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Taking the NPA challenge head on | Rishabh Goel @ Credgenics
210 Plays4 years ago
India is on the cusp of a new fintech revolution. Post demonetization, where the sector has witnessed a surge in digital payments and lending, there have been very few fintech companies that focus on resolving the debt recovery opportunity.
In a candid conversation with the host Akshay Datt, Rishabh Goel, Co-founder and CEO, Credgenics, takes us through his inspiring journey. He is an alumnus of the prestigious IIT Delhi and has worked with companies like Deutsche Bank and BlackRock before taking the entrepreneurial plunge.
Rishabh harks back to his days at BlackRock which gave him a better understanding of the lending process, specifically from the collections perspective. This inspired him to dig deeper into the subject leading to the birth of Credgenics in 2019, which is already valued at USD 110 million.
Tune in to this episode to hear Rishabh talk about how Credgenics is resolving India’s $200 billion+ bad debt problem by delivering customized strategies and legal routes to improve the collections of financial institutions.
What you must not miss!
- Effect of COVID and RBI moratorium on collections.
- Funding and subsequent expansion of Credgenics.
- Scope of global expansion for the business.
Recommended
Transcript
Introduction to CredGenix and the Podcast
00:00:00
Speaker
Take me on a tour. Take me on a tour. This could be a great intro.
00:00:26
Speaker
So, myself, I'm the co-founder and CEO of CredGenix, which is primarily addressing the rising NPA issue in the developing economies.
Exploration of Young Entrepreneurs and CredGenix's Mission
00:00:39
Speaker
We've all heard of young Mavericks like Mark Zuckerberg, who were running companies worth millions of dollars while still in their 20s. But what does it take to become such a successful young entrepreneur? Akshay Dutt is on a mission to learn this by talking to one such young guy.
00:00:55
Speaker
Rushabh Goel. Rushabh is the founder of CredGenix, which is in the vertical SaaS space. A vertical SaaS company is one that focuses on providing a software solution for a deep niche. And CredGenix has created the market for SaaS for loan collections. They help companies collect bad debts more effectively and directly impact the bottom line of banks, NBFCs, fintechs and collection agencies.
00:01:21
Speaker
Listen to this fascinating journey of how Rishabh built up a company worth more than $100 million in just two years.
IIT Experience and Personal Growth
00:01:28
Speaker
So in IIT you obviously have a lot of different pictures in your mind as a student and every different student everyone is an IIT experience and for two years you are almost starting like 10-12 hours or 14 hours in a single day. So you aspire that the college will be very transformational and it will be a very interesting experience and all those which is obviously true but eventually the first impression of it is not that way.
00:01:57
Speaker
like when you enter the college you see at least from an infrastructure perspective you assume the college because you have seen those type of colleges in movies and in other episodes so that imagination which you have while entering that doesn't match with what exactly is out there
00:02:22
Speaker
So definitely in the first go, you don't get a very good impression after entering IIT. But here I think, but the curriculum of IIT has been designed in such a manner that it's not only focused on studies. I think because you have cleared, you have gone into IIT, it essentially is a valid enough proof that you had those skills to come into it. And then you are competing within the top 1% of the entire country.
00:02:52
Speaker
you already had to be in top 1% to reach there and within IIT now if you have to compete there you will have to be blessed among them. And best not only on studies front on multiple fronts like here there was weightage given to almost every extracurricular activities whether it's debating whether it's sports whether it's actually going out
00:03:13
Speaker
in some competitions like there are multiple quizzing competitions, there is multiple drama activities which happen. So a lot of research was given to extracurricular sports apart from the studies and it was a balance which everyone strived for and multiple clubs and also
00:03:31
Speaker
A lot of elections, I would say I was involved a lot in elections as well in the college days. So a lot of elections which obviously open a new perspective to look at things from multiple arenas. And there also you have to be thinking, you have to be best from the entire ecosystem if you have to actually compete there.
00:03:51
Speaker
So definitely I would say that the four years at IIT, it was enriching for me in a way that it taught me a lot of leadership skills.
Transition from Engineering to Investment Banking
00:04:00
Speaker
A lot of leadership skills. I was a very shy kid in 12th. I usually used to speak with outsiders or any people who I didn't know.
00:04:10
Speaker
But after that, it was primarily that I gained that perspective that you have to interact with new people, you have to learn new ideas, and it opens up new perspectives whenever you talk to any new people. And you should be obviously inclined towards
00:04:30
Speaker
gaining new ideas and that learning curve should never stop you should never assume in your lifetime that you know everything and like even even there is superiority complex multiple times that I am from IIT though I will obviously have greater knowledge than any other local college student but that is also not true that is also not true you should never show that and we have seen that multiple times anyone can teach us and you should be open to learning new things
00:04:59
Speaker
than being adamant on what you already know. So I think that entire process got evolved and the entire leadership capabilities I got involved with entrepreneurship sale. Like I was heading the entrepreneurship sale of IIT Delhi for one and a half years. There we met all the founders. I met a Snapdills founder and who ultimately also ended up being the first investors in my venture.
00:05:24
Speaker
That was the first thing we invited them. And there, it opened all new perspective in terms of how we can also run businesses. Being from a technology background, it is not very much obvious that how can any student or anyone from IITs directly go and venture into a business ecosystem, do a startup, where you don't have any business expertise. You primarily are being taught all the technical subjects. There are no business subjects as such.
00:05:51
Speaker
So tell me something like after finishing ITU, you kind of left the technical line and went into investment banking. So why did you not look at doing something which is like a part of your core educational background?
00:06:10
Speaker
that's a very actually very interesting question and I come up with this a lot of times I am asked this question so I was I did my engineering in like the major was in engineering physics it is it is a very new branch and it is only there in selective IITs it's there in IIT Bombay it's in IIT Delhi and IIT Guwahati so it's only there in four to five where primarily the focus is on the basic concept of physics plus the engineering angle there
00:06:38
Speaker
like majority of people who end up doing their bachelor's in engineering physics go to study for the MS or higher studies in terms of PhD to actually gain that expertise because in our curriculum at IIT we were given a very holistic overview we didn't went deep in any particular subject like we started quantum electronics we started like physical mechanics we started
00:07:04
Speaker
the entire gravitational forces but it was purely an overview which was given. So now we were essentially knowing everything from an outsider's perspective. There was no in-depth knowledge we get.
