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The debt funding masterclass | Bhavik Vasa @ GetVantage
312 Plays2 years ago
In the high-stakes world of Shark Tank India, startup founders take centre stage to pitch their ideas to a panel of sharks. An intriguing statistic reveals that every third deal offered by the sharks is not an equity investment, but rather a debt deal. This episode decodes all things debt funding.
Additional links:-
1.GetVantage offers revenue-based financing to India’s founders
2.How a Mumbai-based startup is making life easy for other startups
3.How GetVantage is democratising access to working capital for underserved businesses
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Transcript
Introduction to Bhavik Vasa
00:00:00
Speaker
Hey everyone, this is Bhavik Vasa here, founder and CEO at GetVantage.
Shark Tank India's Debt Deals: Growth Tool or Criticism?
00:00:17
Speaker
If you are listening to this podcast, then you would surely have seen the Shark Tank India episodes in which hopeful startup founders pitch to a panel of sharks on camera for funding. I bet you would not know the statistics about the show. Every third deal offered by the sharks is a debt deal, which means that they offer to lend money to the founder instead of investing in the startup.
00:00:39
Speaker
While many people on LinkedIn criticize the show for this and call them loan sharks, but the truth is that debt can be a powerful way to grow your startup and build more long-term wealth for yourself.
The Role of Debt Funding in Startups
00:00:50
Speaker
In this episode of the Founder Thesis Podcast, your host Akshay Dutt decodes all things debt funding with Bhavik Vasa, the founder of GetVantage.
00:00:58
Speaker
GetVantage is in the business of giving debt to startups, thereby providing a service that most banks are not equipped or willing to offer.
Scaling Itzcash and Understanding Fintech in India
00:01:06
Speaker
Stay tuned for the conversation and subscribe to the Founder Thesis podcast and any audio streaming platform to master fundraising for your startup.
00:01:21
Speaker
Also, the ambition was that digital payments in tech is what I need. Started meeting as many venture capitalists, as many angel investors started pitching my fintech play that we wanted to build out in India.
00:01:40
Speaker
Tothin options started coming, started materializing and actually in all of that is where this opportunity or arised with Itzcash, ITZcash. So Itzcash was again the earliest FinTech and digital payments company in India. It had already set up, it had already set out, taken up one round of investments but as I admit
00:02:05
Speaker
the main founder of Green Surya and some of the investors. The play was, look, it's something that is also my expertise. I would love to build it together. So that's where I merged my business plans and my entire digital focus and immortal board and its cash as a chief growth officer. And took that business then. For 2010, we were awarded
00:02:35
Speaker
to 3 million in revenue is what the company used to clock to then scaling the business to 40-45 million dollar revenue in the next 7 to 8 years. So, let all the scale expansion made its cash one of the largest payments and digital payments in tech in the country, 5 billion dollars, a kind of annual volume that needs to be started clocking.
00:03:04
Speaker
And they have scaled that business and learned another thing, that in India you can't build a business or a startup in three years like you can in the valley. India is at least by itself. It takes a decade to build anything in India.
00:03:21
Speaker
So if I remember correctly, itscash was a way for people who don't have a digital payment instrument, like say a credit card, itscash was like a prepaid instrument.
Strategic Acquisitions and Startup Challenges
00:03:31
Speaker
You could put money in your itscash wallet and then use it for online payment. And also the ambition was that digital payments in tech is what I think.
00:03:39
Speaker
started meeting as many venture capitalists, as many angel investors started pitching my fintech play that we wanted to build out in India. The idea is to go deeper. In booking flights, we as its cash used to always book flights but buyer.com which was another
00:04:00
Speaker
the third largest travel booking, acquiredwire.com, right? So, now you're basically buying into a lot of that volume and aggressively laying that out. We wanted to get into newer spaces of money transfer, both domestic and international. We were getting into money exchange. So, Centrum come money exchange business. So, now whenever you travel into India or out, you'll see at all the airports, deepest cash money exchange, right?
00:04:27
Speaker
Okay. That was the game plan. So, you know, while you were at its cash, you must have seen companies like PTM, phone pay raising lots and lots of money and they really like the hyperscaling with all the cashbacks and discounts and all of that. Like, like you guys didn't feel that you would lose the race. Two things.
00:04:50
Speaker
We never refocused from our work and build a strong, sturdy business with good fundamentals. And so, it's cash at its exit. We were already profitable. In a world or in a play of payments to be profitable as a business, you'll always get value. On the flip side, I actually was at the front end of oil growth and marketing. See, the only difference was how much you spend on
00:05:15
Speaker
Marketing. How much would you spend on customer acquisition, right? If you could learn a little more there. And at that time, you'd remember there used to be these models. Times of India, they used to run brand capital and all where they
From Challenges to Creating GetVantage
00:05:27
Speaker
used to. Yeah. They would take it. Yeah. Yeah. Yeah. You know, I was very clear. Let's take money like that.
