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Simplifying Finance for Businesses | Deepti Sanghi @ Kodo
139 Plays4 years ago
Investment banker, active seed investor, problem solver and now a founder. Our guest today has worn numerous hats, but her greatest adventure yet is the one that’s allowing her to fulfil her entrepreneurial dreams.
Always driven by a passion to do something for other businesses, Founder of Kodo, Deepti Sanghi is making finance simple for startups and businesses. Imagine being a founder of a new startup and being able to get a corporate credit card in less than 3 minutes!
Sounds too good to be true right? But that’s exactly what Kodo is all about. Their mission is to empower businesses to scale new heights through their corporate card and integrated expense management tool.
In this episode our host Akshay sits down for a candid conversation with Deepti where she shares about her early days as an Investment banker, how she coped with the economic meltdown and finally pivoted towards fin-tech.
Do watch out for the part where Deepti shares her fascinating journey through Japan that inspired the name for the fin-tech startup.
For more such inspiring and intriguing leadership stories visit our website at www.thepodium.in.
We are also on Instagram at @thepodium.in and have a WhatsApp community of fellow entrepreneurs and startup enthusiasts at www.podm.in/growwithpodium. Join us to stay updated on the latest from ThePodium.in.
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Transcript
Launching Kodo: A Startup-Friendly Credit Solution
00:00:17
Speaker
Take me on a tour. Take me on a tour. Take me on a tour. Take me on a tour. Take me on a tour.
00:00:36
Speaker
If you are or have been a startup company or even an SME, you would know the hassles of making online spends using your personal credit card instead of a corporate one because you don't have one yet. Deepti Sangee not only recognized this need but also solved it by launching the revolutionary CODO, the credit card for startup which gets approved within three minutes.
Career Journey: From Delhi to Investment Banking
00:01:01
Speaker
Deepthi was born and brought up in Delhi. She graduated from the prestigious LSR college and did her MBA in Finance from MDI. Listen to her as she tells host Akshay Dutt about her placements right after MBA and her journey of building Kodo.
00:01:26
Speaker
And from campus, you got into SBI campus. Yes, that's right. So what happened was I went on an exchange program to Germany in the second year in the fifth term.
00:01:37
Speaker
And yeah, until then I wasn't pretty sure what I wanted to do and this was in HHL in Leipzig. And there we kind of, so that's I think one of the top two schools in Germany and all the investment banks and consultancies come there and they really woo the students there to join them. So they have these parties that the biggest investment bank would show for the students there to get the best of the crop and they would have these elaborate presentations. And so in fact, they had this one
00:02:05
Speaker
day when they, you know, invited all the women in the badge to, this was Morgan Stanley, invited them to go to Frankfurt and look at, you know, and be inside an investment bank. Because during those times, I mean, there was this whole thing about, and even now, right around diversity of having more women in investment banking, which is predominantly a male-dominated industry, at least then, right?
00:02:27
Speaker
And so we got really, we went to the Morgan Stanley office in Frankfurt and we kind of interacted with the women bankers there. And, you know, it became a legit career option. And so that kind of opened up my eyes around investment banking. And I was like, Hey, I want to do this. Okay. So then when I came back, of course we were like, we apply for all kinds of jobs, right? You don't know which one you're going to get.
00:02:55
Speaker
marketing and finance. I did have this, you know, thing, and we just were like, snooty finance people have, hey, we're not gonna sell soaps, right? That's how you start your career in marketing. I'm not gonna go door to door selling soaps. And then, okay, I'll do like this financing. And so I think that's what I did. By the way, like life comes full circle, right? Earlier, I was like, I'm not gonna sell soaps, now I'm selling credit cards, which is worse.
Inside Investment Banking: Roles and Challenges
00:03:26
Speaker
Yeah, so anyways, I was, I kind of sat for all the interviews and SBI caps at that point was the only investment bank where you had a front end role. You know, we did have other like JP Morgan, and I think that was another investment magnet team. But that was mostly around the research part of it. And
00:03:47
Speaker
I was, so SK Caps was only investment bank who came on campus where we would be in the front end where we interact with clients and be on the team that's actually advising the companies for, you know, M&A or fundraising activities. So, yeah, I got that.
00:04:08
Speaker
So what role does an investment bank play? Why do clients come to iBanks? What are the things that you would have been offering to clients? So in investment banking, you have two, three different things. So one is the advisory, which is what I used to do, where let's say if a company wants to acquire another company and they want to evaluate a bunch of options and decide what valuation to do, what should be the deal terms.
00:04:37
Speaker
So that was one, or if a company wants to sell themselves, right? Buy and sales, M&A. And second is if they want to raise a private equity round of funding, which is largely for growth companies, right? Where you're looking to raise a few hundred crores and you're profitable and a high growth trajectory. Well, now startups are raising a few hundred crores, which are not profitable, but that's another story. At least then this was around 2005 is what, you know, that is what we were doing.
00:05:06
Speaker
The second part of investment banking, which comes under equity trading, is more of stock trading and being a trader on the stock markets or the research. So all the research reports around listed companies that comes into play. And the third thing is taking a company IPO, right? So where a company is ready to list in the stock exchanges and you kind of
00:05:29
Speaker
interact with the regulators, exchange the potential investors and put it all together and help the company list. So those are the three main things I can think of right now, but it's been a while and I've been in investment banking for quite a few years now, but I was in the advisory part of it, yeah.
00:05:50
Speaker
And how was that experience? Was it as glamorous as you imagined it while you were in Germany? Yes, it was. Right. So, of course, there's a lot of work and very long work hours, working on weekends. I think all of that stays. Right. And
00:06:09
Speaker
For me, it was OK because I am a bit of a workaholic in that sense. So I was kind of all right with that. And it came naturally. And it was.
00:06:21
Speaker
It's pretty heady as well, right? So when you're meeting, you know, you're in your mid 20s, you're meeting these CXOs and founders of these large companies who have built things from scratch and you kind of just, you know, are advising them or at least helping, you know, put together their financials and, you know, kind of are in the same room. Even if I'm not advising them, at least I'm there and I feel like I'm a part of this, like, you know, environment.