00:07:15
Speaker
It was not like a job-focused kind of a specialisation. A lot of specialisations are very job-focused. This was not the case here. So this was not very job-focused. It was very analytical. There was computational physics. There were so many goals of mathematics. It was primarily improving your analytical capabilities, which are leveraged across the ecosystem in the banking roles. In investment banking, it is purely a number of maths, which you have to do.
00:07:41
Speaker
So essentially engineering physics didn't have any core companies coming to the campus. So what people used to joke around, BlackRock is a core engineering physics job. The HA Bank, they have an inclination towards people from physics. So all these investment banking companies, Goldman Sachs who came to the campus, they had an inclination towards hiring physics schools.
00:08:05
Speaker
And that was quite evident because they knew that they have started and gone through a rigorous analytical session in their four years. So and what is they require also, they also require people with good analytical capabilities. So hence, these companies like Jackrog, Deutsche, Goldman Sachs, everything were called the core companies of physics.
00:08:27
Speaker
So, you spent just a year in Deutsche Bank. Was it because it was in Mumbai and you didn't want to be there or what was the reason? So, Deutsche, that was altogether a very new experience. We straight away from a college into a proper corporate culture and that too in our investment role, I had not studied anything from an investment standpoint.
00:08:48
Speaker
But that was a great learning curve as in a great learning curve when I say I also took up my certifications like CFA Alongside job so as to get more deeper insights into the finance ecosystem
00:09:02
Speaker
there and I could see the correlation between what I have been studying and what the application is there in terms of doing it while doing the job. So that was a great learning experience but even after one year I could see that I am almost doing the same thing day in and day out.
00:09:20
Speaker
That the learning curve has flattened and that was quite evident for me since last two three months I was just figuring out that I'm following the same routine doing the same stuff. Nothing new I have studied I obviously got a very good understanding the first six months seven months I am now complementing that understanding with doing these certifications So I'm learning a lot of new things while studying CFA, but from a job standpoint It is pretty limited in its scope
00:09:46
Speaker
Or I'll have to spend at least 3-4 years more to switch to something else within the company. But I'll have to spend at least 3-4 years. But in the young times, I think 3-4 years is a lot. It's actually a lot.
00:10:00
Speaker
Deutsche was on the sell side. I used to look at different folks that buy side is more attractive. You get to see different portfolios and buy side is much more attractive than the sell side. So I was like, okay, let's try that also. Let's try the buy side of the things and not the sell side. Maybe sell side is completely giving me a different picture of the national banking world. Maybe buy side is something different.
00:10:27
Speaker
So for our listeners who don't understand the investment banking jargons of buy side and sell side, can you demystify that?
00:10:37
Speaker
Right, right. So essentially there are two things in any banking ecosystem, in industrial banking particularly. One are the buy side firms, one are the sell side firms. So buy side firms generally buy different stocks, buy different, like take different positions in different portfolios. That suppose like to give an example, any mutual fund is generally a buy side player.
00:11:00
Speaker
So it would be like people who are either doing wealth management or family office. Right, family office, who are just investing in different portfolios, who are buying different things and managing the wealth on others behalf. Sellside is just a typical bank which is essentially managing that supply demand.
00:11:18
Speaker
that I want this, they'll manage it somehow. And then suppose I want a stock of a particular company, it is not listed, it's a private placement. So they will arrange their both stocks from someone and sell it to the people who are buying it.
00:11:34
Speaker
Basically, sales side is people who facilitate the transaction. Facilitate the transaction, yes. In layman terms, they are facilitating the transactions. They are just bridging the gap between the supplier and the demand. And they are taking a cut on it. It is purely a commission on the transaction. So they are not assuming any risk themselves.
00:11:53
Speaker
all the banks, they are on the same side, they cannot assume risk, they are just making the ends meet. And in BlackRock, what part of like, you know, they have so many different investments. So like, which part were you in? And you know, what was your mandate there? Like, what kind of investments were you looking at?
00:12:14
Speaker
Yes, so there I was part of the portfolio analytics team where essentially we used to look at the portfolio positions as in that suppose we have bought 10 stocks then how the portfolio is performing in terms of the risk profile and to manage their I think so there was a sharp ratio, sharp ratio is nothing but a ratio of what you return you are getting versus the risk you have assumed.
00:12:41
Speaker
So, here we used to closely monitor how the portfolio is performing, what are the different return profiles, risk profiles, how to change the positions in terms of which stock to sell, which to buy, at what point in time. It was primarily that but I also got an exposure at that point in time, there are multiple distressed portfolios. So, what is distressed portfolio?
00:13:04
Speaker
Anything which is essentially like a distress portfolio, I would say that any loan which has gone bad, as in that I bought a bond. A bond is also a debt instrument. So just to explain what a bond is, like suppose I'm giving anyone a loan. I have given 100 rupee loan to anyone. Now I'll be getting interest. Now, if that guy defaults, it will turn into a bad loan.
00:13:29
Speaker
which essentially, I paid him 100 rupees, I was expecting interest in return, but that guy defaulted. So even our principal has gone. But now there will be someone else, there will be a person B who will come to me that he'll say that I'll buy that loan, I'll give you 50 rupees, 50% of that 100 rupees, you'll get 50% of your principal, but you transfer the loan to me, I'll recover from that guy myself.
00:13:56
Speaker
So now this becomes a distressed loan that which I sold it at 50% haircut to someone else because I myself earlier thought it was an investment. So it was a typical debt investment, which I did. Basically, you cut your losses. And basically, you cut your losses. Exactly, exactly. Whatever haircut I can get. And now it is the mandate of that guy to actually recover from him. And I have just booked 50 rupees loss and I have got 50 rupees. At least it's better than 100 rupees loss.
00:14:24
Speaker
So Blackrock does this here, distressed buying, they buy distressed assets? Yes, yes, yes, yes, they are into distressed portfolios also.
Genesis and Mission of CredGenix
00:14:32
Speaker
So they buy distressed assets and then figuring out the price point, also they buy distressed assets as in that they figure out the price point. As I mentioned that I had 100 rupees portfolio and someone bought it was 50 rupees. What is the actual price point we need to buy that portfolio at? Like that analytics was done by us.