00:05:39
Speaker
but could never take it to my board of directors honestly because giving away equity for a barter deal where there is just edge space in return not real money. So, I saw the debt, those models had some flaw. Banks had a challenge of understanding our business to give us debt.
00:06:00
Speaker
while we were high growth, high revenue generating businesses, but banks could never underwrite. So bank debt was always... So it's literally those pains as an operator, founder, that I realized that as India is going to have more and more its caches of the future, more and more digital first businesses that are asset light,
00:06:30
Speaker
All they need money is this booster capital, this growth capital time and time, the short term debt. And if we can do that with a complete new labour of tech and data and performance of that business, right? So, the birth of Gidwandij really came from them. Serious phone, personal founders, operators challenged here. Seasoned time went on, marketing was spent. I needed a booster capital.
00:06:58
Speaker
of beating the competitor, right? I needed to increase some customer acquisition. When do I get short term quick access to capital for that, for all that. Okay. First of August, I stepped out on 4th of August. I had my first born in my head. It was well-timed.
00:07:15
Speaker
So, it was well timed. I knew that I wanted to be extremely hands-on with my first child. That was a perfect way to step out, take a sabbatical. So, the next 6-8 months to an year, Akshay was only being a hands-on dad. You know, I say this, I've built startups. This was the most important creation. I had to be hands-on.
00:07:39
Speaker
Right. So life gave me that opportunity. I think I look back and say timing wise, everything put out where I was able to literally be hands-on with my baby girl. She's now four years old. So everything, I look at my life, read her work and then post hers, right? So the entire journey through Bombay boy, through Silicon Valley, back to India building.
00:08:04
Speaker
its cash was pretty Eva and then literally post Eva, this journey where after taking on 6-8 months with her is when we started and slowly end of 2019 is when we started putting together
Innovating Funding with Tech and Data
00:08:23
Speaker
the first core team for get wanted and started building on complete stealth mode and started building out the tech and the platform first. First make sure we get the basic railroads of our tech and platform. So 2019 end is when we started work on.
00:08:46
Speaker
Like, did you have some comparable models that you had seen in US, for example, of companies doing this that you thought, yes, we can... Like, that's the playbook that we can build in India. Like, what was the playbook that you had in mind that you wanted to build? So, the platform idea, right? In one word, what is get wanted?
00:09:05
Speaker
The advantage is how can we use tech and data to do alternative forms of funding and finance. That's the one word mission or one word thesis of foundation of get wanted. Saying that businesses are going to need all forms of capital as they grew and scale. And can we have a very strong tech intervention.
00:09:28
Speaker
and a platform, right? So, the idea of course won. It won a lot more also from, like I mentioned, my personal journey, my co-founder Rosa, who's another fintech CTO, a patron CTO, called Amit.
00:09:47
Speaker
Of course, he was the first one who came alongside and he took this journey with me. Once we zeroed in on saying, let's make this play where businesses need money for growth, for marketing, for inventory. Today, they have only access to venture capital, so they keep diluting themselves.
00:10:07
Speaker
But what they have is, these are businesses that are also online and digital. So, they know in real-time what is my sales over the last 10 months or the early days. What is my premium gateway revenue? That infrastructure is in place. February of 2020. That's when the first time the media wrote about what Bhavik is doing next and how we...
00:10:29
Speaker
We're looking at positioning our senses, new avenues for business to raise capital or funding. But as soon as we came live in February 2020, March 20 happened. We all know how the world went upside down.
00:10:45
Speaker
What did you build? You must have built a tech stack, right? Because you said the way to give money to a new age digital business is to use digital data for advertising. Like you have access to a lot of data about the payment gateway, transactions and so on and so forth. So what did you build as a way to do your advertising? You must have built that by the time you lost, right? Yeah, absolutely. So the first effort went in building the tech stack and the platform.
00:11:13
Speaker
you have to build the platform ground. There were a lot of shortcuts, ready platforms for lending that could be modified and built on top of, but that was not the IP or the direction. So that's where the first two, three months post brainstorming, literally, and I give more credit to my co-founder Ramit for doing that, where he fought with me for two months saying, we are building this completely in-house and controlling the entire stack.
