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Simplifying global money transfer | Srivatsan Sridhar @ Skydo
103 Plays11 days ago
The global cross-border payments market is on a remarkable growth trajectory, expected to hit $290 trillion by 2030. Amidst this booming landscape, discover how Srivatsan Sridhar successfully navigated the challenges and founded Skydo, a platform which addresses traditional pain points around high fees, delayed settlements, and compliance hurdles and makes international transactions hassle-free.
Akshay Datt, a serial entrepreneur who has run ventures in employability training and hiring, hosts the Founder Thesis podcast. He has interviewed 500+ founders to date.
Connect:
Srivatsan Sridhar: https://www.linkedin.com/in/srivats80/
Akshay Datt: https://www.linkedin.com/in/akshay-datt/
Founder Thesis: www.founderthesis.com
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Transcript
Introduction: Financial Concerns and Entrepreneurial Beginnings
00:00:00
Speaker
Important consequences that Triple S is actually be worrying about financial consequences. So if we can just not do worry too much about it, i mean of course we all need money, we all need
00:01:43
Speaker
You're listening to the Foundathesis podcast, and I'm your host, Akshay Das.
Inspiration from Family: Akshay’s Entrepreneurial Journey
00:01:56
Speaker
Okay. Can you start with understanding a bit of your background first? like you know what is ah If you look back and connect the dots, what made you become an entrepreneur and start Skydo? Just take me through your origin story, your pre-entrepreneurial journey. Sure. So I actually you know get all my inspiration from my dad. My dad is my hero. And ever since I was a kid,
00:02:26
Speaker
um I've always wanted to grow up and be like him. so And my father is an entrepreneur. And he's an entrepreneur of the more traditional variety where he had nothing else to do. So the only only way to survive was actually to you know find something to build on his own. Came from a very average family, no great financial backing or nothing.
00:02:50
Speaker
So and he also could not, I mean, they did not have the resources to send all kids to college. So one of my uncles went to college, my grandfather, my grandfather could not get my dad to study college. So as a 17 year old, my dad's only ability to survive was to somehow find a business to do. And I think it took him seven, eight years to finally land up with something. But by the time he was in his mid 20s, he actually had narrowed down on you know the steel business, more specifically the alloy steel business, the kind of higher quality steel that gets used in automotive industry. Initially, for the first few years, he along with ah his business partner, which is buying and selling steel as traders, those were still the times of you know licensing and production controls in India.
00:03:44
Speaker
And eventually as the market became became more liberalized, ah the opportunity for just being a trader was kind of you know going away because information arbitrage was no longer there, stock arbitrage was no longer there and so on. So, there was a moment where they had to choose between you know perishing versus moving to manufacturing. So, they moved to manufacturing. So, they started with very simple manufacturing of you know steel parts, very simple ah intermediate parts that would go into more complex automotive parts. And then over time they learned and have built now i know a pretty solid automotive components business that manufactures a variety of auto components. So when I was a school kid, and this transformation was just beginning to happen. so and Which year is that? Yeah. i was
00:04:43
Speaker
in grade six in around 1990. So that's that's when this transformation from just being a trader to manufacturing started. And that was around the time India was liberalizing and so on. um So all through my middle school and high school, I saw this business move from just a small office where you know my dad and his partner used to work the phones and you know trade steel to the time when actually they started a factory um and so on.
00:05:11
Speaker
so So that was quite inspiring to me and that's all I wanted to do really. So I wanted to finish school, get a mechanical engineering degree and go sit in my dad's factory and build it.
Corporate Experience and Return to Family Business
00:05:21
Speaker
that's That was my only aspiration in life. and so So pretty much I had closed my eyes to you know computer science. Computer science was the big thing at that point. In the mid 90s everybody was studying computer science and everybody was getting into IT companies. I completely shut my mind to it and I said that's not where my life is so I need to go sit with my dad in his business.
00:05:42
Speaker
um So yeah, I studied mechanical engineering after school. Then I was a good student, so I also got a scholarship to go study industrial engineering immediately after my master's, after my bachelor's. So I went to the US, studied for a couple of years. Again, that was the time when everybody went to America and settled down. So I also did not think that that would be my destiny because I had to come back here and run this business. So I came back immediately after my master's.
00:06:09
Speaker
and and worked a little bit in my father's business. um Actually, I worked in ah in a TVS company for a couple of years just as an apprentice getting to know the business and so on, and then joined my father's business. My father himself told me, hey, you're too young. I am also quite young. The business is just getting started. So there is a lot of time for you in life. Why don't you do an MBA and come back?
00:06:30
Speaker
so So I went to ISB, did an MBA. So I would say till about 2007, my life was reasonably unplanned or I would say unstructured with the single goal of just doing a few things before coming in and settling down in the business. Also in this period of between 1990 to 2007, the business had also grown quite nicely from a very, very small business doing very simple parts to a reasonably complex diversified business with good customers who are either OE manufacturers like you know tractor makers like Taffey, two wheeler manufacturers like Royal and Field and you know a lot of tier one customers like the Lucas TVS Group and the other TVS Group companies. So, so we had you know kind of a good base which I could go in and know help build.