00:14:49
Speaker
that suppose someone had 100 rupees bad loan portfolio, what is the actual price I should buy it at? What is the amount I can extract? Suppose I am buying that 100 rupees portfolio, 10 rupees. And if I have to make anything out of it, I should at least be able to collect more than 10 rupees from the actual borrower. So there for the unit economics,
00:15:14
Speaker
to make sense. We used to calculate that what is the actual price so that it is a win-win for both of us. Win-win for the person who is actually selling the distress portfolio and also as a company, we should be able to tell that this is a profit. Yes, so it is a win-win for both. So how to do that pricing? So some of our ERCs who are the asset reconstruction companies, their typical job is to buy these distress portfolios. So they also used to use the BlackRock platform to do all those analytics.
00:15:41
Speaker
And how do you calculate the probability that I will get, like say I will recover 55 rupees so I can pay 50 rupees for this. How do you calculate that? What is the likely recovery? It's a purely a very intense data science models behind it, as in we refer to the previous data as only.
00:16:01
Speaker
data points only like in the similar type of portfolio in the past basis demographics of the borrower basics financials of the borrower how that collections has happened like what is the chance that it will get collected so there are purely data science models which run if we have the data we'll be able to make a good estimate on the pricing if you don't obviously then it is a mere like shot in the dark
00:16:24
Speaker
but essentially everything when it comes to the numbers and since these numbers are in it's a sizable number as in that there's a hundred billion dollar portfolio being bought or a billion dollar portfolio being bought so hence these numbers are big so a lot of data science is involved while actually co-inhered with buying those portfolios
00:16:46
Speaker
Okay. And because BlackRock had that data, that's why even ARC's would be coming to BlackRock for this calculation. Exactly. So they used to charge for their analytical platform that we just use our platform, you pay as a software fee. So essentially, they themselves had an investing arm. So BlackRock had two businesses. One was BlackRock Solutions. One was BlackRock Technology. So BlackRock Technology used to onboard these companies to do it, enabling them to do it.
00:17:12
Speaker
And there was a division of their own investment arm which used to use the platform to do it on their own as well. So there was a big Chinese wall in between as in that they both cannot interact because otherwise obviously there is a big conflict of interest.
00:17:29
Speaker
Right, right, right. Okay. And this would be what kind of distress has it like business loans or consumer loans or what like or all type? Everything real estate, including real estate, used cars, bad debts as in mortgage loans, unsecured loans, business loans. And these were primarily in the US and the UK markets. So what we used to study, it was primarily in the US and the UK markets.
00:17:56
Speaker
Okay, got it, got it. So how did this lead to cryogenics? Tell me about birth of that idea. How was the idea born?
00:18:06
Speaker
Right, right, right. So there the NP I think that at that point in time was a buzzword. Everyone was reading about NPAs, everyone was reading about how the economy is not performing well, the numbers are rising, bad loans are increasing. So the problem statement was quite evident. And even the ERCs were also in business, I think they used to buy these distressed portfolios at very cheap price, 1% of their portfolio value.
00:18:33
Speaker
So they are essentially in 2019, like I spent some years, one and a half more than one and a half years, actually one year, eight months to 10 months in Blackrock. There while I was venturing there, we could see in India, a lot of index, my colleagues starting up in the lending ecosystem, trying to bridge that gap, which is quite evident as in banks are not able to give loans in tier two, tier three remote geographies, because they didn't have any data points to enter it.
00:19:03
Speaker
No symbol score, nothing, very limited accessibility. So the banks were not underwriting and giving loans to a lot of these people because of the risk profiles. So a lot of these fintechs started solving the underwriting part of the puzzle.
00:19:18
Speaker
as in giving them additional data points to underwrite using alternate data, making the process more seamless, providing a digital interface for anyone to actually come and take loans with the click of a button, removing all those hassle of visiting, doing digital KYC. So a lot of a lot of index were entering that area. But the collections, essentially, it is very easy to give out money. And it is very difficult to take it back with interest.
00:19:45
Speaker
So, if you see lending is purely a collections business, hence we could see that a lot of intervention is there on the first part, but the later which is essentially the collections is still a very age old playbook, no technological intervention, no prioritization of accounts, how to get the money.
00:20:06
Speaker
like whom to target, with what strategy, with what communication, how to go about the entire part. It was purely a manual job which was being done across the ecosystem whether it's a bank or a new age fintech or a
00:20:19
Speaker
old school NVFC. Everyone was following the same criteria. Hence, we could see that now there's a lot of people entering the first part and solving the first part of the puzzle. Let's address the second part and that also I had some exposure from the BlackRock base.
00:20:36
Speaker
as in that I obviously priced portfolios on the district site, knew how the pricing actually happens, how it is bought and what are the juice. So we could essentially see that in this collections business, if you're able to demonstrate that you are aiding any lender in improving their collections rate, as in giving them a delta over their existing money, you can easily charge them 20-25% of the extra value you're adding.
00:21:02
Speaker
So if suppose someone was collecting maybe one CR out of their bad loans portfolio after us, if they're able to extract 1.5 crore, now for them it is a 50 lakh extra collection. And if we are charging them 20 lakhs, we can take 15 lakhs, they'll be more than happy to pay us because for them it was essentially lost money which we have found.
00:21:22
Speaker
So it's a win-win, creating a win-win and the return on investment, what we call ROI is clear in this business. So, okay. So this is on paper, it sounds good, but then, you know, there are many, like, like there's a journey of evolution.
00:21:37
Speaker
From a on paper good idea to executing it like for example Did you decide to take an upfront SAS based payment or did you decide to take a payment? The way you explained just now that whatever extra we help you collect we take a percentage of it Like you know how from on paper to the evolution of execution. Tell me about that journey
00:22:00
Speaker
Yes, yes, I think that also is, it's something you learn over the course of your journey. In the first, I think pricing is something which you really struggle with. And in the initial start, it was essentially not even pricing, it was essentially how to do this, how to solve this problem, how to create that extra value. So that was a bigger question that what should the platform look like?
00:22:23
Speaker
So to do that, what essentially we did earlier, we started working with very smaller fintechs who were just coming up in 2019 through some of our references. You exit from BlackRock, how did that happen? When did you decide, okay, I have to put BlackRock and do this full-time?
