QR code. So because that he understands, right? So we'll, from that moment again, I think the trick is that when I studied Hindustan liver, I also knew that I was buying from everybody, right? Every Kiranawala has to buy from
Kiranawala's Dukkad and OEM Dependence
01:07:40
Speaker
So, about 45% of Kiranawala's Dukkad is from 10-12 OEMs. It doesn't change. Which is unbranded, which I don't go after, which I don't go after. That is the market that I don't understand. And then there is a 3-4-5% which is very exotic.
01:08:00
Speaker
Like, you know, some choco pies, you know, exotic stuff. But 40-45% of them are not. So we have distributed data. And though everybody claims they're exclusive, every distributor in India, like all of us, do multiple businesses.
01:08:26
Speaker
I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not. I don't know if it's true or not.
01:08:50
Speaker
That's how you build the business.
The Role of Credit in Kirana Trade
01:08:52
Speaker
But then you would first talk to the principal now when a new company is introduced. Yeah, we'll always go back to the principal, but we will take it from wherever it comes. So it could be other distributors, right? Because now we know the Kiranawala, right? So we will start with the Kiranawala immediately. We will let three months go by because in the Kirana trade, credit is only seven days. So in three months, you will actually get a minimum 12 repayment cycles.
01:09:17
Speaker
Correct? So, once he's good, that's when you start exposing yourself and figuring out, you know, there are other people who are interested. Ultimately, the guy who's closest to the consumer is the most important guy in the supply chain. You know, I mean,
01:09:44
Speaker
So once you get him for one relationship, you can generally get him for all relationships. Correct? Because that everybody's interested in whether you reached him. If you reached him, then everybody wants to come by the same way. So, so that business builds up actually very, very fast. It doesn't require too much to build up. The question is that you may not want to give credit to everybody. So that's why now my biggest thing I keep talking to people, right? I mean, one of the things in India is that we seem to think that we should give everybody credit to make them grow.
01:10:11
Speaker
And that is such a stupid argument because everybody is not able to actually fulfill their credit obligations. The question really is that you have to make sure that someone is ready for credit.
01:10:34
Speaker
And that to me is a bigger problem in the market than anything else.
Risks of Easy Credit and Responsible Practices
01:10:38
Speaker
You know, I think one of the things you keep talking about BNPL, credit becomes easy. There is a danger to it. You know, it is not even indiscriminate or discriminate also. You know, I mean, fundamental factors when people learn that they don't have to worry about spending more than they earn. Essential culture will also ensure that they don't worry about when they repay.
01:11:00
Speaker
That is what crossed that subprime crisis. Everywhere. So I think wherever credit has become easy, and I think we fintechs have to be really responsible about it because we otherwise will sow the seeds of our own destruction, is that the moment it doesn't have a friction point, you know, the onboarding the friction, you know, a very interesting thing. If you have, you know, if you go to Kiranawala today, fresh new guy, you will not be the credit immediately.
01:11:27
Speaker
He will do one month of work with you. He will actually ensure that he delivers here also that he knows which house you are living in. Correct. That is that discipline you need. I think this whole idea of saying, you know, I don't care who you are. I've just picked up a civil score and I'm going to give you credit. I think that is dangerous. You know, if anything that worries me on this whole business is this, that credit cannot become what they are.
01:11:56
Speaker
So, you have to tap on the credit card. So, you have to tap on the credit card, right?
01:12:04
Speaker
Yeah, this credit being convenient is I think the stupidest thing that anybody has come about with. I fear that we are crossing and I think there's new guidelines that RBI has brought up that saying putting a lot of prescriptions. I think while the industry thinks it's a lot of regulations, I think the worry is that everybody's got access to cheap equity money, though it's not cheap, it's very expensive.
Market Challenges in Credit Practices
01:12:24
Speaker
But you've got money from the US or American, whatever it is.