00:07:20
Speaker
So I felt once I got into MBA, that was a turning point for me because I was an ISB. And my peer group was all you know like people from IITs, people with very big aspirations. And that's when I first came across this company called McKinsey. And everybody told me that, hey, if you want to you know do everything in anything, anything, this is a great training ground, great finishing school and so on.
00:07:44
Speaker
so So my dad and I discussed that you know it wouldn't hurt for me to spend a couple of years at McKinsey, see how big businesses are, and then come back into business. So that's how I got into McKinsey. So up till this point in my life, the only claim to fame was I was academically strong. i could I was more than saying academically strong, I was strong in taking exams. So if there was any entrance exam, I could clear it. And so I got good grades in ISB as well, got shortlisted for McKinsey, was able to yeah convince them on why you know a few years of management consulting would really help me go build a business. The other thing I also did consistently throughout this period was I was always telling everybody that this is all I want to do. I never told McKinsey that I want to make partner here. I always told them that I want to go build my family business, and I think that you are the greatest finishing school. So so they hired me. And McKinsey was the second transformation point because, again, truly, business and metrics and
00:08:43
Speaker
scale and other things that I could never have appreciated. Otherwise, I was able to appreciate. And in McKinsey, one other interesting thing happened. By this time I was married and I had a baby. So my wife and I decided that the only way McKinsey was going to work for me was if I did banking projects and I stayed in Bombay, so that I would not be traveling every week like most concerned students do.
00:09:05
Speaker
So I kind of forced myself to just get into banking and that was again a great thing because then all through my tenure at McKinsey, I mostly did financial services projects. That was eye-opening for me. because What kind of projects, like what were the problem statements you were solving? Yeah, i various interesting problem statements. I naturally always gravitated towards the SMB world because somehow maybe because that was my background, it always kind of appealed to me more.
00:09:34
Speaker
So I did a lot of SMB loans, vehicle finance, non-banking finance companies and expansion strategy for them. Then I also did a bunch of projects on org restructuring.
00:09:49
Speaker
um So mostly I would say on the retail side of it and less about insurance or corporate banking and so on. So did a lot of retail SMB finance type of projects with the pretty much all the big names who were clients of McKinsey at that point.
00:10:05
Speaker
ah so So that was great. That exposed me to a completely different world and that also made me fall in love with financial services because I could clearly see that it's a very different world from the relatively low leverage word world that manufacturing was and is. that was What is that mean, low leverage? So what I mean is, in manufacturing, to make a dollar of revenue, you have to put in a dollar of capex, get machinery, build a plant, then you know an operator has to work on it. And you are actually kind of constrained by the productivity of the lowest you know member in the chain, which is you know a manufacturing operator. Whereas finance by nature can have multiplicative effects, right? So it can, a finance can multiply, money can multiply itself. So that's what I meant. Okay, got it.
00:11:03
Speaker
Yeah, so that was interesting. Then I went back to my family business. So I think I spent five years in McKinsey, you know, two, three years longer than I had intended to spend. But it was a good time. I kept learning. I kept growing well in the firm. And until today, it has given me a great network of friends and you know other business leaders on whom I continue to lean on from time to time. Went back to the family business in 2012. Spent a little more than five years running it.
00:11:33
Speaker
So by this time, finally my dad and his partner had kind of grown tired of running the day-to-day and they were willing to let go of operating control and let the next gen come in. I happened to be the oldest of the next gen. And so it was a good transition point from their generation stepping back to the next generation coming in. It also gave me the chance to apply a lot of the concepts I had learned in ah business school and consulting in reality, right? So how do you make transformation happen? How do you use simple, very simple things from how to use metrics and dashboards to drive performance improvements? How do you motivate people towards a common cause? um How do you make sense of, you know, vague open-ended problems, and so on. And it was also a period of, you know, transformation in the manufacturing industry in India, specifically specifically in South India and Tamil Nadu.
00:12:28
Speaker
because Labor shortages had already started becoming huge. Salary levels were rising. BPO industry was taking away all the youth. So it was very difficult to find people. So in this period, I actually did a lot of modernization of plant and machinery. I started a new business unit, which was much higher on capex and much lower on human intensity. The reason I'm spending a little time on this is this is one of my core philosophies of a business, that it should be less people dependent. And that also kind of eventually drove me into what I'm currently doing. So yeah, I did this for a few years and then it almost felt like, you know, my dream has come true and I've arrived where I need to be in life, right? So it's like, this is the culmination of everything that I've been wanting to do. So I'm where I need to be. I had a few years of bliss. How big was the business? Like by the time you did the new projects and all of that. So when I got in
00:13:28
Speaker
When I got in, we were about 150 crores of top line annually. By the time I got out, five, six years later, we had reached a little over 350 crores. So we've grown reasonably well in that period. um I mean, it's not comparable to venture funded startups scaling trajectories, but for a company which is self-funded. For manufacturing, it's good, right? Yeah, exactly. um So yeah, it was good, but I ah Towards the end of my five, six years there, I was kind of slowly getting tired of a few things. One was this you know low leverage part where I was constantly you know solving um very low level problems of how do I bring in employees from Bihar and Odisha and everything and you know make them motivated, stop them from fighting with each other.
