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The "Full Stack Fintech" Playbook for Emerging Markets | Sandeep Patil (QED Investors)
417 Plays2 years ago
"The First Law of Fintech: No amount of capital is enough to burn if your unit economics are broken."
Sandeep Patil stresses that while tech startups might get away with a "grow now, profit later" model, fintech is different. Because you are dealing with a balance sheet, having a clear line of sight to profitability on a per-customer or per-transaction basis is the absolute first filter for securing investment from a top-tier VC like QED.
Sandeep Patil is the Partner and Head of Asia at QED Investors, a premier global venture capital firm with $4.3 billion in assets under management that has backed 28 unicorn companies. Before his move into venture capital, Sandeep had a storied career as an operator. As the MD & CEO for India at Truecaller, he quadrupled revenues to over $100 million, drove the company to profitability, and paved the way for its successful IPO. Previously, as the Head of Fintech at Flipkart, he scaled consumer and SME lending products to benefit over 1.3 million borrowers.
- India's Unfair Advantage: Why India's digital public infrastructure (like UPI and the Account Aggregator framework) creates a unique, open environment for innovation that surpasses other global markets.
- The Operator-Investor DNA: How QED leverages its partners' deep operational experience to act as "consiglieres" or trusted advisors to their founders, providing practical advice beyond just capital.
- Regulation as a Feature: A contrarian view that a clear regulatory landscape is attractive because it builds customer trust and provides clarity for long-term operations.
- Avoiding the "Tourist VC" Trap: The importance of VCs committing to a geography long-term to help build the ecosystem, rather than just flying in to deploy capital when the market is hot.
Chapters
(00:00) Introduction
(01:28) The Capital One DNA: How the "First Fintech" Shaped a VC's Thesis
(07:35) Why QED Bet Big on India: The 3 Pillars of the Investment Thesis
(12:02) India's Secret Weapon: Unpacking the Digital Public Infrastructure (UPI, AA)
(19:13) The 3 Fintech Models VCs are Funding in India Right Now
(30:03) The Non-Negotiable Investment Filters: Unit Economics, Growth & Founder DNA
(37:35) From Seed to Series D: A Founder's Guide to Answering the Right Questions
(44:08) Beyond Strategy: Why People & Vision are The Only Things That Matter
(49:45) How to Get Noticed: The Best Way to Approach a Global VC like QED
(59:18) The Investor's Take on Crypto, DeFi, and the Future of Finance
Hashtags
#FounderThesis #VentureCapital #FintechIndia #StartupFunding #SandeepPatil #QEDInvestors #Entrepreneurship #BusinessPodcast #StartupIndia #InvestmentStrategy #UnitEconomics #Scaling #AkshayDatt
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Transcript
Introduction to Sandeep Patel and QED Investors
00:00:00
Speaker
Hi, I'm Sandeep Patel. I am a partner at QED investors. I head our investments into Asia.
00:00:19
Speaker
ambitious founders trying to build their startups as rocket ships need to win over an integral stakeholder. And that is the venture capital investor. After all, they are the ones who supply the fuel for the rocket ship. Conversations with VCs are truly fascinating. They have a completely unique lens with which they look at startups. A VC is able to look at a startup dispassionately and analyze it by using his understanding of the market and his thesis on what kind of business models will scale.
Role of Venture Capitalists in Startup Scaling
00:00:47
Speaker
In this episode of the Founder Thesis Podcast, your host Akshay Dutt talks with Sandeep Patil, who is the Asia head of QED, which focuses on funding fintech startups. In this candid conversation, Sandeep shares his thesis on why India, why fintech, and what kinds of businesses model scale. This conversation is a masterclass on how to build a startup that attracts global investors.
00:01:11
Speaker
Stay tuned and subscribe to the Founder Thesis Podcast on any audio streaming platform to learn about building rocket ship startups.
Capital One's Data-Driven Success
00:01:28
Speaker
In many ways, Capital One was the first Frintech that ever was. We were very big on data and very big on technology. When I joined in 2001, that time the joke around the company was that we had the third biggest database in the United States, CI being the biggest.
00:01:47
Speaker
Right, because we used to download, like anyone would apply for a credit card to Capital One, you would download their bureau file. A bureau file would have last seven years of your financial transactions. I think if I recall correctly, again, some 800 different data boards per user is what we would look at. We used to pay fairly little attention to the FICO score, but we pay a lot of attention to what exactly is setting your data up.
00:02:13
Speaker
And five people who don't know is the civil equalization. Yeah. Civil equalization. And Capital One became renowned for its ability to leverage data to drive better outcomes for the customers. Previously, we were the first half of the first decade. Capital One was the biggest credit card originator in the United States, bigger than Citibank, bigger than just Manhattan, bigger than any other institution. And we are very strong in the super prime end of the market.
00:02:42
Speaker
So very low risk customers were able to parse their risk even better than the best lenders out there, better than Amazon. Right. And then on the other side, on the sub-prime, so new to credit group, also we are very good because these days don't have well-formed pure files. The data is not very deep, but it's very sparse. And we are able to parse through that data to identify which are the nuggets of information that will help us understand that this customer is relatively low risk. Right.
00:03:12
Speaker
So anyways, not only was the fintech in that sense, but also fintech in its operations was completely meritocratic. So for a 20 year old joining Capital One, I think within six months I was responsible for 7 million inactive users trying to get them to reactivate. So I was running a intersection P&L.
00:03:32
Speaker
If the P&M was zero, no revenue, no losses from this portfolio. But when I did start growing it, that responsibility stays with you. So when you're doing a program on them, a marketing campaign on them, an activation program on them, you measure the tension control and therefore you quantify how quickly. Two, four years later, the team I ran was called Balance Building. That was the largest asset gatherer for the bank.
00:03:58
Speaker
So if my company, asset gathering group, precise people who have credit cards with Capital One, we would get them to transfer all other debt to Capital One because the card, the interest rate on the card was lower than whatever installment loan that you have or to loan you may have, etc. So you get them to move that over to the card and that became the largest driver of growth.
00:04:20
Speaker
for the company. So for a company, look out team credit that I am amazing and therefore the game is this responsibility but equally so and perhaps more, you have to be in a meritocratic organization that can see the value of this kind of thinking.
Joining QED and Ecosystem Building
00:04:35
Speaker
Unsurprisingly, I am a big fan of Capital One, I am a big fan of the folks there.
00:04:39
Speaker
So when in 2020, Nigel called, Bill called, eventually spoke to other folks at QED, like most of them are X Capital One. And this was essentially Capital One, alumna adaspora coming to venture capital, right? That was the core operating model. And that was just marvelous. It was too hard to say no.
00:04:59
Speaker
There are other kind of structural reasons as well. Look, today is actually a great example, right? If you go back and look at India and venture capital market, most tourists have vacated the space. Tourist fund. Give here example of a tourist fund.