00:22:44
Speaker
So this happened in 2018, December. Essentially, I think at BlackRock also we were studying all these things. And at that point in time, I could see that I have now tried my sell side, I have tried the buy side, everything is good. But when I see myself 10 years down the line, can I imagine to be one of the VPs who are sitting there 38 years of age or 40 years of age doing the same thing over and over again?
00:23:10
Speaker
Like, is it exciting enough or is it worth spending so much time here? I think that call was very clear. I have now explored the pie side, explored the sell side. It is something that I'll keep on switching. I'll never get satisfaction. And it is very important question you have to address now, whether you want to be a very small part of a very big ecosystem or a very big part of a very small organization. And how did you meet your co-founders? Yeah.
00:23:41
Speaker
So yeah, that was during the Blackout days only. So I was obviously on a hunt to figure out a team who will be the best fit. So Anand, who is my co-founder handling the tech part, he is my bachelor from Italy.
00:23:55
Speaker
He is a computer science grad and he was working with 1MG since the college, after the college. So 1MG is also a healthcare startup and is solving the online medicine delivery problem and there also the tech development started in 2014-15 when we were in college. So he was associated with them since those days, like he was working with them since 2014-15 and
00:24:22
Speaker
took that journey. So essentially, from my perspective, I knew that someone who has done that from a tech perspective and who is working with a startup, have the experience will be the best here to lead the tech side. So that was very evident. It was primarily discussing it with him and also then discussing the potential ideas and then coming up together as a team.
00:24:45
Speaker
So we are three co-founders and third one is Mayank, who is a lawyer and who comes from this side. Not core collections, but essentially representing different governmental institutions before DRT, before retro-resistant tribunals, helping different lenders in terms of actual core collections. So he brought in that legal expertise along with the collections parties to address that problem.
00:25:10
Speaker
So it was primarily we had a clear visibility around the roles and responsibilities I was I was myself to brainstorm on entire sales like to bring every client on board
00:25:22
Speaker
get handle the expectations part and then discuss any investment potential opportunities. So I took under like my bucket the entire sales, business development, investment and other parts were clear mandate of Hanan was to scale the product built it from an engineering standpoint also the product role and Mayank was on the operation side and actually assisting also the tech development as in by his inputs in terms of how it should be done.
Building CredGenix: Technology and Team Formation
00:25:52
Speaker
How did you figure out the technology solution? Like, you know, how did you figure out how to improve efficiency?
00:26:02
Speaker
Yes, yes. I think that was also something which we understood after we took up actually the collections mandate. So as I mentioned that after quitting, what we did, we started working with smaller FinTechs to solve the collections puzzle. You are also essentially figuring out things, right? You are solving the iterating part. You can outsource the collections to us. We'll brainstorm it for you. We'll figure out how it gets done. Also, you obviously have inputs, but you essentially can get it done to us. So we actually took collections mandate that we'll get it collected.
00:26:32
Speaker
There was no software platform then. We understood the process, we did the same process over Excel. We engaged different lawyers, we engaged different collection agencies on ground to actually do that collection spot, take that mandate. The entire dealing part was being done by us and for the upcoming fintechs that reduced their workload that they didn't have to deal with the collection agencies. It was primarily we who were on their behalf
00:26:57
Speaker
doing all those collections and trying to do it understanding learning and figuring out how those collection agencies work how the typical debt collection process happens then understood did some surveys took a look at all the new upcoming fintechs how are they addressing collections they are there then took up some collections mandate in a established fintech to actually on a percentage resolution basis so that they will set their expectations right on right up front like there will be a state in our face if you are not performing
00:27:28
Speaker
Then we did that activities for 6-7 months, we got enough data points, we understood the entire process in and out and there we started building the product in July 2019. That was the starting point, we started building the product after the brainstorming in July 2019. That was the start, we started brainstorming on what product should be built.
00:27:47
Speaker
And when did you raise your Angel? I think you did an Angel round first before the current... Yes, yes, yes, right. So in July 2019, we started even working on the platform development. In two months, we came up with a very small MVP with some wireframes, some designing aspect.
00:28:06
Speaker
At that point in time, it was primarily we engaged certain developers. We invested our own capital. We invested roughly 20-25 lakhs of our capital in the initial six, seven months and eight months. Hired some folks in turns. After that point in time, it somewhat appeared that at least I should try because of my entrepreneurship club network.
00:28:27
Speaker
I knew a lot of people and I just tried let's explore this ecosystem because if we are able to at least get maybe 1.5 to 2 CR we will get sufficient bandwidth to hire certain folks get this product rolled out and establish a product market fit whether to figure out its need or not. So at that point in time after too much only I interacted with Kunal I started I wrote him a mail
00:28:51
Speaker
and got connected with him and since we had a lot of common network, it was not very difficult for me to reach out to him. I reached out to him. He candidly called us in his office, both Rohit and Kunal.
00:29:08
Speaker
There was a one-hour discussion which happened with Oith. He was understanding what we are doing, how exactly we plan to address it. So it was a one-hour conversation with him. And there after that one-hour conversation, he mentioned that Kunal also will speak to you and wants to speak to you regarding your idea because it sounded interesting to us. So we have scheduled the conversation one after the other and we want to get you to understand the entire ecosystem. So Kunal then came in. As soon as Oith left, Kunal came in.
00:29:38
Speaker
And his meeting was scheduled, his call was like meeting, it was an in-person meeting, it was not the COVID era. So his in-person meeting was scheduled for one hour, but it went on for one and a half hours. He kept on getting calls, you should come here.
00:29:57
Speaker
Some other guy in person who came, K.U.R. called in other meetings. He mentioned, please postpone it, I'll come after half an hour later. He was also so much engaged in the discussion and it was very difficult for us.
00:30:15
Speaker
to figure out that time has gone and it is already one and a half hours since we are in this discussion room. There was a very candid discussion that what challenges we are facing, how we came up with this idea, what we are doing, what are the plans, how to prize. We were early for a lot of answers and we were very upfront about it that you are asking me this question, I don't know. Actually, I don't know. I'll figure it out. I'll figure it out.