00:14:22
Speaker
ah you know make ah the supervisors and others who spoke primarily in Tamil versus these laborers who spoke primarily in Hindi to collaborate and work together. So these are the problems I repeatedly had to solve in order to make more money. right And secondly, the auto industry is also an industry where the top line is your top line is actually fixed by your customer. It's only the bottom line that you can improve by constantly doing you know operational improvements, quality improvements, and so on.
00:14:52
Speaker
So I was thinking that you know more customers, right? like You can. Exactly. So let me come to that. So then I went and told my you know dad and his partner that, hey, I think um we are we are going to keep growing at 8%, 10% year on year. And we'll do well. um you know I will continue to be rich. Today I'm driving a Honda City tomorrow. I may be able to drive a Mercedes, but we can't do something nonlinear if we continue on the same scale. So they said, what do you have in mind?
00:15:20
Speaker
I said, why don't we dilute about 15-20% stake, get a third party, get some cash in. You guys have spent 20 plus years building this business, so you can also get a little bit of cash out. We'll get new equity in the company, but and that we can use to actually either make a product or expand or go multi-geography. Like all ah all of our customers were actually opening plants in Rudrapur, opening plants in you know other parts of the country. ah So I said, you know you can actually follow your customer, have multiple plants, really grow.
00:15:50
Speaker
ah They said, you know, hey clearly, you know, you and you and I are having different viewpoints. um I don't want to dilute even one percent of my stake. I'm very happy um building a small, sustainable business, getting good profits every day and being happy. And they said you also should be. So I said, yes, i'm I said I'm not unhappy. I just think we can do more.
Transition to Startups and Building a Network
00:16:18
Speaker
ah so So this was the beginning of my itch to do something different. This was around 2015 or so. And then I realized that maybe I have this keenness to do something interesting. So why don't I do something on the side? So I actually you know incorporated a company, just a name and entity name, and thinking that you know let me do something like, at that time, analytics was the big buzzword. So India was exporting a lot of analytics you know, e-values, music fractal, all of these guys were like scaling and growing. So I said, I should just hire a few engineers, maybe do some analytics outsourcing, and then, you know, start. And the reason I i zeroed in on analytics was because I felt like I should do some exports because in this business, I was actually buying everything in dollars, and then making revenue in rupees in manufacturing, because machinery is imported
00:17:17
Speaker
Tools are imported, technology is imported, whereas revenue is in rupees. So I said I should somehow be on the better side of this bargain, where I spend in rupees and earn in dollars. That was one of the motivations for it. and ah and And a college friend of mine was actually an analytics leader in one of the IT firms. And he said, if you start, I'm happy to you know consider helping you initially. And if it goes well, I'll also quit my job and we can do it together.
00:17:40
Speaker
um Started, they know did some exploring, tried to get the first customer, etc., through some contacts and then realized that this is yet another cost plus business because by that time it had commoditized. So everybody said, you know ah all all of that is okay, but we'll give you you know so much per hour plus your margins. Then I said, you know I don't want to do yet another cost plus business. So I kind of abandoned that idea. I also realized that I can only do one thing at a time. It would be very difficult to go to my factory in the daytime and then do this analytics in the evenings, not go to work at all.
00:18:10
Speaker
So I abandoned that. I continued to grow a little more frustrated, a little more impatient internally. And then somewhere in the 2016-17 period, I realized that i had if I had to ah do something, I had to leave. And I really had to like you know go on my own and build something.
00:18:29
Speaker
um So I had a fairly complex, complicated conversation with my dad and his partner. They just couldn't for their life understand what I was trying to say, they they thought of all the ah wrong things. right They were thinking that maybe I'm frustrated with family life, frustrated with the you know them or whatever it is. I said, no, it's not that it's a professional leech and I just need to scratch it. um And if I fail, if I fail, I can come back here in two, three years and nothing will change. But if I succeed, you know then it'll be great. And irrespective of these two outcomes, when I'm 60 years old, I don't want to regret that.
00:19:10
Speaker
I didn't build something on my own. So so that was the genesis of moving to Bangalore and getting into startups. And I also was a little pragmatic. By this time, I had two children. So I did not want to you know just completely lose cash flow income stream and you know start from zero. So I said, let me work in startups for a few years.
00:19:31
Speaker
build a network there and then you know give myself a chance to succeed. So I said in five years if I don't do anything, I just don't want to be an employee five years later, I'll come back to Chennai and run this business. But within five years, I'll give myself five years to start a business. so So that was the move into startups. Spent a couple of years at Ola, a couple of years at Rupik. One question, why didn't you Get the family to fund your startup. Instead of figuring out that, OK, I need cash flow, et cetera, et cetera, your family was obviously wealthy enough to fund you, fund your lifestyle, whatever, and and also put in some seed capital. I think two things. One is I wanted to actually ah truly convince myself that I am doing it for the right reasons.
00:20:26
Speaker
And not just that you know I'm a little bored of monotony, so I'm just finding an escape route. Second is I also wanted to think like and ah like a you know ah startup entrepreneur or a tech entrepreneur would think. And that way of thinking was not at all in my blood at that time. I was thinking very differently. so So that is why I had to come to Bangalore. I had to find a job, and I had to get into this ecosystem.