00:05:15
Speaker
Thanks to the Turkish behavior, which is I, as an investor, have an allocation this month because we raised new funds, so I have an allocation. So I'll fly down to the hottest geographies, sign up two or three years, right? My allocation is done, then I'll fly out, right? And then till the next one gets raised two years, three years later, you won't hear much from me. I won't bother you much either. Let's track the performance. Two or three years later, again, neither return trip will happen.
00:05:44
Speaker
so i didn't want to be part of tourist fund right because they don't have any vested interest in building the ecosystem they want to benefit right they contribute also to be honest capital is not a small contribution so they contribute to the ecosystem also but i wanted to be part of a story where we actually help build an ecosystem
00:06:02
Speaker
And QED had demonstrated that. QED entered LATAM in 2015. It used to be a US fund before that. I think 14 or 15 is when they entered. But after that systematically, they worked with the ecosystem to build it out. To the extent that today, QED is one of the biggest funds in LATAM.
00:06:21
Speaker
I think all but one unicorn, at some point someone had done that, all but one unicorn has QD investment in 2021. So very significant player, but also work with the seed investors, work with angel investors, work with the founders.
00:06:40
Speaker
Yeah. Embed themselves so that they become local or native to the land, but also embed themselves in the sense of building the capabilities, right? Like contributing to development of founders, development of companies, volunteering their own time to speak with people when they don't have, when we are not even going to invest. So we measure an NPS as a venture capital fund, which not many VCs do. And it always sits at high 80s for that reason. Who is the audience?
00:07:10
Speaker
Yeah, NPS from founders. NPS from founders. So when Nigel and Bill and others approached me, then this felt like the right proposition, right?
QED's Strategic Focus on India
00:07:20
Speaker
Because I wanted to be part of this investment story into India, but I also wanted to be part of a player who wanted to be a long-term ecosystem oriented player and beauty was all of that. So it made a tremendous sense to join the fund. Why did they enter India? Like what excited them about India?
00:07:40
Speaker
So to be honest, when I joined, we were thinking about, will it be India? Will it be Southeast Asia? Will it be other parts of Asia? Because that time even Far East was a thing to think of. Could we go to Australia, for example? So when we joined, it was test and learn, with me joining as well, that I'll build out the case for what exactly we want to do in the broader Asian geography, very candidly. But we are very rapidly centered around India.
00:08:09
Speaker
Hindsight is 20-20, but I would say our thesis was driven by three main factors. The first factor is the macro part of the story. Everyone raves and rants about India being the fifth largest economy in the world, GDP growth rate of 8-10%. It becomes national news when IFC or someone revises up or down that number. These are catchy headlines, but that's not what gets me excited.
00:08:35
Speaker
What gets me excited is if you look at global economies, how they have performed over the last 25 years. There have been three main crises. There was four of us who are quite old and up there. I would say like .com and 9-11 was the first crisis, right? Because .com caused tech violations to go down. Oil crisis following 9-11 caused a bit of inflation. Here in the UK, there was a great downturn. A lot of economies expressed had some credit even because of it.
00:09:04
Speaker
The first crisis, the second big crisis was 2008 and Lehman was again the crescendo of it, but 2007 onwards the prime went up and a lot of investing equity went down. All the regulations that came on banks in 2008, 2009, 2010, cause to the fixed income crisis in 2011. Right. So that three, four year period was a fairly long just period for global economies. And then the third period being pandemic and the war in Europe, right? That whole thing that is precipitating.
00:09:34
Speaker
And in all of those three periods, what you would observe unequivocally for India is that there's a bit of a plateau, if you will, right in the economy, but then it bounces back stronger than before in each of those episodes.
00:09:51
Speaker
Right. Consistently. And the reason then could be varied, but what it tells you as an investor is that what is happening foundationally in the economy is strong. We used to think of macro economics very studied, but it used to be number of people times productivity. Right. And when you see an economy consistently demonstrate the strength, that means productivity is structurally improving. Right. Factories are better. Roads are better, electricity supply is better.
00:10:18
Speaker
utilities are better, people are more educated, there's more investment coming into the country and the investment is getting deployed the right way. Things are not getting lost to corruption or just transmission losses. Exports are improving, imports are improving, value add by the manufacturing sector is improving. All of those factors start coming through and depending on the crisis, you can take which ones were really responsible.
00:10:42
Speaker
But that macro story is very strong for us from that perspective, right? The fact that you're resilient there, right? This is here to stay. It's the phenomenon that we continue for some time, right? As I invested, there's a snap on. The second part of it all acts as a hedge while the rest of the world is getting more badly affected as compared to it. It's always easier to swim downstream, right? So if there is macro current is flowing the right way, it always helps you get far better investment rate, especially in venture.
00:11:11
Speaker
There are other parts of investing which may benefit from still waters and even swimming upstream. But in venture investing, it's very true that you want to flow with the stream. So macro is a very important factor.
India's Fintech Landscape
00:11:23
Speaker
Second important factor was both financial services and technology as verticals. So technology is the easier story. I'm sure your viewers and listeners know that internet adoption has gone through the roof, GPS costs per unit of data.
00:11:36
Speaker
largest data consumer in the world. Yeah, right. Like in Flipkart, I looked at a bunch of these numbers very closely. I presented a bunch of these numbers very closely. So the story was very clear.
00:11:47
Speaker
But even outside, all of us can talk about how great e-commerce story has been, great Fintech story has been on the back of it. But technology adoption is phenomenal in the entry. I think the part that I want to talk more about is the financial services growth. The fact that in India we have... Fintech is focused on Fintech as an investment. Globally, we only do Fintech investments. So working from that capital one heritage, Fintech is what we focus on.
00:12:14
Speaker
On the financial services side, India has had professionally run banks for a long time. But also with government initiative, the penetration of core FinTech products, right, core financial services products, sorry, has been very deep written as a bank account. UPI success wouldn't have happened without supporters from RBI and without all the efforts of NPCI.
00:12:38
Speaker
UPA is the tip of the iceberg. There is a huge RTGS, IMPS kind of system that sits on top of the technologies that have been adopted wholesale by banks. It's at the heart of KYC, the JAM ecosystem that came about. And even now, the Oaken framework being drafted, coming live.
00:12:57
Speaker
Such a normal initiative that you can get access to any bank account within seconds for the last three years with information flowing directly from your financial institution without being captured by any intermediary card. It's mind boggling how powerful that framework can be. I think it's unparalleled. There's no other country which has done that.
00:13:16
Speaker
A lot of countries have done open banking, but it's quite crude and rudimentary compared to what India will witness and like next three, four years will be transformational. I think AIN can have the capacity to verify is a account aggregator framework. Yes, exactly. So it's a account aggregator framework. What it allows is say by asking Akshay, then with one consent, you can allow me to get access to all your bank accounts.