00:30:39
Speaker
But I'll tell you what we know. But whatever we actually don't know, we'll be very upfront and categorically mentioning that we'll figure that out. But it is a very good question. We have taken note of it. And we'll figure that out. Obviously, you are speaking from a so many years of experience. So whatever you are telling us is something which we learn. But essentially, it's good that you have told us now we'll be very careful in addressing this question.
00:31:03
Speaker
So there are a lot of things, a lot of questions went answered well, were not answered. And at the end of the conversation, he mentioned, leave aside everything. How much amount do you want? Because I think it is worth spending your time on since you all have left your high coveted jobs. I feel now it is a good idea to actually spend time on. So I am definitely with you on that.
00:31:32
Speaker
Now, let me know what you're thinking around how much, what money you require, etc, etc. Then it was very simple conversation. We mentioned in that this is the very clear one year, like it's a one year runway we are looking for. And this is how the calculation looks like. This is how much we require. Then you mentioned, okay, let's let's do it. And I'll give you my offer tomorrow after discussion.
00:31:59
Speaker
And the next day in the morning, I think the offer came and it got closed into two to three days. Wow. And how much did you raise in that angel round?
Navigating Challenges and Opportunities during COVID-19
00:32:09
Speaker
So it was not only Kunal, we brought in some relevant people from the different industries through the same network. So it was led by Kunal and Rohit. So it was almost a 2 CR fund raise. It was a 2 crore raise where 1 crore was by Rohit and Kunal and the remaining 1 crore was by other angel investors who had some name in the fintech industry or the software industry, SaaS industry. Kunal Shah also came in that round only.
00:32:37
Speaker
A Kunal Chah came later. Kunal Chah came later. It was actually the first believers with Kunal Behel and Dovindir. Got it. Okay. So from that period, how did the journey evolve after that? Like once the funds came in, then how did the trajectory change and you know, tell me about the post the angel funding.
00:33:00
Speaker
Yes, so Angel actually gave us now, it was an actual company right after that. We were able to hire people. We took up an office space because before that I used to live in Gurgaon like while I was doing a job and our entire ground floor was converted into the office.
00:33:19
Speaker
So we were used to living at first floor and the entire ground floor was converted into an office space. So there was no proper office space before that race. Then we took up an office space, we hired people, we started core development of the product. We started and we built a first version of the product in January 2020. Like in the four months. But it was very basic product though. It was a very basic CRM type of product. But we launched the first version in January 2020.
00:33:47
Speaker
Using the capital, we hired some core developers, we hired some interns and it was a full-fledged office we used to go. It established a routine that instead of just switching from first floor to ground floor, now we are actually...
00:34:00
Speaker
essentially going to an office and doing that thing. In January 2020 we launched the same clients where we took up collection mandates, these smaller fintechs. We essentially rolled this product out for free to them. What exactly is required? What is not required? What is good? What is bad? They were the first adopters. It was a very clear indicator that they will be the first adopters and they will give us a very good relevant input. So there is no point charging them for that.
00:34:28
Speaker
Because otherwise, then it will be impacting our adoption rate. So those were the same fintechs we worked with in the initial six months to enable collections to also help onboard on the platform and then give their input. So in the first three months, we were working with those fintechs only and then this COVID scenario happened, which was out of the blue, like one identity expected that this thing will happen.
00:34:51
Speaker
So one question I have here before Covid. So essentially the first platform would have been like you understood collections workflows and then you build a platform to digitize the workflows so that everyone knows next and everyone has visibility through dashboards and analytics. Like that would have been what you built, right? Right, right, right, right.
00:35:17
Speaker
That was something which we actually built, that just to give a visibility around, it is purely a visibility around different teams, how the different teams have been working, and giving them a seamless information flow, which was essentially missing, like there are multiple teams involved in collection, there's a calling team, there's a communications team, there's a legal team, there's a field team, and everyone was operating in their own silos. They were all following the same cases without any feedback loop.
00:35:46
Speaker
And there was no priority order, no priority order for whom to target first, whether it should only be the calling stream who should follow up on that cases, whether this is a very easy to collect case where essentially I don't even need to involve any manual resources. Eventually even the communications will work best.
00:36:05
Speaker
And you would have automated the communication also like SMS and... SMS email, right, right, right. We did this automation, but that also happened in phases. Like initially we just gave them a CRM, it's a collections management platform, you can upload, you can trigger manually SMS email, you can get a visibility, but this automation pieces came in later.
00:36:28
Speaker
So the first version had only a simple plain CRM tool functionality, where you can trigger SMSs, you can trigger emails, you can do calling, you can see how the legal is performing, but it was purely like it's a management tool, no intelligence tool. Yeah, so got a lot of inputs during that phase. And then I think for three months, we saw that there are six fintechs who are using it now. And they're using it very well, as in that they're
00:36:55
Speaker
time spent on platform was on our side. So we essentially knew that they're using it. After that, after that phase, if the COVID thing happened, which was out of the blue, we were not sure how to react to this, like we were completely clueless how to react to this, whether it will be a good thing for us or a bad thing for us. We were not sure. But essentially, we shut down the office.
00:37:20
Speaker
we made it work from home and after that eventually in four days time RBI came up that we are implementing moratorium which essentially meant that any collection activity will not happen for the first next three months. Who wants to pay will pay. Who wants to pay will pay there will be no collections as such communication which will be sent. Now, after and we took che chalo abu marathu matlab it is essentially that we are out of business for next three months.
00:37:49
Speaker
There is no utility of the platform as of now. We essentially will not be able to sell it to anyone. So we thought that, but we essentially also figured out that this problem will become severe after this. This bad loans problem will become very severe after this. The reason being that three months is a good enough time for people to forget about their EMI payments.
00:38:13
Speaker
And also the job scenario and other things are not looking in a good shape. So the collections will become a much bigger problem after the pandemic. And here it might increase our adoption rate. Might, there was a big might obviously in front of that.