00:20:52
Speaker
and And later on it proved tremendously useful for me. Like when I raised a seed capital, when I'm now hiring you know my team and so on, I can see that you know nobody thinks of me as this you know privileged guy who's just come in and who's losing somebody else's money. They see my body of work and you know that gives them a conviction that you know this guy knows what he's talking about.
00:21:15
Speaker
Okay. Interesting. So you chose Ola as your like the place where you landed. How was that experience? So I chose Ola mainly because by the time I had done all of my family business thing, a lot of my my generation McKinsey folks had more where the money is, which is into startups and into Bangalore. So a lot of my previous network was in Bangalore.
00:21:41
Speaker
And one of them actually got got me this Ola job. So that's how I got into Ola. And it also felt to me a you know sensible choice because it was already a grown startup by then. So it was not like I was facing multiple risks in one shot. I just had to prove myself. It's not like the company also had to prove itself. um So that's that is how the first experience was. And Ola was a tremendous learning ground for me because ah the Here was a company doing a million rides a day and you all already a well-known brand and any small action would actually really impact all of these different rides and different people. So I also got a great role. So they were building a new team to actually take the business from negative margin to a profitability and they created this new org called Revenue Management.
00:22:34
Speaker
um Initially, I was not supposed to hit it, but in a very few short months, everybody above me had actually left. And that was a very constant thing in Ola, like, you know, lots of attrition of leadership. So they looked around and said that, you know, okay, this is the guy who's like, got consulting and business experience. So he should be able to do this. And they gave it to me. um And ah for a little over a year, I actually ran that function of moving us from negative to positive.
00:23:02
Speaker
through controlling supply, which is all the caps that are attached to us and their earnings, through controlling pricing, which is the rate that you see on the cap, and through controlling customer demand. so so So this was like literally the tech team or the product team that was operating all the levers in sync to maximize platform revenue and platform profitability.
00:23:29
Speaker
So it gave me a great view, like a cockpit view of how a business works, both from a field point of view and from a central point of view. What I was able to bring to the role and to the table was the fact that I understood ground level operating businesses and operational people very well, which was a little bit of a rarity in Bangalore. And what that says, you know, environment was able to teach me was how to run a tech business and also to give me the confidence that Hey, I'm not like some, you know, totally ancient piece of work that cannot understand and drive in a technology business. I also can do it. It's like, yeah if you strip out all the details, it is also a lot about, you know, simple first principles, common sense, and a lot of, you know, basic things coming together. um That's also when I met Movan. Movan and I worked together in the same team. And right from the beginning, we became very good friends.
00:24:21
Speaker
also could see that we were very complimentary. He was very deep, very thoughtful, ah very product oriented in his thinking. And I was always able to make great relationships with people who work at scale, work through conflicts and work through, you know, different stakeholders. So we naturally complimented each other. We also shared love for many things like, you know, say similar kinds of music.
00:24:49
Speaker
ah We loved having a good time even if we like had long hours of work, still found some time to catch up after work and so on. so so So we became good friends then. So I think one of the, I mean two tangible takeaways from Ola. One, you know i could I convinced myself that I did not make a mistake leaving my family business and coming here to Bangalore. I can survive here. I like this world and I can thrive here. Secondly, you know the friendship of moment.
00:25:14
Speaker
Then both of us went our own ways. I spent a little longer than him at Ola, but both of us went our own ways. I went to Rupik. I was actually now thinking that I should now go to a much smaller startup, which is like also got business ah building risk attached. Because I was very clear that I had to start a company soon or go back to Chennai, right? And moment went ah from Ola to Micho and Phonepace where he had like two other product experiences, both of which were Excellent. Misha was very transformative. He joined very, very early and saw the rapid scaling. After that, he went to phone pay where he got already a mature platform, but there his big thing was he ran the payment platform there. So more about that when we start talking about the business. But for me, I went to Rupeek. Rupeek was at that time just beginning to scale. So they had done a couple of rounds of fundraise and Sumit, the founder, was trying to build a leadership team. and
00:26:08
Speaker
look for the 1 to 10 or the 10 to 100 journey and you know leadership to come in and help him. So a common investor had introduced me to Sumit. We spent a few months talking, really liked him. And at that point, I had been interviewed with multiple companies, but I really felt that Sumit, I could, one, I felt like he was very respectful of you know outside talent coming in and seniors coming in.
00:26:34
Speaker
ah Secondly, he was very ambitious, but in a very understated and business focused way. Not like I would change the world type of ambitious, but saying that, you know, I can build a sustainable, profitable business, I can really scale this up and so on. So yeah, the reason for joining Sumit was mainly, you know, what I identified with in him as an entrepreneur.
00:26:57
Speaker
um had a great stint there, two and a half years, got massively impacted. The business got massively impacted by each wave of COVID because we were a physical plus digital business. We had to go get the gold from customers and we had to go to their houses to give them the loan and so on. So each time a COVID wave come, the business got to zero. And with each subsequent wave, we also you know made the business more resilient. Scaled the business from about four or five cities to 40, 50 cities from Series B c that was series b was after Series B i had joined and Series C was happening just when I had joined to Series F when I left. Health was the first leadership hire when I left. you know We had built a complete leadership team from product head to engineering head, CFO, head of marketing and so on. So fantastic stint on all aspects.