00:13:43
Speaker
for the last three years, where the data will flow in a structured manner. So it's always readable directly from your banks to me. Without anyone else being able to tap into it in the middle, no matter who the intermediate is, the data will always flow directly. And so because it's coming directly from your financial institution, the veracity is very high.
00:14:02
Speaker
because it's coming as structured, it can be readable. And third, there is a phenomenal amount of data protection around it, so no one can intercept it or read it. And then the real power also comes, the real power is here. But the power also comes from the fact that you can tack on other databases, you can tack on insurance on top of it, taxation on top of it, etc. So it just becomes more and more powerful.
00:14:23
Speaker
So what we thought of bureaus, like I wanted to read your positive and negative information when I was going to lend money to you. Now I can get that or probably far better quality information through AA. And then it opens up all kinds of cross-sell initiatives for asset management, for insurance, blah, blah, blah.
00:14:42
Speaker
Such things would not have been possible had the financial services and technology thus had not grown that fast. We can talk about RBI and how the ecosystem has reacted and so forth, but as an ex-operator, I'm a big fan of RBI for two main reasons. One, when I look at them as a regulator, they haven't had a big credit event and it's truly big, right? Like economy-shattering event hasn't happened in the last 20 years.
00:15:07
Speaker
So RBI has not let anything blow up on its watch. And that's phenomenal. That actually is probably a set of one when you look at it globally. But for example, MS also I think has very distinctive traffic. So there might be a few regulators who will sit there. But that's the PR group you're talking about. The second part is forward-looking. Things like RBI won't happen unless RBI didn't enable it.
00:15:30
Speaker
There are a million ways. I'm sure people have lobbied to slow down UPI, things that could have gotten distracted, blah, blah, blah. So I have a lot of respect for RBI from that perspective. The second aspect is, do they excel that the unit can provide you clarity in terms of what can and cannot be done? It's phenomenal. Because this causes a bit of a speed bump, if I may call it for a lot of syntax students, but then the direction of travel is very clear.
00:15:56
Speaker
You can do this, you can't do this. And this is how you do it. It feels like you're constraining innovation, but actually what happens is when you direct innovation, the output is far phenomenal. So I would expect some very creative solutions, very innovative solutions to come out of India. So going back to macro was one part of the thesis, sector was second part of thesis. The third part of thesis for us is talent.
00:16:22
Speaker
Right. And so India's phenomenal talent from, especially from tech perspective, a lot of venture capitalists, it's not a lot of people would know about it. And it is true. Right. And the only thing worth pointing out there is it's not a last five year or 10 year phenomena. India has had phenomenal tech talent, at least as 80s.
00:16:39
Speaker
When we were growing up, PCS Infosys used to take students by truckload to their campuses. And those guys have put in the hard work to build out the thinking, build out the adoption among professionals of technology professionals, thinking about contributing to how taking so many verticals globally has been brought up. A lot of financial services tech now sits in India, big banks in the US globally.
00:17:04
Speaker
Right. So a lot of that has been sketched out and that talent then kind of spawned the next generation, which created the first version of tech companies in India. And now we are probably second or third generation of tech companies coming about. Services tech talent has transformed a little bit into product talent.
00:17:21
Speaker
So that part of the story is well-hatched out. I think the part of talent that really excites me beyond that is the financial services standard. I have worked abroad for the last 22 years where I worked, and those 17 years I have walked into a number of banks.
00:17:41
Speaker
in the U.S., in the Middle East, in Southeast Asia, here in London, of course. In most places, you would find a substantial chunk of middle management will be of Indian origin. It's first-generation and second-generation Indians. So it tells you two things. Banking and financial services as a profession is actually looked up to.
00:18:04
Speaker
by India's. That is not the story in many other countries. It's actually something that folks aspire to. And second, only one shudders to imagine what would happen when some of this talent decides to move back into fintech in India. I'm talking about looking at people like Anurag and Jitain who jumped out of ICR to do startups. I'm looking at people like Jitresh who was here in the UK and then moved back to India to do a startup and a bunch of entrepreneurs like them who can play a very significant role.
00:18:34
Speaker
So when you talk of FinTech talent in India, it's trained not only in tech, but it's trained in Fin part of it also, which is very important, right? This is a regulated part of technology industry. Being able to understand the vertical that you're fleeing to involves a lot of, not just technical expertise, but a lot of judgment in what the regulator is trying to accomplish and how you play along with it. So that was the third part of our excitement for the India story.
QED's Investment Strategies in India
00:19:01
Speaker
What has been your investment thesis in India? Over the last two years, you must have made a lot of investment. So what are those themes around which you've been investing? There are two lenses we can talk about. The first is the times of business models we have liked a lot and that we continue to pursue. The second is ultimately everything has to dive back to a customer segment.
00:19:27
Speaker
without customers you won't have any. So especially on the P2C side, you can talk about customer segments. So let's go in that sequence. So in terms of business models, there are three types of business models that are of very, that have deep interest to us, right? The first one is what I call full stack business model. The analogy there is this is Flipkart is the Amazon of India, right? But actually it's not just Amazon of India. When Bini and Sachin started Flipkart, they didn't have to just send books over internet.
00:19:56
Speaker
They eventually had to build the first road payment network. In India, it was called cash-on-delivery. Still is called cash-on-delivery. Still is 70 personal transactions. They invented cash-on-delivery. And then they eventually ended up building e-cart, which was the biggest logistics company in the country. It's not independent. That's why not a lot of people think of it that way, but it is in terms of its routes and shoots.
00:20:21
Speaker
Right. So what happens in emerging markets is that if you look at any product value chain, it's broken at a lot of different levels. So innovation within a little tiny box doesn't count for a lot. It's a bit like what we were trying to do a true corner. If you wanted to just cross sell loans on a consumer app, there's so many things that are out of our control that were broken that the user experience is not going to be distinctive just because we have solved one part of the puzzle.
00:20:49
Speaker
Right. And therefore those products won't succeed. So very hard for them to succeed. I would say they won't succeed. It's very hard for them to succeed. So if you're building a fintech company in India, similarly, you have to eventually think of full stack renovation. I'm going to have, think about the problem across all Valley chain buckets, and then build tech and ops and everything to solve for all of them.
00:21:10
Speaker
It may not be a starting point, but it should have the vision and the clarity to get there. The best example is one card from day one, building a new credit card challenger in the country. They started with a scoring app because that was the way to acquire customers. But the focus always was that we will be a full-stack credit card company in the country.
00:21:31
Speaker
It has a bit of that vision that he's starting Jupyter for next 40 years, not 4, not 10, 40 years, because he wants it to become eventually a private banking player. Right now, it's a banking platform that is driving benefits from better experience leading to positive selection and being able to attract the right set of customers. Then it will go into a cross-set sort of hypothesis and then it will hopefully start going more and more horizontal.
00:21:56
Speaker
But the vision is that it will be a full-stack institution whenever the timing is right. No one's in a rush. Whenever the timing is right, that's the destination for it. So full-stack is a big thing for us.