01:12:26
Speaker
I think it is dangerous. And when that thing burns, it will take a lot of us with us who are actually good. Because the market will not discriminate between the discipline and the discipline. So I think that's my big worry. I think my big worry is that.
01:12:53
Speaker
Do you also do financing of e-commerce? I believe that is one of the most popular segments in this space of people who sell through Amazon, because Amazon pays after a certain period. So that kind of... So if you go back, right? I mean, long distance marriage is a lot of finance. And I'll tell you why this is long distance, right? The seller is selling through Amazon. The Amazon is about the customer. The seller or the customer has a relationship.
01:13:24
Speaker
What is Amazon's relationship? Amazon is selling his relationship. And I have to finance it. I have to sell it. I have to buy it. I have to buy it. I have to buy it. I have to buy it. I have to buy it. I have to buy it. There is no party on the other side that I know he is married to. Then I will take a risk on him.
01:13:47
Speaker
or Amazon or a flip card or someone will say, I was you, I've given you the data, you take the risk, I don't care. It's like guaranteed, no? I mean, he's made the sale, the product has been delivered. That's a very short term business, right? Because the moment you tell Amazon, and Amazon takes seven days to pay the seller, let's say, that's what you're financing the seven days, right? That's what I call discretionary borrowing. Because if you look at the model, he doesn't require the money upfront every time.
01:14:16
Speaker
He only requires a month. Typically, the season will be on the sub-discount. So, he will be able to do it. Correct? So, he will be able to do it. Because when he knows exactly 7th day, he will be able to do it. Today, my market would disappear. If everybody paid on 120 days in a disciplined manner. Forget 5 days or 10 days. So, no matter who starts the business, you will plan your life. You don't need credit.
01:14:46
Speaker
So the Amazon and Flipkart have a rhythm of paying, which I know the rhythm, I know the grammar.
Financing Challenges in E-commerce
01:14:55
Speaker
To me that business is a very nice business to kind of quickly grow.
01:15:09
Speaker
Yeah, I think that's why it was like seen as a low hanging fruit. So we have never been in that low hanging fruit. That is a small little advantage and disadvantage, but it's okay.
01:15:24
Speaker
So one last question, I know your time is almost up, but tell me about the landscape, like who are the other companies that are in this similar space and how do you rank compared to the others and just help understand the industry? Yeah, so I think to me the biggest competitors are banks.
01:15:44
Speaker
Banks who are not on my network, right? Because India may, banks, unlike banks elsewhere, are actually very, very technologically savvy. They are not, you know, they are as good or bad as fintechs. So you take an ICS to access your SBI, anybody? I think they're all quick. So I would always rate them, they have capital and they have low cost capital. So one has to be very, very clear that they are your biggest competition.
01:16:08
Speaker
Then there are many ways of solving this credit problem, right? So then you have large guys like C2FOs, Guru Dynamic Discounting. What is Dynamic Discounting? And you typically pay end of the month.
01:16:29
Speaker
I don't know how to do it. I don't know how to do it. I don't know how to do it. I don't know how to do it. I don't know how to do it. I don't know how to do it. I don't know how to do it.
01:16:44
Speaker
Then there are ways of doing auctions. So Akshay has bought from RAM. RAM will go and put the invoice up in an auction marketplace, and people will bid on it. And depending on who Akshay is, they will decide they won't take the risk or not. So there are platforms like Credex and Trades in India. For example, it's government RBI setup, which are all in the auction marketplace setup.
Invoice Discounting with TReDS
01:17:04
Speaker
And the people who give loans, they are banks? So in a P2B model, like credit and all run, or other guys run, credit and all that, it's all basically investors, you know, like people sitting in Japan, for example, who have money and therefore want to put some quick 12%, 13% earning investment, so they put it in, right? So it's typically professionals who have some spare cash and want to earn more than they are 5%, 6% that they earn in their deposits, right? So that's the market.