00:38:31
Speaker
that might increase but as of now it is a zero revenue phase for us going forward for the three months but we also felt now we have enough inputs to work upon like our product team will work upon all the inputs and meanwhile our sales team operations were zero our sales team and like me alongside others will we only focus on how to device a strategy to reach out to the relevant stakeholders in the banking ecosystem
00:38:53
Speaker
in the different NBFCs will trigger some emails cold emails will trigger will do a properly campaign activity essentially to just let people know that we are there once the moratorium is lifted people should get to know at least we exist like just to showcase that existence we started working on some PR stuff writing down articles on media on Quora and doing all those things
00:39:17
Speaker
which to just get some popularity in the market so that people are essentially aware about us. And meanwhile, the product was at core focus. In May, we could see that we got a lot of attraction. There was so much response on our cold emails. There was 8% revert back rate on our cold emails. Out of every 100, they shoot it out. Eight people replied to that.
00:39:37
Speaker
And these were all like either banking, connection managers or FinTech connection people. FinTech, guys like these guys from the lending and VFCs, mostly those guys, like it was primarily FinTech, lenders, risk heads, hounders.
00:39:58
Speaker
Banks obviously don't reply to quality holding it. So bank is something, it's a completely different ballpark game to crack them. Do you also target collection agencies? Like there are these on-ground agencies, does your software, like do you also sell to them?
00:40:18
Speaker
It is a use case for them but essentially it's sophisticated enough as of now I think to onboard them and that market is very fragmented for us to even drive any unit economics out of them. So we have not focused as of now to sell to any collection agencies because of even the paying capacity we know and even the appreciation of the platform, how to use it, we could see that will be very less in that sector. So we targeted the lenders, fintechs, NBFCs
00:40:48
Speaker
during that phase and we could see a good response inbound response to our emails to our cold emails and there essentially we started showcasing the demos like it was purely zoom demos which were conducted and there a lot of got a lot of inputs it's quite secure though you can do this you can add this this is a pain point everyone gave the inputs because essentially now everyone there was a clear mandate to scale up their tech infrastructure to handle those volume collections
00:41:16
Speaker
Earlier it was a good to have product. It was not in the must have category. It was good to have because they were essentially managing it. During that time, the new disbursement was stopped. There was no new lending which was going on because of the market scenario. Now there is a clear mandate that once the moratorium is lifted, there will be huge collections problem. So all the sales people were moved to corrections. Everyone in the sales team was moved to corrections.
00:41:45
Speaker
They needed infrastructure to manage so many people. It was just a temporary way to handle because you can increase the number of people that will essentially help you scale the collections. But that is also not a scalable manner to do it. It was just a temporary way around. So in May, we were expecting that now the moratorium will be lifted. It got again extended by six months, three months.
00:42:10
Speaker
that came as a shocker to us as well because now we had to sustain. We had to sustain because essentially it meant another three months zero revenue. And did you have runway? We had one year runway. We had one year runway. We had one year runway and we managed to like
00:42:29
Speaker
get that runway going because we essentially also knew that it is a very unpredictable situation and even Kunal was very useful and guided us that you should be in a position to deliver the product after this is over so you should save as much as you can at this point in time. You should not be spending anything extra apart from what you need because it should not be a scenario that once this problem is over and your collection product is required by the market, you don't have bandwidth to build it.
00:42:59
Speaker
and you don't have funds to do that. So there, and obviously the funding scenario was also not good. Like there was no funds being, no investor funding anything. It was such an unpredictable situation and it was a purely funding was right. So eventually look, even to understand that, like even to go out and look for funding was something which you're not doing because we knew that this is something which is not doable.
Growth and International Expansion of CredGenix
00:43:24
Speaker
But interestingly, what happened for the investors as well,
00:43:28
Speaker
the entire hospitality space, travel space, everything which was badly impacted by COVID were not of interest. They didn't have the leverage to park their money or invest in those sectors. So 70% of the sectors where investors used to invest were gone bad due to COVID.
00:43:47
Speaker
Now it was essentially only 30% of sectors which were neutral or which got positively impacted by COVID, which might be healthcare, which might be edtech, which might be zooming platforms like Zoom, any fintech who is there in terms of essentially engaging the payments. So there were some sectors particularly which got positively impacted and ours was also the one which seemingly looked like will get positively impacted after the moratorium is over.
00:44:16
Speaker
because the collections will become much bigger problem there. Though it appeared that once this problem is actually come over, then the art platform will be of very good utility. So we were also focusing on that marketing and all those activities. So by a matter of chance, our one article got picked by our story. Purely, organically, it got picked by our story that how we are essentially targeting to aiming to help NBFC lenders who get the collections and etc.
00:44:46
Speaker
So what do you mean your article got picked? Like did you send it to your studio or did you publish it on a Kora?
00:44:54
Speaker
It was published on a medium, it was shared through our LinkedIn channels, it was shared through my personal LinkedIn. So it got picked up from there. So it got picked up from there and it got published. And there we saw a lot of inbound interest from a lot of investors, they started reaching out there. Sequoia, Excel, Lightspeed, everyone started reaching out to understand what we are doing, how we are doing this, a background, etc, etc.
00:45:19
Speaker
So, everything started in on June 17th, I even remember the date when I got the first ping. It was June 17, I got the first message and then it was a series of these messages which came in on Malignan to understand. Then in June, June 17 had first interaction. On June 29th, we caught our term sheet from Accel, from Sequoia, from every like three funds.
00:45:50
Speaker
Wow. Okay. So why did you choose accent? I think you didn't go with Sequoia, right?
00:45:56
Speaker
Yes, yes, yes, yes. Yeah, I think that is also something which was a tough choice to make. But actually, at that point in time, we felt that actually will be potentially a good fit because of their SaaS expertise. Sequoia came in with the financial services expertise. But it was essentially they do a lot of background checks on us also, before investing. After the offers, we did some background checks on them also.
00:46:26
Speaker
with multiple founders where both of them are investors. So there we felt, maybe from our particular use case, Sequo has also very good fund, but from our use case, Excel might be better. And also Excel was the first mover, as in they were the first one to extend an offer. So there was definitely some soft corners for that as well. So essentially we went ahead with Excel during that race.
00:46:56
Speaker
So, then tell me what happened after the moratorium got lifted. Yes, yes I think so excel was very helpful after the even like in that phase like they invested in July to they signed the term sheet it took 2 months really also which happens and then we got the funds in around September at a time when the moratorium was getting lifted. How much did they invest?