00:22:08
Speaker
The second theme for us is what we call embedded finance. So again, this phrase these days especially gets used and abused a lot, but from our purposes, embedded finance company is any company that necessarily doesn't operate in financial services, but through its product, creates either a proprietary flow of customers or a proprietary flow of data.
00:22:32
Speaker
will be advantage in offering financial services products. And for such companies and eventually financial services becomes the main model for monetization. So I take an example, we have this logistics company, which operates in the Mexico-US corridor. It provides working capital solutions to truckers, fuel cost, etc.
00:22:57
Speaker
Now that's a very specialist vertical, right? And we know nothing about logistics. QEDI would profess to know nothing about logistics. It works because for that company, it's able to target truckers.
00:23:08
Speaker
It's able to get data on which leg are they operating in, how frequently are they fueling up, where are they fueling up, blah, blah, blah. A plain old financial services company would not have access to that data. That data doesn't get captured in any bureaus. So you have a proprietary source of customers, you have a proprietary source of data.
00:23:27
Speaker
which is then helping you lend to those customers in a responsible manner. So those solutions we are quite interested in. There are two sort of companies that are playing into that in my portfolio right now. There is Finance PR, which is saying a verticalized lending. So it's targeting specifically schools and parents for lending. So if you are a parent in India, sending your kid to private school, the school would want their teacher paid once a year, maybe twice a year.
00:23:56
Speaker
written in that creates cash flow issues for you. Not borrowing issues, but cash flow issues. Just one month that amount seems high and so most people would either save up for that month or better still would cut out some of the discretionary spend for that one month so that school fees can be paid out.
00:24:11
Speaker
Finance peer says, hey, this doesn't need to be a problem. The schools don't want to run collections. That's why they want all the fees collected up front. We can take over the burden of any collections. In fact, running your entire finance piece of the school. And we'll break the fees for the parents into sort of six months or 10 months installments. So the bills get basically no cost EMI.
00:24:33
Speaker
right so they don't have to pay financing for it and then the school gets all the cash upfront and solves problems on both sides of that and then it becomes a wedge into thinking about the whole ecosystem of how the school operates ERP software payments all of those layers can be layered on top of it so it can be covered the second company let me take it place to theme number two and theme number three so let me introduce the thing
00:24:57
Speaker
Theme 3 is a classic fintech or techfint, as people used to call it, which is providing technology to banks and financial institutions to operate better. The new stage there is to say, we don't just need to make the banks work better or help the banks work better, but also help them connect with fintechs.
00:25:17
Speaker
In India, especially, a lot of banks have realized that if maybe the first-level realization is that digital is a fantastic way of acquiring new customers, right? And so they have the need to connect with FinTech's large banks, let's say ICI and HDFC would have the wherewithal to invest in technology themselves, right? They would have big enough themes and kind of strong enough focus that they can go very deep.
00:25:42
Speaker
but now it's mixed level down in terms of sites. Those banks may or may not have that. Some of them have others may not, some may have focus others may not accept it. But there's enough balance sheet to be built in FinTech that all of them can and should participate. So the upswing takes that perspective that, hey, we will build the pipes to connect banks to FinTechs and consumer techs for them to sell products, right? For Amazon, so and so.
00:26:11
Speaker
So that's what Upswing is trying to do. It's trying to bring together not just banking APIs but contract structures and perhaps most importantly, regulatory compliance and data security so that any app can host an Upswing SDK and be confident that everything from a regulatory perspective will be perfectly managed and then still be able to enhance the headless SDK so you can have your own brand. Upswing doesn't have any V2V thing. They don't have any V2C ambitions.
00:26:40
Speaker
We just need there, but they put power in the back end of a bunch of X. So those have been the three main steps. The company I didn't chance to touch upon is refined. So that becomes relevant in the customer side of the story, right? So everyone draws this, this classic analysis of parameter, right? Top of parameter in India, top 30, 40, 50 million customers who are responsible for 60% of GDP. If you allocate that analysis, never do accurate.
00:27:06
Speaker
But you can imagine majority of our GDP is coming from a good chunk of our GDP is coming from that top strata. Then let's say our next 100-150 million users who are the kind of emerging middle class, sliding out in customer, so getting there. Then they are responsible probably for again the next 20-30% of the chunk.
00:27:25
Speaker
and then you have those next 200 million who are mentally active and then you have another 200 million. The total match should add up around 800 million because that's the number of working age habits that we have. The younger population means that we have a phenomenal number of children which is a good thing. It will hold us in a little long term.
00:27:44
Speaker
One card in Jupiter, one card is going after the classical top end of the pyramid. Jupiter is somewhere between the top end and the middle chunk because they're also going to have to run emerging athletes. But what about the rest? So Refine is saying it provides earned wage access to salaried employees in the country. Right? So you're a big lawyer in the country.
00:28:07
Speaker
500,000 a million, 100,000 employees, then refine with partner with you so that your employees can withdraw their salary on 15th of the month or 10th of the month.
00:28:18
Speaker
which then can be processed as part of your payroll reduction at the end of the month. And so that becomes a very small way of making salary more convenient. This was really highlighted during pandemic, right? Because you don't know when sickness tries and you may or may not be able to wait till the 30th to get your paycheck to afford medicines and whatever care that you need to provide for your families. That was really the high debt which got highlighted. But if you think about it, actually it becomes the structured way of accessing the salary pool of the country.
00:28:47
Speaker
Right. And you can then layer on a lot more convenient financial services on top of it, the beach landing. The fire is going off to the kind of next year, if you will, right? The blue color and the gray color employees, all the way to the new economy, right? Big workers, all of that gets captured by the client where they can provide these services and then help them graduate 200 years of the program. So broadly speaking, lending is a big focus area, right? For all three of these areas.
00:29:17
Speaker
Yeah, lending was the first vector that we went after because that's the business we understood really well. That's what I had big network as well. But we are looking at insurance, wealth management, very closely trying to think of what would be the winning propositions there. IRDA, in fact, has made a lot of announcements to think of new licenses and insurance. They want to grow the amount of insurance in the country. So that would be a vertical, which would be very close to our heart and which you ought to think very carefully about.
00:29:45
Speaker
So far, I've met all the companies that kind of come across now know of etc. etc. We haven't been blown away by any of the propositions. We've tried to check the react, but that doesn't mean we are not hopeful about the current and new players. We continue to look deeper to see what would make sense for a QED to participate. For us, we didn't really talk about it, but like the three, four main things that we look at, one of the first things we look at in the company is unit economics.
00:30:10
Speaker
right? Being able to maybe not generate money on day one, but being able to at least illustrate economics and have a line of sight into economics that makes sense on a per transaction, per customer, per whatever cost center that you have, right? Per distributor, a few is very important, right?