00:11:42
Speaker
I don't want to use any third party modules and build on top of it because what we're creating as value is on data that flows through our system. And don't want that dinger to ever go to any other platform. So yes, you're right. We built in
00:12:01
Speaker
our strongest trend is even before we touched any external capital. We bootstrapped it, completely funded it ourselves and put together a platform that is a completely API-driven platform. So do your question, Haching, what is this? APIs are nothing but we had pre-create pipes into all other digital platforms out there. So think of yourself. You are a small business, a small brand.
00:12:29
Speaker
Today, you will use two or three payment gateways. In India, you would use Razor Bay, Cash Free Pay, if you are aware of some of these names, for digital payments. If you are a small store, you would launch on Shopify. So you'll use Shopify as your store launch. You might be selling on Amazon or Flipkart in the marketplace. You might be using a logistic path. All of these are digital stacks.
00:12:54
Speaker
We did the plumbing of building bikes into all the payment gateways, into Google and Facebook, so that when a business comes and applies through just a few clicks, we are able to connect all these platforms so now I can keep all data from source. I am not dependent on an Excel sheet or an MIS that the business submits to link.
00:13:21
Speaker
Once he applies with me through his payment gateways, I know his last 12 months, what his daily revenues are, what his monthly revenues are, what is the seasonality of the business? Live data, unfiltered data from source is what there are a lot in this whole business, right? So, building these basic pipes and this piping infrastructure, these complete API stacks, that's the value of the advantage plan.
00:13:48
Speaker
So we have a complete homegrown stack from a tail origination system, tail management system, the collections, the grid engine. This is the entire platform that we picked out. We're able to pull if there is any company's history of defaults or legal laws, lawsuits against them.
00:14:16
Speaker
The report we are churning out, even our partners of friends and venture capital firms are saying, your due diligence is like a leap and fin due diligence. That was being done by the humans, right? Mults and mults. Here in seven days, my engine is able to connect in data normal life process and pull all and give one report, which is untampered, unhuman biased and system driven.
Pandemic's Impact on E-commerce and Validation for GetVantage
00:14:44
Speaker
So,
00:14:45
Speaker
As soon as we came live, another silver bullet that we dodged was about to start to make our first punishments and disbursements. I think the first few months, like all of us, nobody knew ahead of the word where this is going.
00:15:07
Speaker
But what happened interestingly is very quickly as the world started opening up, the first thing that started opening up was e-commerce. So come end of July, June, early July, it was only e-commerce businesses that came up. So here is, I call this the second inflection point of my life. No, actually the third one.
00:15:25
Speaker
if you've taken the chronography well, right? Or the third restriction point because what's interesting is suddenly now every business is concerned or has to be online and digital. It's not a good to have anymore. It's a must-have possessed in this universe. We all started buying everything online, right? So, our thesis that get advantage will back as many and more digital business, not only product, even service. So, whether you buy cosmetics, apparel, whether you're buying your essentials like milk,
00:15:55
Speaker
or whether you are buying services like media or subscription driven in business. We said that all small businesses in India are going to go that much more digital and I think that COVID times only has accelerated that by 5x.
00:16:12
Speaker
since the minute ago. So, we came out completely action-backed. So, here is get-wanted, set up, built as a COVID baby, a business that has come up in the COVID times.
Hybrid Capital Approach: Balancing Equity and Debt
00:16:26
Speaker
We do what we tell people and founders to do. I tell every founder out there, raise all forms of capital, right, in your journey and raise hybrid forms of capital. So, all the capital we raise today is also hybrid. It's a mix between equity and debt. Of course, we've taken some debt in our books.
00:16:41
Speaker
So, we can find some programs, etc. But this is a mix of net and equity. Thank you. You are very right. If you like what we said in our business, I absolutely don't tend to dilute more. And also, I'll tell you the second reason Akshay is we are in business of financing. I need to be well established. So, when I am well capitalized, also from perception,
00:17:05
Speaker
When I open up a lot of large banks, financial institutions, they need to see how well capitalized the advantage is. Some of them on that are expenses, if you ask me, a lot of capital going into building the right tech. Besides tech investments or platform investments and employee costs, we don't have any other costs.
00:17:28
Speaker
So we're not burning money, but we will keep raising money because any institution that's in the game of financing, the more well capitalized I am, the more access I'm able to get partners, and I'm able to also then cost of capital.
Podcast Conclusion and Call for Feedback
00:17:46
Speaker
Okay. So tell me about connections. Who's responsible for connections?
00:17:52
Speaker
Oh, we are. Like I said, when you don't like something on Amazon or Uber, you complain to Amazon and Uber. So in the same way, the entire user journey is also advantageous. Yes, we are absolutely responsible for ensuring the collections also will be done. That's why with all our lending partners, we are technology service provider, which is doing not only the sourcing, underwriting, but even collection.
00:18:21
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in the show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.