01:17:31
Speaker
But as on the trends platform, which is the RBI set up as only banks and now in VFC soon, we'll be able to participate. What is this platform which RBI set up? It's called Treads. Treads, Receivables, Exchange. There are three of them and now the fourth one has got an in principle sanction. But basically they allow MSME suppliers or large buyers to put up the invoices.
01:17:50
Speaker
And with some recognized, like there must be a list of companies. So a list of pre-approved companies. So the buyer can put up their bills. And the buyer himself can offer the bill invoices for discounting. And large banks come in, large banks come in, and they will finance it, right? And they bid for it. So in general, from an economics principle, anything that is bid will probably discover the best price.
01:18:19
Speaker
This is a general economics principle and if it's well organized, you'll always get the best price. The problem with it is, and this is the reason why we have not been big votaries of it, is that this is like your daily dal chawal danda. So my simple example is, let's say that you have a credit card and you go into a restaurant and you eat and instead of putting a credit card under the POSS machine, you have to open up and have.
01:18:38
Speaker
Okay, where you will see multiple banks that are ready to finance that credit card, correct? And you have to choose the cheapest one or it gives you the best cash backs and you choose it.
01:18:54
Speaker
I think maybe invoicing is a daily occurrence, right? So you won't want to take a decision with every invoice. You will take a decision. So we have never been fond of these kind of too much engagement kind of models. That bid model would only work for like very high value invoices where it is like discretionary.
01:19:11
Speaker
It works. It's not that it doesn't work. I mean, but it doesn't work consistently. So I am 50 years and above old. I like things that just happen every day without me walking and running behind it. So in a non-discretionary model, because I ensure he gets the most cheapest credit, he's not going to talk. Yeah, I mean, the difference would not be more than a percent. You're already like sub 10%.
01:19:41
Speaker
So I think it just suits my lifestyle. But the idea really is to kind of focus on dal chawal. As I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial, as I tell every millenial
01:20:09
Speaker
So your kids are all grown up now? Yes, yes. One is in the US doing his fourth year of mechanical engineering and one kid has just gone now to product to doing his comp science. So are they planning to join you? No, no. As in you are, like you said, no.
01:20:27
Speaker
No, no, it's not because you know, I've never believed in it. In fact, you know, my kids also, I was told very clearly, I'll only finance you for your third year of engineering. Fourth year, you have to figure out yourself, right? Undergrad. You know, yeah. Why is that like? Same thing, right? You know, you have to, you have to see, you go under 18 years into undergrad. You're 21 and the third year, right? 21, 22. That is the time when you should start figuring out life here.
01:21:00
Speaker
You have to know what happens in life. I think that's very important. Otherwise, you know, we only teach our children to be entitled and then worry all their spoiltier. You know, stupid. So you have to be very careful. That's my principle. How do you build hunger in your employees?
01:21:28
Speaker
Generally, our intake has been people who have spent time in industry. It is not people who are freshers, though we do take freshers also. Largely, it is people. And I think what people in the industry who come to us are looking for is they have seen the work and they have seen done work. I think they just want to get to a point where they treat us as adults. So one of the very interesting things about finance here is HR.
01:21:51
Speaker
So we have no, we have no leave policy and cash in policy, expense policy, reimbursement policy. But look, people can do what they want. Like, because the point of the matter is, no, and the reason is very simple, right? I think the world over we focus too much on measuring input. You know, we should be measuring output.
01:22:23
Speaker
I think a lot of these MBA principles came from the industrial revolution, HR principles. So I think they're all tuned around measuring people. You measure output, don't measure people. Secondly, there are others.
01:22:36
Speaker
You know, I mean, if you are giving so much money to someone, you may trust him to figure out the right decisions.
01:22:53
Speaker
Have you put in place a system to measure output? Like, is there like a tech behind measuring output of all employees in the company? Like, you know, people have these fancy new age approaches, like OKRs and stuff like that. So do you have anything like that to measure output or it's trust? It is trust. It is trust. It is trust-based. And it is, I think in many ways, a little like the Pagerang algorithm on Google, right?