00:30:29
Speaker
Since we have operated banks, we understand quite intimately that in financial services, no amount of capital is enough capital to burn. In e-commerce, you can exhaust a whole bunch of capital to get customers. You can exhaust another chunk of capital to get those customers to repeat. At the end of, you'd have to repeat customers.
00:30:49
Speaker
here you have much of capital you can lend it out and they will never come back and you will have nothing right and they will know how to avoid you also in future you will create anti-customers issue for us at QT the first lens is get your e-commerce right that's what we said you're saying the first filter is unit e-commerce well seem right e-commerce then you can spend money on acquiring customers
00:31:11
Speaker
Acquiring a bunch of customers, for example, acquiring a bunch of customers and then saying that, hey, something will work out. We'll figure something out.
00:31:20
Speaker
It's not a great community thesis. Might work for other VCs. It works probably for a good chunk of technology ecosystem. But it doesn't work for us because we tend to be those operator lens and we go into the depth of it to understand why do you think this line item can work, right? And again, we're not going to budget on one person versus two person kind of conversations. But you want to structurally make sure that the products make money, right? Unity is the first one.
00:31:49
Speaker
The second filter unsurprisingly is exponential growth. You can have very good positive unit economics business. This is a classic example. I would say SME lenders. Traditionally, SME lending has been a localized business.
00:32:02
Speaker
If a branch in a city lend to SMEs, that means it means all the shops or all the manufacturers in that industrial area are on that street, right? They're inside out. First time gets us there now everyone. So if a machine, for which they have lent to whatever manufacturer stops working, or whatever the manufacturer goes out of business, then they know who to send that machine to, with that level of machine.
00:32:27
Speaker
So, you know, you know, it's positive done, right? Ability to scale exponentially, not done. Because what this means, this model means is you have to go and set up, set up operations and whatever. You know what I mean? You have to set up operations in every locality. There's a human involved. You have to train those humans to operate in similar ways, have a new, so similar types of things. And scaling this exponentially with technology, something like technology is very difficult.
00:32:54
Speaker
I won't say it's not accomplishable, but it's very difficult. So that's what the exponential growth filter says that having done Unity, always can we show that this model will then scale. And again on day one, it doesn't need to be. And the answer hopefully is not always, we'll buy more Facebook and Google ads and therefore we are able to scale. It's better than that. But that's the second filter we are looking for. The third filter then becomes talent and talent, not in the
00:33:21
Speaker
There are different stereotypes of founders, right? Ventric athletes always like to think of them as a type A, type 2 as a kind of thing. And all of those are important. I'm sure it's a basic curiosity of human mind to bundle things up. So they're easy to understand. So there's some classification that goes. What we are looking for mainly in talent is one above and beyond what one thinks of a technology. It's that we're starting a bit from tech, truly appreciates the gravity of what it means to start up in front.
00:33:49
Speaker
It becomes when you are building a tech company, you have to think of things like org and people, recruitment, but you have to also think of how what will be my technology that I will build on, what will be the basic layers, what languages, how important your UX will be in driving growth, if you are doing B2B, then what kind of EPA architecture exists there and therefore what am I going to build there.
00:34:13
Speaker
We'll then build out all of that. So you have a strong point of view on technology, a strong point of view on product, and a strong point of view on people. Those are the important things in technology. But you're starting to think of all of those. Plus, you have to think of, hey, is a regulator here? What do they want? But beyond that, what does it mean to run a balance sheet? How do you think of a debt structure?
00:34:38
Speaker
How much equity financing? What is your advance rate going to look like? All the way to an insurer, then what kind of loss ratios will you operate on? I can operate on to ensure that your product is profitable, but at the same time, an insurer is willing to look at your books.
00:34:53
Speaker
right? What's management? What kind of recurring revenues are you able to attract from these customers? Why would this stick to when all the problems just come out? So there are a lot of things that are FinTech specific. The talent lens is about understanding that the founder appreciates these two things and has thought deeply enough about these things, right? So that when we talk to him or her, then they can bring that across to us. So those are three lenses that we look at companies from
00:35:23
Speaker
really assets if this is the qd type of company or not why did you invest in katamukha is like in that embedded fintech space right which use more of your thesis like it does seem to be scalable and outside
00:35:38
Speaker
Yeah. So again, I shouldn't copy the specific companies, but there are a lot of use cases that have come up in the market, which are trying to simplify back office, classic back office, right? Katabuk is trying to do the actual Katabuk that she waits to have. There are other players and globally that are out there. See, I think process is a difficult hypothesis to prove. banking has struggled with process for the longest time.
00:36:05
Speaker
And if you remember history, then people were claimed greatness at cross-sell, then came out to a hill, then they didn't have such a generous cross-sell ratio eventually, once people started looking closely at books, right?
00:36:19
Speaker
There is a sort of compartmentalization of products and services that happens in the human's brain naturally. There are ways to bridge across that in certain ways, but it's not always easy to think of your accounting books as the way where you would want to then jump on.
00:36:36
Speaker
to take a load equally. So being able to do that depends on the quality of the data that's sitting there. Ultimately, all that comes down to it, customer access and data quality. So if you think that you're able to capture those data, then it can become a phenomenal platform across a little later. But it has a potential to be, right? And still the consumer mindset shift that you have to jump against, right? We just think of long as communication. Can I use something that I use for communication or borrowing? Yes, you can.
00:37:05
Speaker
The Chinese story tells us that's possible. It's achievable. But there are certain circumstances that have been true to be able to make the shift in the customer's mind for the product of it into that context. And then for their interaction to work in a specific way. So isn't achievable? Yes, it's achievable. But is it easy? What is any shape or form?
00:37:29
Speaker
Can you take me through the evolution of a successful company from seed to series DEU? At each stage, there must be certain key challenges they need to solve to go to the next stage. What is your thesis on that? Look, in some ways, building a company is about answering a set of questions.
00:37:50
Speaker
It's a set of hypothesis, which if all true or if majority of them true or true significant extent, that will become a big company. That's how we think about it. We have written a paper about it. They call it the 0.9 to the power of 6 kind of thesis. If you have 90% probability of succeeding or 6 questions, in reality, the probability of success is 40 or 50%. So chances of success are low.
00:38:15
Speaker
Basically, it's a message, and therefore having to track a bunch of questions at the same time is not a great way of going about building a company. Again, not saying it can't be done. The probability is still 50%. But if you want to set yourself up for success, then what do you do with that window? You would probably want to bias the odds a lot more in your own favor.
00:38:36
Speaker
So don't try to disrupt too many things at the same time. Focus on one key area that you want to crack or one or two key areas. Yeah. So you may have to still disrupt a bunch of things. It's not to preclude that you should not disrupt too many things. I think the important thing is.
00:38:58
Speaker
What you focus on, what is the question you're answering? Should be maybe one or two questions at a time. What is this question going to sound like? Okay. We are starting. So let's say finance, we are starting on day one, right? We talked about that. Okay. So explain the business model. First thing I would say is let's prove the unity.