00:27:55
Speaker
and also One question I have about Rupeek. Rupeek was an aggregator like it would connect people who wanted to borrow his loan with lenders or it was also lending on his own. It was a
Founding a Fintech Venture with Movan
00:28:10
Speaker
lender. Yeah, so it was a lender. um And banks used to be just a balance sheet provider for us. So we would co-lend along with banks. We also had an NBFC. So we were not an aggregator who would just do buying in was matchmaking of banks and customers, but we would actually take risk and lend. And obviously, since a small company cannot hold the entire balance sheet, we used to co-lend along with banks. Okay. Got it. Like like maybe 20% of your own funds and 80% from banks. Okay. Got it. Got it. Okay. So yeah, so towards the um towards the end of the two years at roki
00:28:53
Speaker
I kind of felt like I think I am done being an employee now. I think whatever I need to learn from the universe, I have done it. And now i should either I should take a call. I should either go back to Chennai or I should start a business. I had come to that kind of ah point in in my career. um This was mid 2021. And it was also the end of wave two of COVID.
00:29:21
Speaker
So Mauvin had got stuck in Chandigarh the entire Wave 2. He went there to visit his family and then he couldn't come back to Bangalore at all. So he had come back and ah in between we had always been in touch. I went to his wedding in 2020 just before COVID and then you know I knew all his career moves and so on and so so we knew what was happening in each other's lives. As soon as Wave 2 ended and he came back to Bangalore he said hey I'm just back it feels great to be back in Bangalore let's actually catch up for a drink.
00:29:49
Speaker
So we caught up, we were chatting in just generally about everything and then eventually the conversation turned to you know what mixed for you and so on. I was telling him, hey, I'm at this point where I think I should either start or I should go back and run the family business. I think I've given myself enough time and that time is kind of coming to a close.
00:30:08
Speaker
um so He said he's a second time founder, so he had already started and run a company before joining Ola. That company is still running. In fact, just recently it got acquired by you know another larger company, but he left an operating role in that company as well as he realized that that was not good to scale non-linearity. So he said, I think I have another startup in me and I want a startup, but things are going exceedingly well for me at phone pay.
00:30:38
Speaker
I'm enjoying myself, but I feel like in the next few years I want to start up again. So this was the conversation. Then we kind of got into, okay, if you start up, what will you do and you know what kind of business and this and that. And by the end of that evening, we had gotten to a place where we felt like, you know hey, not only do both of us want to start up in some time, we also have very, very similar you know points of view on what kind of business we want to build and so on.
00:31:08
Speaker
ah Basically, we were aligned also on multiple things, right from the beginning. like Right from the beginning, one of the things that also got us together was both of us were very people-oriented. very We also wanted to build great teams. We wanted to build a great culture. We always used to find the culture at Ola very abrasive and a little difficult. So we always said, if I ran this place, this is how it would be, and so on. right So we had very similar overlapping philosophies of people, on culture, on the kind of business to build, and so on. So that night was very energizing.
00:31:39
Speaker
especially for me, um because I was in that frame already. So, so the next day we actually, you know, did a call and I told moment that a last night we had such a good conversation, I don't want it to just go waste as yeah yet another, you know, casual conversation in a bar. So if you're serious about starting up in some time, and you know, if you think financial services is the place to do it, why don't we just have some brainstorming chats every weekend It can, it need not go anywhere, but it will just be like interesting for me. um and And then we just started that. And in one of the early conversations, we also kind of said, I asked him like, if do you want to start something together? Like, would you be open to doing a business with me? He said, absolutely, I love working with you and I love spending time with you even outside of work. So definitely I'm happy to do it. ah so so So with each conversation,
00:32:36
Speaker
My primary thing was if these conversations themselves didn't happen consistently, then anyway, you know that there is not much energy to it and it will fizzle out. But to both of our surprise, actually, we met every weekend for the next six to eight week or seven, eight weekends from about July, August of 2021 to almost October 21. So much so that by the time Diwali came around, and we were not only at a place where we wanted to start together, but we were like, you know,
00:33:05
Speaker
There's no greater time than now, let's actually quit our jobs. Did you have an idea by that time? By Diwali? Yeah, we had an idea by that time. So, so we I'll walk you through the idea generation journey in a moment, but we had an idea at that time. So, both of us felt like the natural next step for us was to validate the idea and further we had to go talk to external people and we did not want our founders to actually hear from the environment that we are deciding to start up. So he said, even before we talked to a single human being, we should tell our founders that this is running in our mind. So I went and told Sumit that, hey, Sumit, I'm thinking of starting a business in this. ah so And I want to quit at some point. So he said, you know absolutely, I'm very happy if you started a business. I'm very supportive. But take out all the time you want to crystallize the idea, et cetera, et cetera. I also need at least three months from you because
00:33:58
Speaker
you are literally running the business was very difficult for me to just like, not have you around very soon. So I said, I'm giving you not three months, but you know, like, I'm happy to spend five months from today, right? So let's take it slow. But I'm just telling you this right now, so that you know, if any investor or anybody in the market comes and tells you that, you know, I'm speaking to them, you know, you should know it from me first. These are great. So Momen also had a similarly positive conversation at the phone page
00:34:26
Speaker
And then therefore, both of us got out by, he got out in January and I got out in February of 22. The good news is we are already we were already able to raise capital by then. So we raised our seed round even before we had quit our jobs. Amazing. that' That's less about our ability and more about the combination of right idea, right place and also fantastic positive environment for fundraising at that point.