00:06:49
Speaker
So in that sense, it's pretty glamorous and heady. And in fact, I remember the day I left my investment banking, I was feeling like these are like these nice corridors of our office. And I'm walking into an important meeting. I'm like, OK, I'm going to leave all of this. I didn't feel that tug internally. That's really. But I guess it is glamorous. And of course, it's a lot of hard work, which is there everywhere.
00:07:19
Speaker
If you want to succeed, I think in any field that hard work is there. But yeah.
Shifting Gears: From Investment to Retail Banking
00:07:26
Speaker
And of course, this was in 2005. And 2008, 2009 is when the big crash happened, when being an investment banker was like a bad war. Yeah, and it's kind of funny. A few months before the crash, there was like an episode on TV around investment banking as a career.
00:07:46
Speaker
and my company nominated me to kind of be featured there. And that was like a big joke, right? Where the whole thing starts with me looking into the sea because we were on the, we were in Nariman point in Bombay, right?
00:08:02
Speaker
So it starts me looking into the sea and the next day after this was aired, the head of investment banking. And by the way, he's the one who nominated me. He comes and he's like, he's laughing at me. He's like, you know, she's like the poster child of investment banking. She's looking into the sea and that's what investment banking is right now. We're all at sea. We don't know what's happening.
00:08:20
Speaker
This is like a couple of months before the Lehman crash. So I think the early warning signs were there. So this was the period when it was super hot. At the same time, immediately after that, it kind of crashed.
00:08:39
Speaker
I mean, in India, it was not India basically felt the tremors of the shock that happened in the US. So it was not really something that was intrinsic to the way we were working. But suddenly, it was
00:08:54
Speaker
you know from becoming very glamorous it was more like okay you make a lot of money here and and you know you find those um yeah but but i think that's the nature of the job when you're dealing with like a large amount of capital like advising companies and you know hundreds of thousands of crores uh and you take a small percentage of that it's just the nature of the job right so so in fact
00:09:17
Speaker
I've kind of moved from investment banking to retail banking in a sense. And I can see why investment banking, you make a lot more money than retail banking. The reason being that the poor person contribution to the amount of money that the company makes is so much larger in investment banking, because like a team of three or four people would be advising on thousands of crores of capital, right?
00:09:41
Speaker
versus in retail banking, you have poor employee ticket size of money that's exchanging hands. It's much smaller.
00:09:51
Speaker
So you had like a bunch of stints after SBI, you went to Edelweiss and then to eight, you know, tell me about
Inspiration for Entrepreneurship: Microfinance to Fintech
00:10:00
Speaker
Edelweiss. Yeah, so Edelweiss was basically, again, investment banking, where I spent a large part of my time focused on advising companies on cybersecurity and M&A transactions.
00:10:12
Speaker
My main focus was in financial services space. In fact, one of the companies advised in 2008 was a microfinance company, which had a very strong impact on me in the sense that I could really see how a lending play can actually
00:10:32
Speaker
impact the lives of these women who are entrepreneurs, who are founders in their own right, like very small micro businesses, but how that credit is super important to help them take off, right? So that had a very deep impact and, you know, along this while I was always like,
00:10:48
Speaker
kind of working on ideas to do something of my own on. I had this thing that, OK, I'm going to do a job. And one of the reasons of investment banking, other than the exposure in Germany, was around that you make money. So I was like, OK, I have a certain number I need to reach in terms of my savings. Once I reach that, then I'm going to do my business because, you know, I thought that that's the right way to do it. And yeah, so that transaction that I did for SKS Microfinance
00:11:14
Speaker
seeded something around how a credit can help with an entrepreneur or a small business's journey. And I was like, I trading a number of ideas around that. And while I was hoping to reach that savings number, which I had in mind,
00:11:31
Speaker
And as life has it, I mean, I reached that number and beyond, but, you know, you kind of settle into a comfort zone and a rhythm and you get addicted to your paycheck. So, yeah, it was just like, you know, I was like waiting for that idea to hit me. And yeah, it was...
00:11:51
Speaker
So I continued there for a while and then I one day I just was like okay and this was like a slow period right when when things were kind of slow and I mean in investment banking you always have these extreme highs and lows right when there's a lot of work suddenly and you don't like have any day off versus you might have a few days when you're kind of cooking a deal or you know pitching and stuff like that so this is probably one of those days when and given that
00:12:21
Speaker
I'm kind of addicted to work. I was probably just restless. And I said, OK, let's just figure out what's next. And I took the plunge. And initially, for a couple of years, I was kind of doing angel investing.
Exploring Fintech in the US and Returning to India
00:12:36
Speaker
I got married and moved to the US for about a year. And I was dabbling in a few startup ideas, investing in them in the fintech space. Right?
00:12:50
Speaker
You moved to the US because your husband was there? That's right. Yeah. And yeah, and there I kind of, you know, met some of the most successful fintech startups and met with them. And that's when I realized it's so easy to meet the CEOs and, you know, of large companies and kind of understand what they're doing, if you just ask.
00:13:16
Speaker
right? Because when the company is large enough, you know, the CXOs usually have time and if they see they can help you in any way, at least in the US, I saw they were very generous, right? So yeah, I kind of understood the FinTech ecosystem there. And, you know, it was
00:13:37
Speaker
dabbled a bit in cryptocurrency ideas in terms of investing in them, evaluated a few of them. Didn't buy much Bitcoin, unfortunately, but yeah. In this period, you were using your own money in all these things. Yes, that's right. Remember, I had crossed my number that I had.
00:13:58
Speaker
So yeah, I think that's what happened. And then I decided to come back and start a venture, which was around offering credit to small businesses in India. And so there was a digitization happening where businesses were selling online on Amazon Flipkart. So I was like, hey, what if we can offer credit to
Insights from MoneyTap: Bridging Banking and Tech
00:14:20
Speaker
them? And I knew this has to be a tech play because that is when you can actually reach scale.
00:14:26
Speaker
in a short period of time. And so while I was kind of working on that, I realized that I was really out of my depth in terms of how to use tech to do this, right? It was just something, and I did not have the network in the tech space because I come from investment banking and I, within my own, an MBA before that, right? So not even an engineering school. So I just did not have like the network to leverage to, you know, or to even like kind of understand how to go about it. And this was also fairly new in India then.