00:47:18
Speaker
They invested $3 million. But the overall round was $3.5 million. So the rest, $500,000 were invested from other angels. Some funds like DMI, they have an alternate fund. So there were some strategic angels. Like Kunalchha also invested in that round only. Like Kunalchha, was that inbound or like you reached out to them?
00:47:41
Speaker
Also to them it was primarily I think whenever a round gets completed by any typical venture capital firm, in their own circle they also circulate that. So they circulate that whosoever is interested they directly reach out to the founders.
00:48:00
Speaker
And then we obviously had a list that who will be helpful for us and who will not. From a strategic point of view, we had options of around 25 to 30 people whom we thought will be strategic. And then out of that, we took money from eight or 10 people. So Kunal Shah also was a strategic in a way that their main business model was turning out to be lending.
00:48:28
Speaker
They planned to venture into the lending where collections was also something where they wanted to invest. And hence, instead of developing their own capabilities, spending so much time doing the same thing which we have done, they essentially thought it is best to partner and also to not share. At that point in time was very candid in saying that you test out any new product line on us. You have enough legroom for you to try out any tech piece you want to do. And also we'll give our inputs in terms of how to build it for a credit card company.
00:48:59
Speaker
So from an investment standpoint, from a business standpoint, from a strategic standpoint, it was a win-win for everyone. So we got him on board. So after the moratorium, I think the exciting journey started after the moratorium. There, this problem, as we were expecting, it exploded. It was a huge explosion in terms of the problem which happened.
00:49:25
Speaker
So there, we saw so much demand in terms of the platform that we essentially were not even able to cater to some of the requests. So we had to stop outbound sales for some time. We had to stop outbound sales for some time. It was only inside sales, it was only the people who were reaching out to us, we were entertaining them. And the banks, we were reaching out before COVID started reaching out to us.
00:49:55
Speaker
that we want this, we want to have a look at the platform, demo, et cetera, et cetera. Although with any bank, it is at least 20 meetings you have to do with different stakeholders, different people, convincing everyone, doing their security audits to get a final nod, then the pricing, they are very hard negotiators. Pricing, everything you have to get it done, but the banks were the toughest. But even for the banks, all these NVXs, new NVXs like Wran,
00:50:24
Speaker
loan tap, money tap, money view, n number of index which are there. All these got unloaded. And we went on from almost zero revenue at the revenue was zero for six months. We went on from zero revenue to almost doing 1.4 CR a month in January. Wow. Amazing. Okay.
00:50:47
Speaker
And that too without even multi banks going live, it was only one bank which went live during that time. So even without banks going live, we were able to go to that revenue scale. And there also in January, we reported a profit in a bit of around 42% net profit after taxes for that month.
00:51:11
Speaker
So, so during that time, it became clear that there's a clear path towards getting live with the Greek one and getting this rolling and we have enough capital in the bank to roll it out to the Indian ecosystem. But in that January month only, we started getting some
00:51:29
Speaker
queries from across India like across different borders like there was a query from Indonesia Bank there was a query from a bank based out of Vietnam South Asian countries to understand what we are doing how we are doing it
00:51:45
Speaker
getting the processes. So we figured out that this problem statement is common across the developing economies. Collections is a much bigger problem in other Southeast Asian countries because they don't even have an E-Nash or E-Mandate system. To explain what E-Nash E-Mandate is, it's an auto debit that you automatically, your amount gets debited without even your consent, you get a sign in E-Nash. So a lot of the collections problem in India got solved because automatically the payment gets debited if your money is there in the account.
00:52:14
Speaker
That Inash humanity is not there in other countries, so collection is a much bigger problem there.
00:52:19
Speaker
So now our focus was to get going very aggressive since we knew that this market will be very hot for the next two years and we have to capture as much as we can. There we started receiving a lot of inbound interest from the same funds we spoke to in the last time from new funds. Even Sequoia again reached out to figure out whether it's an investment potential there, opportunity there as of now or not. So that was something that we were in a commanding position because we didn't require any funds.
00:52:49
Speaker
it was essentially and I also have heard that the best time to raise is when you are not raising grant with the investors I have given you don't need it and with the investors also I figured out that like they're very good like if you ask for money from them they'll probably give you advice if you ask for advice they are probably interested in giving you the money because on and that is a very true fact because they they they only
00:53:19
Speaker
I think I try to invest when they see everything is going very well as in that whenever anyone used to interact with me I used to say we are doing very well we have reported net profit we have a strong client pipeline we have very aggressive plans we'll reach this revenue run rate in such so much time spent of time
00:53:42
Speaker
and it's going very well for us and then obviously they are also on lookout for such businesses which are running very smoothly and there's a clear pathway and clear runway to execute different things. So essentially if they figure out that everything is going very smoothly and they don't require funds it's the best time to invest for them as well. So during that got a multiple interest but we were very clear that if you have to raise now it will be at our terms.
00:54:10
Speaker
So we can ask for any valuation or any terms we want. If it happens, it happens. Otherwise, it is not going to happen. It's OK. It's fine either ways.
00:54:22
Speaker
So, there we ended up getting a very strategic investor on board. So, that will be also made public very soon. It has been covered although by some channels. But yeah, so we onboarded Westbridge Capital. Westbridge is a very heavy investor in financial services domain. They are on capital of almost 30, 35 NVFCs and banks.
00:54:46
Speaker
deep investors in the financial ecosystem, in the lending ecosystem. They are also investors in civil, they are on the capital level of experience, multiple, like they are on capital level, multiple of these financial institutions. So there we could see that from a, like energy perspective, we could easily see that they will be able to reduce our GTM as we go to market.
00:55:11
Speaker
in multiple of these NVFCs and also they are very good in terms of their track record as they are managing 6.5 billion dollar fund in India. So the fund as of now the quantum is around 23 to 24 million and it is at over 100 million valuation it is around 110 million.
00:55:33
Speaker
Wow. Amazing. So that's like phenomenal value creation in like a matter of months that you have achieved. Yeah. So we are raised at almost at six six in the, in six months.
Reflections on Success and Luck
00:55:50
Speaker
So, and we gave exit to some of the investors who were in the angel round in yesterday.
00:56:05
Speaker
Right now you are able to capture a large part of the margin because this is not a commodity software. I am helping you recover 50 lakhs more so give me 20 lakhs out of that.