00:39:18
Speaker
Let's figure out a few schools where we can go deep. Lend to those schools, parents in those schools. Show me those parents pay you back. Show me that it's a repeat story to be heard. Show me that you can systematically go to 5%, 10%, 15%, 20% of parents in the school overtime.
00:39:35
Speaker
They are not okay to wait, we are no one in a rush to build a company. Because we build which is a phenomenon. But the first question is, is this a product first structure that can work? 2. Is this a product that parents get?
00:39:49
Speaker
attracted to. Is the customer need actually progress? One thing to stand outside the school and go survey and say, Hey, you find a product like this and everyone will say yes, because on the paper, it looks fine, right? But tomorrow when it comes to filling out the loan application, taking a one or two date out for the loan to actually come back and therefore the school be satisfied factory paid the cashier on the school said recognizing the payment has been made and therefore stops chasing you all of that.
00:40:15
Speaker
Yeah, are things like the micro hypothesis sitting within the major hypothesis? So I would say that's the first question you answered. Prove that. Second question then becomes, okay, one particular school or two particular schools have adopted it, but 10 schools, 100 schools, 1000 schools adopted.
00:40:33
Speaker
Why would that happen? So let's get that out, right? So if you have tested this in Bangalore and Mumbai, then let's go and test it in Nagpur and Ujjain, right? And let's go tier-wise, the spread here. If you have tested this out with an RINR, then let's find a local, whatever, private school in Indore and then test it out there, in Jhasi and test it out there. And let's go a different type of institution and see if it works. If you have tried it at school, let's try it at colleges and see if it works.
00:41:01
Speaker
Right. So that, that becomes a second vein of questions that you have to prove, right. And that then starts playing into the exponential scaling part of it also. That can this model actually exponential is clear. And in both cases in parallel, you're answering the talent question any which way, right. If I have to, if I need us on the ground to make this work, can I
00:41:24
Speaker
get entry in the staff to operate in dependency North zone and West zone and East zone when I am sitting in Salchow.
00:41:32
Speaker
Why would that work systematically? Are there insurances there that can work systematically? Are there schools that think about it systematically? Are the promotions aligned with all of them? Let's think of what are the questions. In any business, you can think of it. One card started, the first hypothesis it thought of was a customer aggregation. Will it work through something like one score? Today, that app has 3 million downloads.
00:41:57
Speaker
It's a phenomenal community of people that they're gathering there. The second thing in the answer was, hey, therefore, can we cross sell? No, because India crosses because very hard. Also, we started with the ambition of building our own products. We are going to build our own products. So then they built the credit card product out of it. And in the credit card stack also, they went through a set of questions answering them.
00:42:16
Speaker
From your seed to series D journey, at every point, you should have one major question you're answering, maybe one or two minor questions that you're answering. The question is ever present because you'll need people to solve all questions. So that question is ever present, but then you should have systematically thought of it. It lines up with some benchmarks. So it should be around like a million dollar rent rate. If we actually polish markets like 2021.
00:42:38
Speaker
Then having a line of sight to a million dollars is a great place to be. When we are in bearish market, then going past the million dollars is a great place to be. But somewhere there lies in one benchmark, then there are 10 is the next one, and then 100 is the next one. But something around those ranks, 10 or 5 POs are there depending on the share in a B to B vertical, scale ups take slower, but then they're more record. And so therefore you might be able to live with a slower number.
00:43:08
Speaker
That's how there's a numeric aspect, but I think the judgmental aspect is far more important. So when you talk to a new dust age company, we typically ask them, what are the questions you're trying to answer? What are the guards you're going to turn over?
Driving Company Focus and Strategy
00:43:20
Speaker
To be honest, life is more complicated than this conversation, right?
00:43:24
Speaker
When you talk to them, they would be like, hey, our licenses are becoming available, or now this opportunity has opened up, or there is some regulatory change and therefore new segment has opened up. Those can also be very powerful drivers, why we think we can accelerate the company into the next vector of growth. But again, opportunities present themselves, right? But as a founder, your group of founders, your job is to simplify it into a series of questions that you're going to answer.
00:43:53
Speaker
So one of those things about what makes a company successful is to have very clear questions that you want to answer at each stage. What else is there things which make a company successfully scale?
00:44:08
Speaker
I think the classic things always hold, being able to connect the right type of talent, be able to inspire them, that by far is the most foundational question. In my operating roles, it always came down to the people puzzle. There are only many problems that you can solve on your own, where you can be present in the conversations. And frankly, it never becomes practically irrelevant. What is far more relevant is people who are
00:44:38
Speaker
discussing, driving, doing things on the behalf of the company, and having the right set of people in those seats, and having the right set of motivations for those people is much, much more important. In fact, it's the only thing that will actually deter, like everything else is on paper, right? This is when rockets are launched.
00:44:58
Speaker
So you can have all the best unit economics and you can have wonderful abilities to scale exponentially. But if you don't have people to execute on those, then from everything else, right? So the question is always the most important, right? Foundry should always be thinking about that seed series, a CSV series, a series day, public.
00:45:18
Speaker
10 years public, right? That question will never change. Always the most important question by far, whether it will be any company is a collection of people. Having clarity of direction and purpose is very important. I think third thing, and they may not be necessary in that sequel because these are all important things, but having vision is very important.
00:45:35
Speaker
As a founder, you get rejected far more than you are accepted. Every single thing is a bit of a push. Recruiting is a push. Getting your first, second, third sales contract is a push. Getting customers to adopt your product is a push. Getting them to review is a push. Getting investors to invest is a push. There's a lot of pushing. That's what drives you.
00:46:00
Speaker
at the very heart of it is then I think the vision part of it. The reason why I'm building this, but also how far and how big can this be? This is actually the driver in my mind. As an investor, what it tells me is, when I talk to you, can you paint me a picture of what this company would look like with 100 million revenue? Give me that picture. If you will. And what were the complexities associated with that picture that you're thinking of today? And what are those that you think of tomorrow? And why all of that becomes a very interesting conversation.
00:46:29
Speaker
But in the sense, what you're really testing there is, can the founder envision an industry that is inspiring an idea for them? Because that's the vision and eventually some version of that that will sell to all other counterparties involved.
00:46:45
Speaker
They sell it to themselves, they sell it to employees, they sell it to their customers, they sell it to their suppliers. Having a sense of vision, the rationale for it, almost very zeal, if you will, is very important. For fintech space, wouldn't the balance sheet, the way you structured the balance sheet, also be like one of those critical things, like how much debt you take on and things like that? See, technical skills is important for sure, but somewhere in that vision, if you're especially thinking about fintech as an end state,
00:47:13
Speaker
There will be questions about regulation and there will be questions about protecting customers' interest, which should automatically surface.