00:14:56
Speaker
So around that time, I had the opportunity to work with MoneyTap, which is a FinTech company based in Bangalore. And they were looking for, so I know the founder, Bala, really well. And he used to keep coming to Bombay because you have to work with banking partners. So he said he wanted somebody to manage those banking partnerships. And
00:15:18
Speaker
I thought this was a perfect fit where I kind of bring the banking relationships and the understanding I have of the financial ecosystem and kind of be the bridge between Bombay and Bangalore, so to speak. So I was literally living between these two cities for about two and a half years. I joined the team at a very early stage.
00:15:43
Speaker
So I remember the day before I joined, I was actually launched into a large meeting with a partner bank that was a kickoff meeting for us to kind of figure out the product and take it ahead. Yeah, so... MoneyTap was doing the same thing, like they were lending to SMEs. So MoneyTap, the product was similar, but the target customer is salaried individuals, so they don't do businesses.
00:16:08
Speaker
So yeah, so we kind of launched that and I would live between the two cities, kind of marry the financial and the risk side of the business that the banks look at from with the technical and the extreme customer focus side of a tech startup that the team in Bangalore was looking at.
00:16:34
Speaker
So that was an amazing experience. I had so much to learn. I went going into money that I didn't know what is back and front end of engineering. It was just like words. And then that kind of really got into the guts of the tech platform, the legacy systems, the banks, and see how to change them or
00:16:58
Speaker
No, you can't change it. I mean, there are certain ways around it where how to modify certain flows so that our customers get the experience that we want them to, which is like a quick, like get loan instantly, right? If you're applying for a loan, get that
00:17:15
Speaker
Yeah, get that approval in like two minutes. How do you do that? Right. And this was in 2016 and it wasn't, I mean, right now, I think there's a lot of work that's gone into it already and successful, but then it was kind of the first of its kind, right? To actually even implement that.
00:17:34
Speaker
Those were like amazing years. And Bala, who's the co-founder and CEO, he has built multiple companies in the past and sold them. And he's a very successful VC as well. So I had tons to learn from him in terms of how to lay the foundation of the right team and the best practices of running a startup. And of course, the whole product and tech around it.
00:18:03
Speaker
And yeah, so that was a very important milestone in my journey. Okay. And how did MoneyTap grow in your stint with them? Like what kind of numbers did you see or, you know, was it like an explosive growth kind of a phase? Yeah, so I think we launched Beta, I think in June 2016.
00:18:30
Speaker
And I think September, October 2016 is when we kind of launched it in the market. And of course, there is like an endless demand for credit, right anywhere.
Focusing on Business Credit: The Birth of Kodo
00:18:43
Speaker
And the product is so powerful.
00:18:45
Speaker
I remember we had this chat-based interface to onboard a customer. So there was a Q&A happening where you answer questions instead of filling a form. So that was pretty cool. We were the first ones to do that. And I think over the next two years, if my memory serves me right, we were probably disbursing $50 million. So we had disbursed $50 million worth of credit in that period.
00:19:13
Speaker
And we partnered with RBL bank for that. And then there were a few other partners that we had. And we were also expanding. I mean, by the time I was leaving, we were working on expanding to outside India to a couple of geographies. And I think they've gone live in one of them now. So yeah, it was a good phase of launching and scaling a product at MoneyTap.
00:19:40
Speaker
So, you know, what made you want to move on? Yeah, so I think I kind of had seen the journey of a startup from scratch, right, to a stable, scaled, I mean, no, not stable, it was still growing rapidly and a scaled business. And I was like, hey, this was basically a flexible credit for salaried people, right? And my vision was always to do something for other businesses, right?
00:20:10
Speaker
And kind of now when I think back, I can join the dots, right? That I grew up in that environment. A lot of formative years were around books, around these stories. And like even the best part of investment banking was that you're
00:20:28
Speaker
of working closely with the founders and really understanding how they build something from scratch. I used to love visiting factories because as part of investment banking, when you're advising companies, it's a part of due diligence where you go and visit a factory or the production setup. And I used to love that, especially like steel factories. They were full of dirt and soot and everything, but it's just that you can see things like being built there. And
00:20:53
Speaker
I don't know, for me, it was like a very, the best part of doing a deal. And so there was a constant thread that was running and I was like, Hey, now this product, which I'm like, which we've got here at money tap to the flexible credit for salary people, it's actually very relevant for small businesses, right? So, and this is what I wanted to do before money tap as well, but I just didn't know how to do it. So then I was like, okay, now I know it. And, you know,
00:21:20
Speaker
We have an NBFC in the family. I said, okay, let's just leverage that. And now I know how to build the tech and the partnerships and the various pieces of the puzzle that go into giving a frictionless banking experience. And kind of launched into that. I started working on that idea then.
00:21:38
Speaker
So tell me how you put together all the pieces. How did you have an NBFC in the family? And why does one need an NBFC here? What was the role of that NBFC? So the role is when you're providing credit, when you're lending, then you need to have a lending license, so to speak. But you're lending yourself or you have a banking partner who's lending and you're in a way that tech. Yeah.
00:22:06
Speaker
I'll come to the current avatar of Kodo, right? But when I started, it was basically a flexible credit line for businesses. So we would be selling, sorry, we would be lending ourselves from the NBFC, right to the other businesses. And, you know, we'd build a tech over that too.
00:22:23
Speaker
given instant approval and a constant line of credit. So basically what I mean, any business can lend to anybody else, right?
Identifying Market Gaps in Business Financing
00:22:31
Speaker
But however, as per regulations, if more than 50% of your income is from, you know, financial income or lending activity, you need to be licensed as a lender, right?
00:22:42
Speaker
So that's a prerequisite to do this. And yeah, so when I started that, that was a plan and I tried to, so, you know, I'm a Marwari and I was like, okay, I have to have my finances clean and clear and separate, right? I said, okay, let me get a separate card for my business expenses because I shouldn't be putting it, and this is the first time I was doing something like this, right? I was like, okay, I'm gonna put it on my personal card and then get a dream verse and stuff. I'll just put it on my company card, right?
00:23:12
Speaker
And so we've had very long banking relationships with a couple of top banks, HDFC and ICIC bank. And I think HDFC didn't even bother to respond to multiple follow ups. Maybe it's a function of the relationship manager or whichever department we were in.