01:23:30
Speaker
I think over a period of time on small companies, I don't know whether it spreads whenever a thousand people or whatever.
01:23:38
Speaker
How many people do you have now? We are 125. So, you know, I mean, they're not very large, but you know, so for example, we have always been work from home, even before COVID started, because I don't like this idea of commuting, right? I mean, Bangalore is better, there's a lot of office offices, there's a lot of parking lot, there's a lot of things to do, I don't know. Hybrid or like pure work from home? Nothing. We have no rules. We have office. If people want to office, we create office.
01:24:03
Speaker
But if someone wants to join you and he stays in a different city, you'll hire him. Yes, yes. We have people from everywhere. We have people from Berampore and Orissa, Chandigarh, Baroda. So our first state of engineering, we sat out of Baroda. I mean, it's always been Baroda where there's no office.
01:24:23
Speaker
We have kept offices. In Bangalore, there should be an office. Now people said, no, we are not coming back to office. We said, okay, no office. When you want an office, you put an office. If you want to come to an office, you come to an office. Because the whole idea is this idea that I also have a strange thing. I don't believe companies are families.
01:24:43
Speaker
The company is obviously a place for professional engagement, learning, career and all that. I think you should be encouraged to spend time with your real family.
Cultivating a Culture of Trust
01:24:50
Speaker
I don't want to invite you to zoom lunches and get you to put Rangoli in the office.
01:24:58
Speaker
I just find all of this very strange and I'm probably wrong. I am sure there are people in my company who feel very upset about it. But I really believe people should focus time on their family. So you spend four hours a day travelling, you may as well spend with your family. So I just think this whole idea of economic overheads.
01:25:24
Speaker
You know, a lot of people who are so insistent on people coming on time do, they put one sensor, then they have an HR software, they check it, then they are worried that people are tailgating, two people will go out and they are there. I find the whole concept very strange. I think a large part of this model succeeding depends on hiring, no? Because if you, I mean, you need to really find adults to hire then, no? I mean, if the kind of people you hire are not, people can take advantage.
01:25:54
Speaker
But you know, if they take advantage, they get caught because everybody kind of then points out to them, right? Look at the end of the day, it is not like you can, you can fool me maybe five months of the year. He is working with someone, he or she is working with someone, right? Someone else is depending on his output. So it's not like you can escape indefinitely. So the cost of
01:26:18
Speaker
you know, tracking that fellow versus the cost of finding out when he's not working out, I think it's a very lopsided cost. The cost of tracking is much more huge. What is the message you're passing to people right from the day they come in? You know, I am going to check you out. So then I don't rush to you. We ask people to give deposits to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our pen to us and then we ask people to give our
01:26:46
Speaker
This is exactly what we have become with employees. We are telling them, we'll pay you a lot of money, but we don't trust you, buddy. I think the cost of getting things wrong is so overrated because it works most of the time. Most people really, honestly speaking, want to do an honest day's job.
01:27:09
Speaker
You know, people don't want to kind of do a dishonest day's job. You know, this feeling that we have that everybody chor. I think that is all there is to it. Look, I have a very simple process. I want to be treated the same way. I would, I would explore this
Referral-Based Hiring and Output Focus
01:27:23
Speaker
simple. I don't want someone to monitor.
01:27:31
Speaker
But how do you hire people? Largely referrals. So now we have also looked at normal recruiting, but largely referrals. And I think it works. Again, that PageRank is what you're using? PageRank is what I'm using to monitor, to kind of get a little bit of sense of who is really doing well or not well and all that. But otherwise, it's just a mechanism of you figure it out very quickly. In any organization you work, you will find two, three names always coming up. You know who your stars are, honestly.
01:28:01
Speaker
and you know who the idiot starts. I mean, it's not difficult. You don't need appraisal systems. If you have been in a professional organization, three months of your career, life goes in doing appraisals. Then three months of your time goes in controlling people who have got bad appraisals or then redoing their appraisals. You don't have appraisals. How do you give instruments? Very simple. I'm going to give you salary. Should I give you salary for your next year's performance or your previous year's performance?