00:47:22
Speaker
For example, there are a lot of places without napping anyone, there are a lot of places where making cheap tickets, you can easily sell something worth $2 or $5 and make $3 of it and keep doing it. People realize that you're given inherent arbitrage that you're trying to operate. There are any number of companies that we come across who are kind of moved on these specific niches of where customers don't recognize the pricing, how it's inherent in the offerings, and therefore they're able to get the economic margin. Some places are justified.
00:47:51
Speaker
Other places, for example, is just lack of disclosure and lack of understanding. Right. And those are the kinds of companies where, yeah, the founder has a vision, right? But the vision is not really attuned to regulatory standards, perhaps even ethical standards in some way, shape or form is not the most extraordinary. Right. Your vision should be about customer delight, right? You're delivering something that is far superior to anything else. Because that's the easiest way to get economic value.
00:48:22
Speaker
It's the most sustainable way of creating value, the rate of protecting value. Because if you're creating genuine economic value, right, something that used to get, take you $5 to get to, but I can offer you, offer it to for $4 and produce it in-house for $2, then I have captured a margin.
00:48:41
Speaker
Then it's economically reduced to everyone. You're creating value for everyone in the ecosystem and therefore you will grow faster and grow forth without structural issues. I think the point is bang on. Being able to understand regulatory and balance sheet aspects of it is very important.
00:49:01
Speaker
But I see that as being a inherent part of the vision. It's rather than an additional thing. There are a lot of additional things to be honest that you need to be. You need to have a tech founder to understand what is the underlying tech. You need to have someone on financial side of it so that they can understand biology. Actually help you fund the biology. You can run it in a structured manner. If it's a lending company or an insurance company, then you need someone that's very strong credit.
00:49:24
Speaker
background. If it's an asset-backed company, you need someone with very good investment understanding. Both have technical jobs, but either one of the founders should be proficient in those skills or be able to recruit. Ideally, one of the founders should be proficient in those skills.
00:49:41
Speaker
Those things are needed, but they are table sticks. So as you said, we need to play the game. So you would be getting founder requests to meet because they want to pitch to you from a variety of sources. What is the source you value the most? That if a founder comes through this source, then I would surely want to beat him.
00:50:01
Speaker
True to QD, now we analyze backward-looking which sources have been most valuable. So it becomes sort of a self-fulfilling prophecy also, to be honest. But there is an inclination and theory between them. Referells tend to typically be the strongest source. Referells from other founders, in fact, are the strongest source, followed by referrals from other investors, existing investors, but founder-referells are usually the strongest.
00:50:27
Speaker
the what's it blind and bound as you call that where a founder just slides to you on email directly quite mercurial so we have found some phenomenal companies there because our founders were just so amazing and they were undaunted so as to say right the confident of their vision and knew that CUNY was the right investor for them that they left no stone unturned to reach out to CUNY and those are fantastic investments but a lot of there the important thing is to be able to distinguish from the noise
00:50:57
Speaker
because a lot of folks will reach out directly. My LinkedIn, in particular, gets bombed like crazy. So you should be able to distinguish yourself very, very quickly on why you are the one. But if you are able to, that source is not bad. Frankly, I've done very little of our bond, like us reaching out to get to founders. Our main thesis is that you will have the brand and the openness to be able to attract the best founders. The positive selection is very important for us.
00:51:24
Speaker
The founder should think of QED as like a destination we see, right? If I'm starting up something in fintech, then having QED on my account table would be magic. Hopefully we are able to get to that point of view, but that's the aspiration nonetheless. And so a mom will be the main source for us even going forward. Okay. Your is your limited partners who fund you. Are they from India? Are they from the west? What is the makeup of that?
00:51:47
Speaker
They're all, so we are a US fund, inherently. So most of our LPs sit in the US. They are our diversity of growths, educational institutions, long-term money managers, all of those on the offices. And frankly, Nigel himself is a big LP for us.
00:52:03
Speaker
So it's a mix of institutions, but we have very little penetration, if any, in India. That's something that we need to work on to get more money from India, for India. That should be our source of capital for us. But right now, it's all international.
00:52:19
Speaker
Does it make any difference to the company on whether the money is raised from India or from outside? Is there any transaction cost of raising from outside? So you're talking about a company incorporated in India raising money from foreign investors.
00:52:34
Speaker
I think there are a few things to be mindful of right there are no restrictions from rbi in terms of money being invested into fintech but if you're operating a regulated entity and if you're raising into an nbfc then you need to get more thoughtful about because
00:52:52
Speaker
What the regulator essentially cares about is that the decision-making should sit within its jurisdiction. And so there are a lot of shady ways in which foreign companies can own companies in India and their decision-making then sits abroad. Clearly that's not the case when venture investing is happening. I'm not going to sit here and make decisions for the Indian market.
00:53:10
Speaker
But that would be one of the scruities that you may have to go through. You have to think about what that would mean. It practically means that from an ownership perspective, there are no restrictions for us. We can go as much and go as deep, but we just have to be very clear in terms of the company charter, the way what the reserve clauses are structured, how the governance works, so that the decision making sets firmly in India. It's very transparent to anyone looking at the company from outside.
00:53:37
Speaker
But in our journey in India, and I know from a lot of foreign investors as well, we have never had any issues on this. And in fact, most funds based in India are also actually dollars and abroad, Sycora, Accel, Matrix, Innovation. All of these funds, action money is sitting abroad. The investors are sitting abroad. But not just the advisors to the fund.
00:54:01
Speaker
So to use our current capital in that sense, right? So it has not been an issue for the longest time in India. India has been very set up for that. Of course, there are matters regarding taxation and how easy and quickly can the money come in and come out. All of that, that can be improved, right? These are all ease of doing business kind of thing, but structurally, it's pretty well set up.
00:54:22
Speaker
That taxation would only kick in at the time of exit, right? Like when you're investing that startup, which is receiving the funds, there are no transaction costs, taxation costs. Unless you're coming in soon. Yeah. Unless there's a secondary component to your investment.
00:54:37
Speaker
So then taxation could come in up front, you'll need to get your tax IDs and all of that. The second part of it is like, how deep is the KYC? How is that done? At what level is it done? You would prefer like a one single window clearance where you are accredited by a central authority and then basically anyone, as long as you have that certification, everyone else is fine with it. But what tends to happen is for every transaction, you go through a process.
00:55:01
Speaker
There are things to simplify, which will make it much faster. The parallel I hold is it should deliver C-corporation that we are investing in. The investment would close in a month and a half. If you were investing in an India domicile company, that would probably take two or three months to close.
00:55:18
Speaker
Those are the kinds of, that's the delta. But again, as people get better and better, these things as venture becomes deeper and deeper, things are just getting faster and faster. Do you see funding drying up from the perspective of your ability to raise from LPs? In India, startup ecosystem in general, most founders talk about how there is a slowdown in funding and the numbers also back it up. Does it similarly?