00:23:33
Speaker
So that was hard. And I say, see a bank, I had to do relentless follow ups for three months to eventually get a corporate card process, even though our banking account is with them and I've had a personal relationship like I always bank with them like since 2005.
00:23:50
Speaker
And I have a lot of respect for them. I think they are probably one of the best in terms of customer service, et cetera, and the user interface. But this product was just not something that they were focused on. And it was super hard to get. And eventually, when I got it, I did not have a net banking access to my credit card statement. They were sending me physical statements.
00:24:14
Speaker
And it was linked to my corporate account. So I didn't have to, like, it didn't hurt me because they were just doing automatic debits from the account. So it was fine. I didn't miss it, but still it was just bizarre. I was getting paper statements instead. I could never log in and see. So I was like, okay, this is something that I could see was, uh, you know, a pain point. And I had done something like this in money tab, where it was a credit card and a credit line, uh, product that was, I know I kind of literally, you know,
00:24:40
Speaker
was a part of the team that built it from scratch. And I knew the ropes of that. And I said, hey, this is a great entry point. Let's do this. This is the white space I can see. And let me see if I can put this together, if I can do a credit card along with the credit line.
Building Kodo's Tech and Team
00:24:58
Speaker
Around that time, there were a couple of platforms who sit between the networks like MasterCard, Visa, and the banks and have this tech platform that you can plug and play into and launch your own card. This was really early days. This was 2018.
00:25:22
Speaker
I'm very deep in the fintech ecosystem as such. Literally, I've been with the system since 2015, and that's when it's been kind of taking off. So I knew the right people to work with. And then I kind of approached them, and we kind of put the pieces together that, OK, this is how this is going to work. This is a bank we'll partner with.
00:25:50
Speaker
and we'll have MasterCard and we'll have our company that would run the program, acquire customers, et cetera. So I think that's how it started. Now, I still needed somebody on the tech bit, because this is fairly tech intensive. And I was
00:26:12
Speaker
had already built an instant credit product, right? Like, so you must have got some, somebody to do that for you. At this stage, you already had like a credit product. Oh, no, no, no, no. So so no, I did not have that. At least in my company, I did not have that right. So I was, it was not identified the people that who would be building it, but they were all outsourced.
00:26:42
Speaker
The chronology is that the credit card and the credit line both got launched together, is it? While you were working on the credit line, the credit card idea also came to you and then you kind of redrew the business plan and got it. And one of the things I had in terms of tech thing was that I'm based in Mumbai. And so it was kind of hard to build that tech team in Mumbai.
00:27:11
Speaker
at that point in time because most of that talent is in Bangalore and it was just a little bit difficult, but still at least I knew what I was looking for in that person, right? So it's interesting, I reached out to Gaurav, who's now my co-founder and CTO on LinkedIn. And this was in, I think, late 2018.
00:27:34
Speaker
and we connected. So now, in fact, when I tell people I met Gaurav and LinkedIn, they give me a disdainful look. And they're like, oh, it's like saying you found your husband on Tinder, you know? Look, that's not too bad, right? Because, like, I have friends who found their, you know, life partner on Tinder and it's worked beautifully. And, well, it's, it's worked really well for Gaurav and I as well, you know, you should ask him though.
00:28:02
Speaker
What's his background? Like, tell me about that. Yeah, so before this, he was a part of a startup in the US, which was basically a kind of a LinkedIn stroke GitHub for security professionals, right? So like tech security professional. And I was like, this is great, because prior to that, he had worked in a number of startups, like I think Apna Pessa and Holiday IQ.
00:28:29
Speaker
Media Mellon, ATOS origin, so very strong tech background. And I was, you know, I found his profile attractive because he had worked for security professionals. And I was like, for a FinTech product, that is super important, right? It was as simple as that. And I was like, okay, let's meet and figure it out. And then we met in Jan 2019, right?
00:28:51
Speaker
Yes, he was in Mumbai. And we kind of, so when I was telling him about my vision for what we wanted to build here, he was like, he articulated it perfectly, right? Because he'd been in a number of startups, and he could understand the pain point of this. And he found an immediate connect there. And he agreed to come on board as an advisor, right? So he
00:29:17
Speaker
Remember, we had met on LinkedIn, right? And I know as being an angel investor in startups, I know the biggest cause for any startup to fail is founder conflict. And I was like, I don't want to deal with that. So unless I'm pretty sure about this person, I'm not going to commit.
00:29:37
Speaker
So yeah, so and the same thing with Gaurav as well. He was also, he's got very high EQ, right, and IQ, obviously. And he was also very aware of this fact and
00:29:50
Speaker
Yeah, I think that's what I got super lucky. And he kind of agreed to come on board as an advisor.
Kodo's Launch and Market Impact
00:30:01
Speaker
And then he was there with us for the next few months while we were getting this built. And August 2019 is when he decided to come on board full time.
00:30:11
Speaker
I think he kind of said, okay, I'm safe to work with. And he took the plunge. And we launched our product in December 2019 with our first real... I mean, our product was live, I think in September, but for the next two, three months, we were just doing intense testing, just doing transactions ourselves internally. We gave it to like two, three people.
00:30:36
Speaker
Because this is a, at the end of the day, it's a credit card, right? I mean, you are swiping the card somewhere to the transaction happening. And then as you go down the payments rabbit hole, you see that, okay, there are just so many scenarios that can occur for any given transaction that
00:30:52
Speaker
We're testing it intensely. And then in December, we had a first real customer who finished the first full month of where we issued the first credit card statement was in Jan. Yeah.
00:31:07
Speaker
So your original idea that you were to do the lending yourself so that you pivoted from that into partnering with the bank who would like. Yeah. So the lending is still there. So whatever you spend on the cards is on the bank. But at the same time, we also have an option.