01:28:31
Speaker
So my investment is very simple. My question is very simple. If I were to hire an Akshay today, how much would I pay him? So every year, I am hiring you fresh. Because I am looking at what I would do with an Akshay today. How much would I pay him? Then there is no concept of some tagging. If I were to hire an Akshay today, how much would I pay him?
01:29:05
Speaker
You need an HR to do this calculation every year. Every guy who is running a team has to do it. Look, he has to manage a team and he has got to run a team, he or she, and he has got to make this calculation. If he sits down and starts figuring out last year's performance. See, last year's performance only to figure out whether he should stay or not stay. It's a binary issue.
01:29:27
Speaker
The rest of it is, you know, do I need you
Decentralized Decision-Making and Employee Trust
01:29:30
Speaker
or don't I need you? If I need you, if I went to the market to get someone like you, how much would I pay? And then I should pay you that much, you know, at least minimum. Simple, you know, I mean, I don't think there is any major complicated science in this. I mean, all increments have to be forward looking. Only when shifting lanes, you look at rear view mirror.
01:29:57
Speaker
So you're like basically doing extreme decentralization, like, you know, in the sense that you would probably set a vision for the organization and set some broad goals, but decision making is largely decentralized. You know, I mean, so, you know, I, I interfere in everything that I feel I should interfere in and I don't interfere in things I don't want to interfere in. I expect everybody to do the same.
01:30:26
Speaker
So, at the end of the day the simple thing is that if I know something I will I will get into it whether it is at a very detailed level or whether it is at the top level.
01:30:34
Speaker
Yes, over a period of time, you get a good sense of people who you are, anyway, while doing their stuff, then you will never interfere in some things. You will interfere in things you won't interfere. I think this need to codify everything, right? A human beings like problem, you know, I mean, we like to put one label, like packaging, you know, if you are sales, then this is what you're supposed to do. If you're CEO, you're supposed to do.
01:30:58
Speaker
I mean, there is no unique, they are all unique individuals here. We all do whatever we want. No, my advice, I will not tell someone to run the company like I run Vayana. If you are the type who is control free, be a control free, trust everybody. Your DNA is to not trust anybody, don't trust. That's your life. But the IO operator is very simple. There are things that catch my fancy, I go and interfere. There are things that don't catch my fancy, like HR, I don't interfere.
01:31:27
Speaker
If you like the Found a Thesis podcast, then do check out our other shows on subjects like Marketing, Technology, Career Advice, Books and Drama. Visit the podium.in for a complete list of all our shows.
01:31:48
Speaker
Before we end the episode, I want to share a bit about my journey as a podcaster. I started podcasting in 2020 and in the last two years, I've had the opportunity to interview more than 250 founders who are shaping India's future across sectors.
01:32:04
Speaker
If you also want to speak to the best minds in your field and build an enviable network, then you must consider becoming a podcaster. And the first step to becoming a podcaster starts with Zencaster, which takes care of all the nuts and bolts of podcasting, from remote recording to editing to distribution and finally monetization.
01:32:25
Speaker
If you are planning to check out the platform, then please show your support for the Founder Thesis podcast by using this link, zen.ai.founderthesis. That's zen.ai.founderthesis. Before we end the episode, I want to share a bit about my journey as a podcaster. I started podcasting in 2020 and in the last two years, I've had the opportunity to interview more than 250 founders who are shaping India's future across sectors.
01:32:54
Speaker
If you also want to speak to the best minds in your field and build an enviable network, then you must consider becoming a podcaster. And the first step to becoming a podcaster starts with Zencaster, which takes care of all the nuts and bolts of podcasting, from remote recording to editing to distribution and finally monetization.
01:33:15
Speaker
If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link zen.ai founder thesis. That's zen.ai founder thesis.