00:56:18
Speaker
But eventually this could become commoditized as people see the opportunity and then more companies will pile on, create similar tools. So what do you think will be your mode and how will you protect your margins?
00:56:35
Speaker
It's a very interesting question. It's a very good question. I think I come across this question by every investor. So here what we could see as of now also Akshay that it's a valid question. I think anyone can come up with it. But the data we are capturing, we know at a pin code level how the collection is doing. We keep on sending newsletters. We have our models are built, our data when models are built.
00:56:58
Speaker
in a way to prioritize the concept, what pin code you need to prioritize, how the collection is going on for this particular type of borrower. Now any new portfolio we onboard, we exactly know the contours of that portfolio. Like suppose there's a two-wheeler portfolio based out of Rajasthan.
00:57:11
Speaker
will essentially tell if they code Rajasan material portfolio performance across the ecosystem SCA. So you should expect the similar numbers and this is the strategies working best in this geography at this point in time at this pin code and this is how you should go about it. So that data we are sitting on is the mode. It is essentially that we are leveraging that data capabilities.
00:57:30
Speaker
and anyone who comes in the market at this point in time will have to build that data by themselves and there is no reason for any bank or any fintech to go to them either like they have to be 10x better than us because as of now they have gone from a no software approach to a software.
00:57:47
Speaker
any new software to replace us they have to be 10x better than us only selling it for lesser will not be sufficient and they cannot never compute us within the pricing like if any new even startup comes up it's really a chance that any they will be aggressively funded in the initial times so we will have enough capital to ultimately even if there is a pricing war we can do that but that is should not be the scenario because it's essentially the value add it's not only a competitive pricing we are doing
00:58:17
Speaker
If we are able to drive those value at by a combination of a data by combination of multiple things, then it makes sense for them to do it. Okay. So how old are you, Rishab? Akshay, I'm 26. So how does it feel at 26? You are probably worth at least, you know, like maybe 50 to a hundred times more than what your parents would be worth. And you know, how does it feel to be where you are today?
00:58:44
Speaker
I think I never compare myself with my parents because I think everything is there because of them.
00:58:50
Speaker
Like, not to say that you will compare, but I mean, it's like compared to anyone in your social circle, you would be worth 50 to 100 times of anyone that you would have grown up with, anyone you would have spent time with, you know, you would be worth more than 99% of them and you would be worth 50 to 100 times more. So, you know, how does it feel being Rishabh Goyal today? That's what I want to know.
00:59:18
Speaker
you know I think yeah actually so there it obviously feels good in a way that essentially our labor and hard work has paid so it essentially it's a journey of ups and downs where we also think that there might be a scenario like to shut down again go back to the same world again do the same thing but it is essentially here like having found out that I don't actually at this point in time I don't
00:59:45
Speaker
feel tired at any point in time even on weekdays even on weekends we are working on Sundays we are working we're doing office stuff we are doing calls we are taking all the calls on Sundays and it also doesn't tire us which essentially means that we are doing something and we can see a value add is being done and it's some value creation we are doing so these monetary stuff is something which comes on its own it is something which comes along but that is not the core objective to get it done but
01:00:10
Speaker
Talking to everyone, I think as of now also my social circle is same, everything is same. There's hardly, there's not even an outer of a difference in what I used to be before or as of now. And I think humbleness is the key to eventually go there. You have to just keep your heads down and execute. Whenever you lose your touch with the ground reality, whenever you actually
01:00:33
Speaker
lose that humbleness where the downfall starts. And that is something which I have studied, I have seen across my journey, which I have seen that how eventually the downfall starts once you lose your round touch and once you lose that humbleness, my wealth has become this much, etc, etc. And then I need to improve my social circle, etc. So all these things should not bother you, you should be in the same and I think what I can see my as much strength is I come from a middle class family. So I don't have that luxurious
01:01:03
Speaker
I don't have that kind of aspirations that I have to go to this or I have to wear this type of clothes. So I think that is the biggest strength also. We are never dependent on any luxurious lifestyle. So eventually I don't want also to go into that manner.
01:01:18
Speaker
it is essentially that is our biggest strength that we don't need like Ambani Adani they have to maintain their standard of living they have to actually go and extend a lot we don't we don't need to do it like that is our biggest strength we come from middle class family and we don't need to do that things so how much of the success that Crederics and you have achieved do you attribute to luck how important was luck in it or
01:01:46
Speaker
Yeah, definitely luck is a very important factor also. I cannot attribute a certain percentage. It is a combination, it is as in a combination of your hard work, it is a combination of an opportunity, the tailwinds, the scenario, the luck, eventually everything, if it fits in the right spot, it is the right spot.
01:02:05
Speaker
any of the thing falls apart, you are done. So you should not worry about the things which are not in your control, not your own hand. Even during the fundraise, it was primarily, I think we were discussing, if something, there are obviously a lot of questions that bother us, but if they are not in our hands, we should not just unnecessarily worry about them. You should do best what is within your control. What is not in your control, you should just definitely leave it to, if there is supreme power, you leave it to them and see what exactly happens.
01:02:35
Speaker
you should not worry about things which are not in our hands. So my always objective is to give my 100% and then leave it. Then don't worry about it. Like whatever is bound to happen will happen. Like if that is something is not in our control, we should not worry about it. Somehow I feel that here, luck was important in a way that this COVID helped us a lot because it increased the adoption of digitization. It is somewhat of a scenario which no one had anticipated. We were not sure whether it will impact us in a positive manner or negative manner, but it turned out to be helpful for us.
01:03:05
Speaker
It turned out to be helpful for us. Like same thing happened for PTM or demonetization turned out to a very big boom. So what we felt that maybe our adoption of the platform was not at that scale if it would have been precluded.
Conclusion and Encouragement for Listeners
01:03:19
Speaker
So that was Rishabh's inspiring story of building up a $100 million SaaS company with nothing more than grit and hustle. And we hope it inspires you to find that niche and build your startup.
01:03:33
Speaker
If you like the Founder Thesis Podcast, then do check out our other shows on subjects like Marketing, Technology, Career Advice, Books and Drama. Visit thebotim.in that is T-H-E-P-O-D-I-U-N dot I-N for a complete list of all our shows.