00:31:29
Speaker
where you can take credit, like you can say, OK, so let's say you've got a credit limit of five lakh rupees, right? And you've spent, let's say, two lakhs a month on your various online spends. So be it, let's say, Facebook or Google Marketing or AWS or server costs or various ID subscriptions, et cetera. Now, you still have three lakhs of credit limit left with you. So what you can do is you can say, and if you need working capital, short term credit for three months, six months,
00:31:57
Speaker
You can say, hey, I need one lakh for rupees, one lakh for six months. So you can go and, you know, select that amount and the tenure for which you need that working capital. And the money goes into your bank account instantly. Right. And then your EMI is start on that. And so that is the lending part that the NBFC is doing. Right. So that is going from the NBFC's book. And that gets adjusted against your credit limit, like your credit limit would go down by that. Yeah. And then the EMI gets added to your statement in
00:32:27
Speaker
So how did you convince a bank to partner with you? Was it a tough sell or because of your connections, you were able to do it easily? Yeah, I think one is the credibility, right? So given that I had built something like this, I knew the language to speak and I knew the risk and what is it that the banks are concerned about. So I kind of knew that language and that kind of helped. And of course, experience.
00:32:55
Speaker
of being in MoneyTap and doing this, I think that really helped. And so I think, you know, like for a bank, the most important thing is that, you know, so banks actually in India are very open to partner, right, with FinTech startups, which is incredible, right? Because they understand what is it that they can do and what is it they can't, right?
00:33:18
Speaker
And so I know what is it that banks are most concerned about. Of course, they need growth, like anybody does. But they are very compliance first, which is how they're designed to be, given that they're regulated by RBI very strongly. And given that they are the custodians of all the deposits, the savings and FTs that all of us keep with the banks.
00:33:46
Speaker
they have to ensure that the banks don't fail because all of our hard-earned money is there. So those are the two things that they are most concerned about, right? So not to take overdue risk so that it depletes the amount of money with them. And second is be compliant with RBI regulations.
00:34:04
Speaker
Right. And once you respect that and, you know, kind of so that's one part of the thing. And the second part on the customer end is that now because banks are compliance first, they find it hard to make a radical shift where the customer gets an instant banking experience. Now some banks are actually doing that. Right. But for a new customer, a new to bank customer, it is super hard for them. So and there is a lot of legacy that's already there, which has been built compliance first.
00:34:34
Speaker
So I mean, eventually there will be some banks that will be able to do a great job of marrying the compliance and regulatory aspect with the customer experience of instant credit or instant financial product. Eventually that will happen, but it's not happened yet. And that's where the opportunity is for FinTech startups or tech companies to come in and
00:34:57
Speaker
take care of the customer side of the experience. That's why we exist. But at the same time, we have to run on banks or regulated entities, rails. So that's where the magic lies. That's where the art of this is, that how do you do that? And for that, you need extreme empathy on both sides.
00:35:19
Speaker
So in your two minute approval process, how do you do the credit risk assessment? What all data points do you look at? Are you at liberty to talk about that? Yeah, I can talk about it. I mean, it's fairly simple, right? So when it comes to credit, there are two things. There's nothing new about it. It's been there for ages. It's the intent and ability.
00:35:42
Speaker
So the intent is basically whether you as a borrower are honest and have high integrity and whether you will repay if you had the ability to repay.
00:35:54
Speaker
And the second is the ability is like, you know, whether you can afford to take this amount of credit, right? So it's like, if somebody is making an income of, let's say 10 lakhs, and I give them a credit of two crores, it's obviously like they don't have the ability to service that, right? Unless it's like a 50 year or 30 year loan, right?
00:36:15
Speaker
So those two things, very basic, nothing new. Now, how do you address that? So intent is basically now we are at a journey where there's a lot of credit history already for a lot of borrowers out there. So based on the credit history and the past credit behavior, you can understand whether this person's intent is correct or not. If somebody has defaulted a lot in the past, then this person's either intentions wrong or irresponsible.
00:36:42
Speaker
So these algorithms you had to make from scratch or are these like, you know, available off
Adapting During Lockdown: Growth and Customer Focus
00:36:48
Speaker
the shelf? All this decision making which you do, like, how did you build that up? So, yeah, I mean, we built it from scratch, right? And I had the experience of doing this at MoneyTap where I was working closely with the risk teams of banks and I knew what is it that is required in these algorithms.
00:37:12
Speaker
So I knew the business requirement and the product requirement of this.
00:37:18
Speaker
And then of course, Gaurav coded it into building those algorithms. However, these algorithms are available to buy, but they're very expensive. So we didn't take that up. So, and you know, so December, you kind of went live. So tell me the journey from December to now we are hitting December soon. So, you know, what's this year been like for you? Yes. So we went live in December, the next two months, obviously growing rapidly.
00:37:47
Speaker
100% growth, right? And this was through our own network and people who took the product initially, they loved it. And again, people didn't know about this kind of a product, right? People don't, a lot of people don't know there's something called a corporate credit card, right? So we saw very good offtake until SAB and then
00:38:07
Speaker
mid-March, the lockdown hit us. So March is when we kind of decelerated a bit. And April was the first lockdown month when everything came to a standstill. So we were again down in April. And so that April is when we took the time to really talk to a lot of our customers and understand what is the most important thing on their mind.
00:38:33
Speaker
So what is it that's top of mind for them? Now, everybody's business is shut, right? So everybody's thinking, okay, when will this lockdown end? How do I increase my sales? How do I sell? I have these expenses. And it was an interesting thing where a lot of these businesses that were cashflow businesses, they didn't fire anybody.
00:38:57
Speaker
Right? Especially the smaller businesses, they kind of kept everybody on board because it was more like family, right? Like the founders felt guilty of firing people. And of course there was also this thing that, you know, this thing with like locked-outs only for a month or something.
00:39:14
Speaker
So for them, that was the top of the mind thing. And what we did then was that we said, hey, what if we can? And around that time, we were thinking of starting some social media campaigns and stuff, because we had been really under the radar throughout. We just wanted to keep
00:39:30
Speaker
growing the product and not really like do PR or you know, any kind of make some it make any noise because we were just kind of working hard on getting customers understanding they need building the product by trading. So that time and when the lockdown hit, we were actually thinking of some ideas. Okay, how do we start activate their like social media?
00:39:50
Speaker
So we said, hey, you know, our customers need this. They need more awareness of their products. They want to sell more. So we started a campaign called the heartbeat campaign. The idea being that these businesses are the heartbeat of the economy and we got to keep them running.
00:40:04
Speaker
And we started posting stories of the founders and the companies and publicizing their product to, in whatever small way, we are too small, we don't have a large audience, but we said, okay, whatever small way we can do that and drive people to there.