00:34:55
Speaker
Right. a Because we were just coming out of COVID, everybody thought, you know, ah businesses, digital business are the way to go and, you know, you don't but all areas are getting funded. Right. So, so, so we were, we were beneficiaries of that buoyancy. And, and I also think we had a clear good vision and we had a great team, a complimentary team and so on. So we got funded. That gave us a lot of ability to, you know, do a lot of right things, which we'll talk about in a moment. But I think long answer to you know my background, but let me pause here. Okay. ah Tell me about the evolution of the idea. That that was what you were going to tell me. Correct. So when we started, we said, let's stick to financial services. You are in a fintech. I'm also in a fintech. So let's stick to this space. We both have a view that in India, financial services is massively supply-starved. All kinds of financial products are
00:35:53
Speaker
you know under penetrated, customers want it and the system is not able to provide it yet. It could be because of access or it could be because of distribution challenges, it could be because of any reason, but there is much more demand than there is supply and this is going to be the case for at least the next decade or maybe two decades. So, Financial Services and is going to do well and we are in Financial Services. So, let us stick to Financial Services was the first decision we made. This was made right that day in the, when we met.
00:36:24
Speaker
So within financial services, I had some strong points of view because of my rupee experience that we should actually pick areas in financial services where we could actually legitimately challenge incumbents. That is we had an ability to challenge incumbents. And I felt for example that lending was not one of them. Many of our challenges in rupee was because of the fact that the where to play as McKinsey would call it was you know very difficult So, McKinsey has this this two-part framework called where to play and how to play. And and they say that where to play determines a large part of your success and the how to play or your execution ability is only a small but small contributor. so So, if you choose a ah wrong line, then even if you are the greatest executor, it is not that you will have fantastic outcomes.
00:37:15
Speaker
Essentially, it's like the TAM philosophy, like for a lot of these, the way of evaluating a startup is how big is the TAM, total addressable market. So that is great. Exactly. so So for me, I felt like while Rupeek was such a smart team and we all worked so very hard, the fundamental point was that you know as a fintech whose cost of capital was much higher than banks, ah whose risk management was not as valuable,
00:37:44
Speaker
and who was not regularly you know in the driver's seat, unlike a bank, it was always good to be a challenge. And bank ultimately is also a 360-degree product. right They have multiple things. So once they acquire a customer, they could make money off the customer in multiple different ways. And we were hamstrung on all of these accounts. So so for me, I felt like you know lending was not a day-one game that a new fintech can play because we neither have the product nor the distribution nor the cost of funds.
00:38:14
Speaker
or the regulatory advantage. So two, three areas that we kind of identified where FinTech could legitimately challenge banks was payments, banking infrastructure, that is BAS. And at that time, globally, also BAS was a big thing in 2020. Banking as a service, okay backing as what is this zero which is basically all kinds of, yeah, all kinds of financial infrastructure in India, companies like Zeta, M2P and so on.
00:38:42
Speaker
globally, multiple companies were doing well at that time. So that was something. Then we felt like checkout optimization was an interesting area. While it was not strictly financial services, it was at the border of financial services and commerce. That is just pay. Just pay would be infrastructure.
00:39:06
Speaker
and So companies like, you know, whole quick go quick where we are doing this. yeah but so So that but that was an interesting space for us and and we were also interested in emerging things like wealth management which we said that you know in the next decade it will grow massively so that's also something to think about. so So this was the space in which we were thinking about that is a few areas outside of lending where
00:39:37
Speaker
As a fintech, we could legitimately play and have some some reason to win. Then one by one, we actually kind of thought deeper into it, like whether we identify with that problem, whether we can see a problem, and whether we can see you know ourselves building a large business there. And slowly you know we started gravitating towards payments. a Main reason for that was that we just felt that the time was virtually unlimited.
00:40:05
Speaker
One thing, second thing is that we felt like we could spend many years learning, tweaking, improving until we actually found you know a large enough space. Whereas in all other, in many of the other areas, it felt like a zero one. And if you didn't get your game right, you probably didn't have a play. right Somehow that's the feeling we got. What's the example of zero one with another space? like let's say let's Let's take, you know,
00:40:36
Speaker
checkout optimization, for example. So we felt like checkout optimization, the moment a couple of players became so big that they are sitting in the interface, then you know they already have the shipping addresses of Akshay so they can offer the next customer even more value, and so on. So the winner takes all kind of kicks in there. yeah and i thought So that was one example. um Similarly, in wealth management, again, you know like you get some area, then you have wealth management is still, I would say, you know, there is space for more than one player, but, but that would then mean there the risk was either you become a lifestyle business where you are managing a few hundred crores, and then you're just becoming an independent financial advisor versus you are actually the platform where everybody wants to go. Right. So, so, so these are the things. Whereas in in payments, what I thought was you could be solving one time at a time and gradually keep expanding. It just felt much more
00:41:34
Speaker
for me, you know, a forgiving business where there is a lot of time to learn and grow anymore. I don't know whether I feel the same today, but definitely that time, this is what I felt. And and moving being in phone pay also helped us a lot because then he he had that instinctive understanding of the tech behind payments. a And so ah he said that, you know, yes, there is enough tech here that can create a competitive differentiation. There is enough product nuance here to actually make great experiences happen.