00:55:42
Speaker
Also get experience at your level where you see your LPs and not as willing to back your next fund, for example. Yeah. So QVD is particular and is not facing anything like this, but I can imagine that happening across the ecosystem. See, from an LPs of money allocator, right, lasted allocators in some way. So they have to allocate a certain part of their balance sheet towards private funds and certain part towards public funds.
00:56:10
Speaker
So now as public markets are underperformed, then the proportion gets rolled. Suddenly you are overweight in private markets because your publics have dropped. And private doesn't get marked up as frequently, so it doesn't get marked down also as frequently.
00:56:27
Speaker
Right. So then that creates an allocation issue, but those are the wide phenomena. From an LP perspective, the QD proposition is that we are a specialist investor, right? So we have the high beta returns of financial services. We have the high beta returns of tech into our asset class, if you will, which distinguish us from other private investments or other VCs that you would invest in. And it will also distinguish us from other specialist funds that you distinguish.
00:56:57
Speaker
Right. So as I said, we are quite distinguished within their spreadsheet or within their book.
00:57:04
Speaker
And frankly, we are not that big in the ecosystem. If you look at the universe of private investors, restaurant opportunities across hedge funds, venture capital, private equity, growth equity, all of those, restructuring special opportunities fund, all of that goes into that 30, 40% alternates bucket. Within that, we're a billion dollar fund and so billion dollars is huge from a venture perspective.
00:57:31
Speaker
But from an alternate market, it's not that significant, not that big. Okay. What do you mean by high beta? All I've been done is it's a public market analogy, but if you analyze sector returns, right? So if you have ETFs or exchange trade instruments or index funds, right? For every vertical, for financial sources, manufacturing, agro, consumer goods, that is so and so forth.
00:57:55
Speaker
and you analyze movement of these indices relative to the overall stock market index. Then some of these would have a lot of volatility associated. When the market goes up, they go up a lot more. When the market comes down, they come down a lot.
00:58:13
Speaker
Right. And some of them will be counter cyclical. When the market goes up, they actually go down and when the market goes down, then they can continue to stay flat. So they're relatively robust, right? And you can think of like in shy and all of that would be relatively more stable, slightly like if you will. So they're more stable and then you'll have.
00:58:30
Speaker
So typically take technology index and financial services have very high betas and beta means it's more monetized. So when the market goes up and it's even jumps up even high and then when the market goes down to the extent that we are in double cycle then
00:58:50
Speaker
financial services and take a great place to invest your money because whenever the market goes up, then these indices should rise a lot more. So you should take that and the reason for that hybrid is obviously market performance, but there's also the underlying structure of earnings, the underlying structure of companies, the value they add, all of that, right? It comes into a lot of structural factors. So if you take down a million applied to private markets, then Frintech should be the part that we think up again within the investing climate.
00:59:18
Speaker
Are you at all interested in decentralized finance? The evolution of the tech over a decade or so would eventually be defined. Do you not believe that?
00:59:30
Speaker
Well, no. So we actually pay a lot of attention to crypto. I would say we are not the most forward-looking investor when it comes to crypto. We are fairly late to the party, as I thought to put it. But essentially, we are very cautious because we didn't fully understand the technology and we didn't understand the full implications of the technology. So in the market, the way it was last year and the year before, we were very cautious. We have done a few investments. We have a board position or an exchange in Mexico.
01:00:00
Speaker
We have a crypto payments company where we sit on the board in Canada, for example. So we did take a few calculated.
01:00:09
Speaker
bets into the vertical. But we are quite cautious because we wanted to understand what is really going to happen here. And so our CIO actually Frank Rottman, he probably spent like 50-60% of his time looking at crypto for last year and a half, trading with his own money. So he gets a good sense of it, but also really small investments, a sense of the community, understanding the community, right? What is driving it?
01:00:33
Speaker
He really spearheaded us thinking of crypto in many ways. We individually as partners also, so I have placed a small bet in Motrex, which is a crypto company in India, but talked a bunch of them as we valued it. Motrex, but as we valued it beyond it, etc. See, our main takeaway was to fold. One, it's a bit of hammer looking for a nail, so we don't think of this currency as the right problem to solve or not. We are not fully watered. It is the right problem to solve. It is a bit of fun.
01:01:01
Speaker
At the same time, there are aspects of it which are evident would have some applications or tokenization, especially as it applies to reward streams and other non-monetary forms of signaling. It could be a phenomenal use cases. There are some use cases which are of value. I think in SRAAP is in general, we are optimistic on because again, we think it's a phenomenally powerful hammer. So anything that makes the hammer even better should be of value. But the nail won't think we have found it yet.
01:01:28
Speaker
that we don't know exactly what the problem is that we are trying to solve. Because going back to the origin of money and all of that, it was supposed to be a medium of exchange and a store of value. And it had value because someone said that this has value. So can you have a group thinking that this has value and therefore it can retain value? Surely, basis, suggestion, yes. But if you really raised back the origins of money, then no, it was because the king, the big man in the village said that this has value, therefore it had value.
01:01:57
Speaker
Someone had to stand behind it and someone's physical might had to stand behind it for it to hold value. So today, say anything that everyone believes will have value will have value because we are all democratized and individual aspirations and all of that. But the heart of Irish system did rely on might of an individual, if I may say so, individual or quarter institution. Can you subtly solve for that trust? Sure you can. Yes, you can.
01:02:20
Speaker
But is that going to be just us believing? Maybe not. Maybe the whole new world has understood that we need to think a bit more carefully. And then especially in the context of emerging economies, India has had very strong currency controls for a very long time. Since the indivendence was probably even before that, I haven't studied. But since the independence was for sure. Even today, if you want to take more than $250,000 out of the country, it becomes synonymous. There are very good reasons for it.
01:02:47
Speaker
right? Musals and protections are actually 10 wells to India if you look at the history. So will the institutions in the country just abandon these controls? No.
01:02:57
Speaker
That's not going to happen. Can they recognize the value that a technology like this can bring? And if we think that it structurally is better value, then will it actually get adopted in some shape or form? Yes. Because when leading indicators perspective, very forward-looking regulator, development of government, development of the Indian finance ministry, blah, blah, blah. So therefore there's value on the table. They will see it and they'll adopt.
01:03:21
Speaker
But there's also battery and the restrictions we have. And I don't think those are going over anytime. You said tokenization is a use case which you can get behind. What do you mean by that? You mean example? Jet Airways, right? We all used to fly in Jet Airways. And those jet privilege points were of lot of value.
01:03:41
Speaker
Jet went away. Those points still stuck around for some time for people to monetize them. I think I lost balances there, so I didn't keep track of it. But had it been organized and it been tradable in some shape or form, this is a value we have more protected.
01:03:56
Speaker
Oh, yeah, I can see that. Yeah, that would be super interesting. And that brings us to the end of this conversation. I want to ask you for a favor
Listener Engagement and Feedback
01:04:04
Speaker
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