00:40:23
Speaker
to their websites and help them increase their sales. Luckily for us, a lot of our customers fell in the essential services category, right? Like just some of the large names that we have as customers are Epigamia, Bluetokai, Urban Platter, Dr. Weathers. These are all like companies that fall in the essential services category. So they could technically sell, but their whole supply chain and operations on the ground were stuck.
00:40:50
Speaker
Right. And they could not. So offline retail channels were shut. And I think Amazon and Flipkart and BigBasket were also shut for about a month, largely because of the operational complexity on the ground. They didn't know how to store stuff. Right. So then all of these guys activated their own e-commerce websites where they started selling directly on their channels, because until then they were getting a lot of demand from, you know, the larger e-commerce players and to the offline channel.
00:41:20
Speaker
So they started getting traffic there, and then they started spending on Google and Facebook to drive traffic to their websites.
00:41:29
Speaker
Right. And suddenly in May, we started seeing a lot more spends happening on our car and we're like, okay, what happened? Right. Suddenly, I mean, because the lockdown continued and we're like, okay, what's changed? And we looked at our data and we saw, okay, these companies are spending more on like digital marketing. And while we were talking to them, they also said that, Hey, we are driving traffic here. This is where, and then at the same time they had to service those orders themselves. So they started spending on logistics as well.
00:41:56
Speaker
Right? Because earlier the servicing was being done by offline retail or through Amazon Flipkart, et cetera. Right? So that was like the turning point when we said, OK, now this is something that is where all the spends are going to be. So let's just focus here. Right?
00:42:14
Speaker
Prior to that, a large amount of our spends were in travel and food because of business development activities and that's obviously gone down to zero. Now it's again picking up, but for the last few months it was zero and however this kind of took off and how, right? It kind of literally overshadowed everything else.
00:42:32
Speaker
And yeah, so that's where the businesses started spending. And as businesses were remote, they were spending on various IT subscription tools to manage report teams. So that also kind of took off. And a little exercise of the heartbeat campaign gave us ideas where we said we already offer a lot of
00:43:00
Speaker
free credits and discounts from AWS and Freshworks, Message 91, Exotel. So a lot of business tools that companies can use. It's almost worth 50 lakhs of free credits that we offer. And we said, hey, why can't our customers who are also offering various products, they can showcase their products to other CODO users?
00:43:24
Speaker
So we call it the Kodo Club and we started offering our customers products on that benefits section. So yeah, that was an interesting thing that came out of the lockdown. There are two things, right? One is that complete shift in the spend profile on online advertising and also, you know,
00:43:47
Speaker
this thing where we started offering, and we give this for free to kind of talk about their products on our platform. So would not an economic downturn also inherently increase demand for credit? Because a lot more people would be worried about making ends meet and would be looking for credit, especially small businesses, I imagine, which are very cash flow based.
00:44:15
Speaker
It works both ways. The thing is when somebody is responsible, and that's where the intent matters a lot, when you're responsible and you have high intent. If they see that business is going down or it's shut,
00:44:31
Speaker
they actually don't want to take more credit, right? Because they don't want to be stuck with debt. I mean, credit anyways in India is like, you know, a bad word. So they are kind of like more conscious of the fact that they don't want to be indebted too much, right? Of course, and so I think
00:44:53
Speaker
It'll be interesting to see the data. I don't know that, but at least from our limited data set, we saw that unless that credit is actually helping you increase your sales, you don't want to dip into that because people understand there's a cost attached to it. And that was one of the things which I was pretty clear off when starting this out that people should take credit only if it helps them enhance their income earning capacity.
00:45:17
Speaker
That's one of the learnings I had from the SKS microfinance days that this credit is important to help them increase their income earning capacity because there's a cost attached to it. If you're taking credit for consumption, let's say if it's a housing loan or a car loan which is spread over a long period of time and it's basically imagining the cash flows of a stable income with a lumpy expense that you have in terms of buying a house or a car, that makes sense or an emergency that comes in.
00:45:46
Speaker
But if you're funding a lifestyle or let's say a stalled business and you're going on funding the expenses with credit, where is the cost attached to it, then that's not the most prudent financial planning for yourself or your business.
00:46:04
Speaker
So that's where we saw that a lot of our customers were actually quite diligent about it. So now the spendings were happening on online advertising, and that is basically a revenue driver. So the more you showcase your product and put it out there, the more it sells.
00:46:23
Speaker
So yeah, so it's basically like they say, it's a K-shaped recovery, right? Where some businesses are benefiting a lot. So all the businesses who were quickly able to turn around and be digital first and drive traffic, I think they saw a lot of growth. Businesses who were unable to do that, their growth kind of stalled. Thankfully, we had more of the farmer in the latter. And that helped us grow 12x in the last six months, right? So we've been growing at a very
Kodo's Revenue Model and Future Plans
00:46:50
Speaker
strong clip.
00:46:50
Speaker
Do you think that with offline getting hit, the process that you've built of two-minute online approval would have a significant acceptance and preference also as compared to people looking for credit cards with traditional banks as the
00:47:15
Speaker
Yeah, absolutely. I think that that's an important thing. And that's something that's been non-negotiable for me even before the lockdown. I mean, that's what my whole journey in FinTech started with. That's how it should be. I mean, imagine you can get a full car and a human being in the form of Uber or Ola in like a minute.
00:47:36
Speaker
at your service when you tap on an app. And that's like a physical object. So why can't you have money at the tap of a button, which is just like bits and bytes. So I mean, it's mind boggling when you kind of compare the two, right? And then you're like, okay, what's going on? Why is it not possible? So I think that was a de facto thing where we wanted to create that journey where it's an instant approval.
00:48:02
Speaker
And you can use the product instantly. I think that's always been the nod star. And from the very beginning, we had that flow. We didn't take any shortcuts that, OK, let's do this later, et cetera. I think that's the basic line you need to have in any FinTech product right now.
00:48:26
Speaker
How do you make money? Do you have monthly fees or do you also make money when transactions happen? What are the revenue sources? It's largely through transactions. It's interesting you mentioned that. When we pitch to customers and we tell about a product and we say it's free,
00:48:45
Speaker
then they're like, okay, it's another startup that's just burning money, right? Or they feel like, are you sure you can sustain this? Like, does it make sense? And well, they would never ask a bank, right? When they get a credit card, which is kind of free, but they have an empathy for us. Because I guess they believe that banks should at least offer them like this, if nothing else, right?