00:42:04
Speaker
And for us, a simple example was, hey, UPI is a common ring. Every bank has it. How is it that you know literally two or three payment companies are actually dominating the UPI space? So you also have no reason to use a phone pay versus using HDFC or ICIC as native UPI app. But none of us ever use the native app. right We always use one of these payment apps. So so he said that the ability to use product and tech to increase our option to improve customer attention etc is tremendous here. So, we kind of slowly started gravitating towards payments.
00:42:42
Speaker
This is when I felt like, you know then suddenly the you know flashes from my past just came in and it all came together. I said, you know hey I know that business to business payments are so archaic, my accountant still writes checks and then you know People will still come in and you know stand outside his office and you know wait for their check payments. And when I used to import machinery or export parts, it used to be a different level of complication. I don't even know for three, four days whether somebody has received my money or not. I don't know what my bank charges me is right or not. So all of these challenges exist. And if I'm dealing with a country like you know some Eastern European country or Latin, etc, it's even worse. it's If it's not dollar or euro, then it's even worse.
00:43:31
Speaker
So so like these were still anecdotal things. We were just shooting the breeze. And then we said, hey, what if we actually just ignore consumer payments? Because there's just too many companies already, and many of them have become at scale. And we only focus on business to business payments. So then we started talking to a few people. So we started talking to you know some factory owners here that I know, my dad's friends, my own family business accountant, and so on. And we kind of realized that B2B payments are still at least a decade behind consumer payments.
00:44:00
Speaker
a The only problem was there was not much money made in domestic B2B. Whereas, you know, cross-border, there were like huge margins. And we said, why don't we start with cross-border payments? There are margins there. So there will be a reason for somebody to shift to us. And then we'll see over time, you know, maybe the market will allow us to do something in domestic also, but we can start here. So yeah, so this is all that the idea evolution journey brought us to.
00:44:29
Speaker
The moment we decided cross border payments and since we had also spoken to two, three customers just to get a little bit of a sense of the idea, ah these were all manufacturing guys by the way. We said this is good enough for us to quit our jobs now and do deeper research. And at that point fundraising was not even on our mind. What we thought was it because we can't do, a moment is also exactly like me, he can't do two things at the same time. So we said, let's just quit, spend maybe three to six months just talking to people traveling the length and breadth of the country. And the moment we find a niche to actually start, we can actually like both of us know enough people in Bangalore now to raise about two, three hundred thousand dollars. Once we raise that, we can hi you can have one engineer in the team. The three of us can build something simple. And then, you know, after some time, you know, we can raise a proper round. This was our idea initially.
00:45:26
Speaker
So I think with this conviction, we quit. And how did the funders happen then? The funders happened because, like I said, you know the industry also was searching for somebody to come and solve this problem. Because by this time, VCs also have their own thesis building approach. They keep looking at spaces, ah comparing it with another country, comparing it with another space, and so on. So I think independently, VCs had also come to the conclusion that B2B payments had to be disrupted, which we didn't know, obviously. so
00:45:58
Speaker
um when So and when I told Sumit that I'm quitting, then the next logical step for us was to talk to more customers and start talking to a few VC friends just to see if this idea even makes sense. Because one of the early conversations I had with a VC is when I realized that Go Quick is already a business. I didn't know about that company till then.
00:46:21
Speaker
I thought checkout optimization is a great idea. We should do it and we can build a bolt of India, etc, etc. Then realize that you know there is already a company which is doing it. In fact, they had raised two rounds of capital by that time. So so we said VC, one or two VC friends we should talk to. One of the advantages of having been in McKinsey is that in the VC industry is filled with McKinsey alumni who would have a non-evaluative chat. right so So I reached out to a few friends,
00:46:50
Speaker
And said, you know, hey, I'm thinking of something. But and this is like at the idea stage. So I don't even want you to think of it from a VC ad, but just think of it as a friend, and then just give me some feedback. So so as I spoke to, so one of the early guys I spoke to was our current investor, Elevation Capital, right? So Virutula Elevation is someone I know from McKinsey Days, had kept in touch with, the intermittently even after that.
00:47:17
Speaker
And he said, OK, let's talk. And I told him that you know i but and this is what I'm thinking about. And I could immediately see his eyes light up. So he said, oh, we have we have a very strong point of view that this is an important space to be disrupted. So I said, then let me not say more to you. Let me do some homework and come back. right He said, yeah, fair enough. I'm going on a vacation. That was by the time it was December. So he said, I'm going on a year end break. So why don't you come back to me in the first week of January or something like that.