00:49:07
Speaker
So I've been explaining our business model quite a bit to a lot of people. So it works simply, right? So whenever you swipe a card at a restaurant, and let's say you have to pay 100 rupees to the restaurant,
00:49:19
Speaker
the restaurant owner gets 98 rupees or something around that number. And the two rupees is shared between a number of players. So let's say if you are representing a card that's issued to you by Citibank and the merchant, their bank is let's say HDFC. So that two rupees would be split between Citibank and HDFC. And if your card is a MasterCard with MasterCard.
00:49:48
Speaker
So in our case, we are issuing you the card or let's say it's a Kodoco branded card. And so it is split between our banking partner us and the merchants bank and Mastercard.
00:50:04
Speaker
So, support transaction is how we make money. We also have like a small set up fees and eventually, I mean, we're adding a lot of business tools around managing your expenses and your finances of the business. So as a product evolves more, we will probably have a freemium kind of a version.
00:50:28
Speaker
where if you want more features, more integrations with your banking or accounting systems, then we'd probably charge some kind of a monthly fee. But that's not there yet. And of course, the interest rates, if you take a loan on the credit line, then there's an interest value. So this is shared between you and the issuing bank. Yeah. The interest. Yeah. OK.
00:50:52
Speaker
So these additional integrations that you want to build up, like, give me an example, like, say, instead of manually entering the spend, it would automatically get into your tally or your Zoho books or whatever. Yes, that is one example where it can integrate with your, you know, accounting system.
00:51:13
Speaker
Right? And so there are a bunch of more things that we have planned. Like, for instance, there's one part which is free right now, and it will be, is that you can actually manage your subscriptions, right? So as a founder, what happens is you would have your card put up on a lot of different subscription services. And often you forget, and your card keeps getting hit, right? And so now this is one place where if you have your codocards on various subscriptions,
00:51:42
Speaker
You can see, OK, these are the five places where we have a separate tab for that. You can see the other five places where my card is on subscription. And you can block those subscriptions if you'd like and unblock them. So sometimes it happens. And especially in newer SaaS companies, they make canceling a subscription super hard. They say, OK, call our call center to cancel it. So in that scenario, you can just go in.
00:52:10
Speaker
I've been struggling with a LinkedIn charge on my personal card. I wrote to LinkedIn, they have no idea what that charge is about. My own account doesn't show any kind of premium subscription, so eventually I had to block the card altogether to stop the charge. Wow, and you're not able to stop it from LinkedIn?
00:52:30
Speaker
Yeah, they said we don't know. It's not on my account. My personal LinkedIn account doesn't show any charge. So I don't know when I used it. Maybe I used it for an employee or something like that. So I've not been able to track that. Wow. Yeah, it happened to me once and I wrote to them and I said, OK, I want to cancel my subscription.
00:52:55
Speaker
Somehow when you threaten to cancel subscription, then they reimburse. So maybe that's a small hack you can do. But yeah, so then you should probably put your codocard on LinkedIn and everywhere else. Yeah, then you can block it there if you need to.
00:53:10
Speaker
Yeah, this is an amazing feature. So and how have you been funding it so
Y Combinator: A Catalyst for Growth
00:53:16
Speaker
far? So, you know, we've deployed our own capital into this so far. And, you know, we got accepted into YC recently. So that gives us a little bit more funding. And yeah, so and then of course, we plan to raise another round next year.
00:53:38
Speaker
So tell me about YC. You said YC gives you funding. In what way? YC gives you funding as soon as you get accepted, or they make you attractive for VCs to fund eventually. What is the value add of YC? So they do write a small check. They do offer $125,000 as part the moment you join YC. And of course, then there's a demo day at the end of the program where we can raise a much larger round.
00:54:06
Speaker
Yeah, so that is what, and of course, I mean, YC is a lot more than money, right? It's really, at least, and for me, it's very new right now, but I'm super excited to be a part of it. And it's just that, you know, you're a part of a tribe where, you know, people are trying to build something amazing in their businesses, and
00:54:29
Speaker
YC ecosystem has a network of super smart super successful founders and the partners themselves have built businesses and scale them and they kind of have seen tons of data points right of what works what does not work.
00:54:45
Speaker
over more than a decade and because that's all they do all the time. So it's really something where you can kind of leverage that experience of so many companies and founders and partners over the last decade or more and distill that and they help you in kind of along the journey.
00:55:11
Speaker
And yeah, I mean, I think what we're excited about is to really tap into that knowledge pool. And that will help us guide us over the next stage of our company. Because I mean, for us, our product's ready. We know what's working. We've got the product market fit. It's just about scaling it from here. And we're a part of the best in the business to help us do that.
00:55:36
Speaker
Why did you choose to apply for YC? I mean, you know, there's a cost for everything, like there would have been a cost in terms of time spent in doing the application process, which I'm sure must have been significant. So, you know, what made you want to do this? So, YC is like the blue chip in the industry, right? When it comes to, you know, a startup, I mean any startup would, you know, it's like,
00:56:03
Speaker
the place to kind of go and be a part of that ecosystem to really modify your business for the next scale up. So I think that's that. And in terms of the application, of course, they have a full set of questions that you have to fill an answer.
00:56:22
Speaker
You know, that does take time, but that is like super valuable exercise in itself, whether you make it twice or not, because they ask very fundamental questions and you have to answer them in plain English and with numbers, right? An important part is that you have to substantiate whatever you're saying with real data, like whether you have a product and the numbers and the metrics, right? So that
00:56:48
Speaker
exercise really kind of if you do it diligently, of course, you can do it in a very, you know, superficial way as well. But if you are diligent about that, it really helps you kind of dig deep into your business and answer questions at a very fundamental level, and see if that is substantiated by
00:57:06
Speaker
the metrics of a business, right? So I think comparing that to building a deck, I think in a deck, anybody is, you know, so there are all these things, right? In a deck, you shouldn't have, you should use like an X font, and you should not have more than one idea. And it should not be in, like shouldn't have too much like information overload. So
00:57:30
Speaker
When you're trying to balance the insight that you have about the business and what is it that you're really doing in trying to come up with a one-liner, which can be written in a size 20 font or something, it's super hard. And I think people who have that skill are, I think, exceptional, where they're able to do that.
00:57:56
Speaker
just to have that liberty to explain your thought process and in a consistent way, right? So they ask like different questions in the application form. And it's also, but it's important to have, at least the way I, when I would read my own answers, I would always see, okay, is it consistent? Is it something that I'm actually, and,
00:58:21
Speaker
I mean, thankfully for me, it was consistent. I didn't have to do much around it. But if you see any signs of inconsistencies, then that's the red flag where you yourself as a founder need to think through it. Like, OK, what is it that I'm really doing? And sometimes you don't have those answers, which is fine, because it's like an early journey. But it at least surfaces those problems in front and center to you. So even if you make it or don't make it, just that exercise is super valuable.
00:58:49
Speaker
And why do you think YCE selected you or they shortlisted you? I don't know. I mean, it's really something that I'll get to know over the next few months. But I think attraction is something that was super attractive.
00:59:08
Speaker
There are a lot of YCE network is super close-knit. They're always out there to help each other. So there were a lot of people who offered to review your application and do mock interviews. So yeah, I mean, at least from what the alumni told me, a couple of them whom I shared the application form with, they were like excellent traction. So I think that kind of stood out a lot.
00:59:37
Speaker
One of the important things, at least from what the partners have told us, that you should have the clear insight into the problem. And how are you well equipped to handle it? So I'm assuming if they selected us, they probably were satisfied with that, that the insight into the problem and our capability to address it was something that they were comfortable with.
01:00:01
Speaker
What is the origin behind the name Kodo? Like, you know, where did that come from? It's a Japanese
The Significance of 'Kodo': A Cultural Connection
01:00:07
Speaker
word, right? Yes, that's right. Well, the Kodo means multiple things, even in Japanese, depending on the kanji, right? Japanese, like, like, we have Dev Nagri, that's called kanji over there. Depending on how you write it, it means multiple things. The meaning that we chose to talk is that Kodo means the rhythm of the heartbeat, right?
01:00:30
Speaker
And every transaction a business makes, every expense a business has is basically a pulse in the life of a business, right? So we said, well, eventually we want to serve businesses by offering them a platform to do all of their financial or banking activities on CODO. So we want to be that heartbeat of the business that keeps it running.
01:00:59
Speaker
But any special affinity for Japan or like just like part of a brainstorming exercise? Oh, no. So yeah, I don't know. I like Japan a lot of like normally when I have this thing, I don't visit the same place twice because it is so much to see in the world and there's only so many years we have.
01:01:18
Speaker
But Japan is one place where I've visited many times. I don't know some connection there, but I love that country. It's just everything is like a couple of things stand out, right? One is that everything works there, right? It's just everything is so systematic and efficient. And the Japanese people have a lot of empathy, you know, they're just like, think through every part of whenever they're designing a product or a service, I think through every touch point.
01:01:44
Speaker
So I think that's always fascinated me. What like, like, for instance, in terms of how the efficiency of the system is there, right, I'll give you an example. So so I went hiking in Japan, you know, in a certain area, come to the name of the place. And you basically are in the interiors of Japan, and you're
01:02:03
Speaker
like you take buses to various places. Now, like somewhere in the middle of the small city or a small town there is, you know, we had the schedule for a bus to come at 7.34 a.m. and the bus was there at 7.34 a.m., right? Not a minute before, not a minute late, right? And it's a bus, it's not a train, right? So,
01:02:27
Speaker
It's that's the level of efficiency. I mean, at one station, like again, in the interior somewhere, you have to change multiple trains. My husband had a backpack where he was carrying a lot of like currency, you know, like for our travels. And he left that bag in a train. And then we had to change a train and we went somewhere else after like two changes of the trains, he realized he had left his bag. And three hours later, I think three or four hours later, we
01:02:55
Speaker
got the bag and it was untouched. So of course it's a developed country and there's no poverty and maybe that's why we got it back. But it's just really high up there when it comes to ethics and empathy and efficiency.
01:03:10
Speaker
civilized, it's like the most civilized country. Yeah, and yeah, even philosophically, I think there are a lot of things that I relate
Podcast Wrap-Up: Reflections and Call to Action
01:03:18
Speaker
to. So the hike that we went for is in a region called Kamanokodo, right? So that's where the word, that's where I heard the word the first time.
01:03:30
Speaker
And yeah, so it's basically a pilgrimage and it's very sacred to the Japanese people. So it's like, to draw a parallel, it's like the, I would say, so it's a, you know, like India you have Chardham Yatra, right? Where you have to go to these four places before you die, right?
01:03:50
Speaker
to achieve salvation. So they have something similar there called, and it's a walking trails. It's like walking meditation. You have to go to these like three important shrines and it's the forested and a hilly area and you walk to them. So in the like, I think thousands of years ago, the Imperial family used to kind of follow that route to those pilgrimages. So yeah, so we did that. My husband and I did that, you know, in, I think,
01:04:17
Speaker
December 2018. And it was a most surreal experience. It's like, so it's walking meditation, where instead of sitting in one place, you're walking in the forest, and you're kind of hitting up these shrines. And yeah, so that's where I mean, I heard the word. And it wasn't like that's when I said, okay, this is the word I'm going to use. But later on, when I was kind of thinking through various options, and
01:04:46
Speaker
I could relate back to my period there. It kind of fit in. Yeah. And in the word actually means something else. It doesn't mean the rhythm of the heartbeat. But when we looked up and we spoke to our Japanese friends, they kind of told us what it means in various forms and we picked that up.
01:05:07
Speaker
Something similar happened with me. My business is called Unati. So, I mean, it was something similar. I incidentally came across the name and I loved it. And then later on, of course, you justify that, okay, this is Unati means progress. These things often are like, you know, there's a gut connection with the word at times.
01:05:29
Speaker
Yeah, it surfaces later, right? It's not like in the moment you're like, yeah, a light bulb goes on and you're like, okay, this is it. It's something that kind of surfaces later and you kind of find that connection. So that was Deepthi telling us how her fintech idea led her to developing Kodo.
01:06:14
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 thebotom.in that is T-H-E-P-O-D-I-U-N dot I-N for a complete list of all our shows.
01:06:16
Speaker
To apply for a Kodo credit card, log on to their website www.kodo.in