00:47:45
Speaker
so In the meantime, we spoke to two three other VCs because we were very Encouraged by this reaction from little they spoke to a few other VCs. They all poke holes at the basic idea They said how will this happen? How will that happen? Why will our business come to you? ah How will a bank who we even wanted to partner with you? As a as a you know non licensed entity will RBI even allow you to touch money and so on and so on None of this where it was clear in our head yet And I'm saying this to you because you know, whoever listens to your podcast and is having a business idea, they should not think that I need to know everything before starting because all of this is a discovery process. We had no clue what the regulations were. We had no clue why a bank would partner with us. I would say at that point we were just collecting questions, nothing more.
00:48:38
Speaker
so But this collecting questions all through December was so useful. That early January when I actually went to meet Brazil, I had answers to many of these questions. I had by then discovered that there were some regulations which would allow, you know, payment intermediaries to process payments. I had found out that there are globally comparable companies like PayPal, Pioneer, etc., which had, which do cross-border payments on behalf of clients and what is the regulatory structure on which they operate. Why a bank should partner? How can I collect money?
00:49:09
Speaker
Where will I start? What is the total addressable market? So a lot of these things we were able to answer sitting in December. December was year end. Everybody was you know out on break. And for us, that was a great time because we had also like resigned from our job. We were serving notice period. So we had a lot of free time on our hands. So we could you know do a lot of homework on thinking about time, thinking about regulations, thinking about use cases and and globally comparable companies and so on.
00:49:36
Speaker
So early January, when we went with our first pitch deck, Brazil was already like, you know, reasonably amazed that, you know, in one month, these guys have, you know, moved so much in their thinking. So I think that's one important thing, which is in especially in the first round of fundraising, acceleration of your thinking process from meeting to meeting is very important. So yeah, so this, I think was the was the journey.
00:50:05
Speaker
and journey up leading up to the first fund raise. Then we had a month of constant you know back and forth.
Skydo's Business Model and Market Approach
00:50:12
Speaker
We we were meeting like many funds. Some of them were less enthusiastic. Some of them were more enthusiastic. But elevation was one constant, and they also constantly helped us improve. So they also did some research on their side and so on. And and finally, end of January, ah we got a term sheet from them. And this was a fairly sizable seed round, right? Like $5 million. dollars
00:50:36
Speaker
as opposed to $300,000. Correct. So even knowing what to raise was actually a discovery journey. right So we thought $200, $300. Then when an institutional investor got involved, we thought maybe $2 million. ah But as we started, then you know in one of the meetings, you know they asked us, OK, if you were to raise now, how much would you raise? And what would you do with that money?
00:51:06
Speaker
So then we excused ourselves and we actually said, you know, I'll come tomorrow and talk to you because we had to think about it deeply. Spoke to a lot of founder friends. the Other advantage of all these networks, McKinsey, ISB, IMA, of my co-founder and so on, is that a lot of our friends were are also founders. um so So then we quickly spoke to some of them, understood, you know, how do you think about ah fundraise? How do you think about deploying capital?
00:51:32
Speaker
and so on. and We got a fairly good idea of where to spend money, how to build a team. So we said, and we also, are I think one one good thing that we did was we were also very honest to these guys. We said, yeah um if we raise a million dollars, we would probably hire two engineers. If we raise two million dollars is what we would do. But I think that if we if we had a say in how much we could raise, we would probably raise somewhere in the three to five million dollar range because that would probably give us like an ability to build without worrying about money for about 18 months. And we believe that in this space, we will need time to build underlying infrastructure. the It's not like, ah for example, a D2C brand or a commerce business where from day one, I can actually have an app, see some downloads and so on. This will need many months of building before I can even make a single dollar.
00:52:24
Speaker
um so So that was that answer, I think, appeal to them. And they saw these numbers, etc. And um deciding how much to raise was primarily just based on what percentage you were willing to dilute. So so he said, we'll not dilute more than 20% in the first round. And within that, we'll try to negotiate for the best deal we can get. So ultimately, it kind of ended up the arithmetic ended up at this level. So so yeah,
00:52:54
Speaker
Fascinating. ah What were some of those answers to questions like, say, the TAM? What is the TAM of cross-border payments? how but regulation From a regulation point of view, ah how what is the opportunity to build something here when you're not a bank?
00:53:15
Speaker
is that so The first thing that got us excited about international payments was the TAM because globally, in that year, 2021, $42 trillion dollars passed between countries. right Then if you just remove all the government to government flows, large corporate flows, et cetera, just the SMB flows were about $7 to $8 trillion. dollars right And in India also, India had done in that year, the exports of about 650 billion. Today, that number is closer to 900 billion. But 650 billion was India's exports.
00:53:50
Speaker
And the trillion dollars was India's imports. So imports plus exports put together was $1.6 trillion. dollars Within that, the share of SME was about 30%. So today, India does about $250 to $300 billion dollars of SME exports. And this is spread across you know three very broad groupings. One, i I would like to think of it as you know the manufacturing space of the goods exporters.
00:54:18
Speaker
The other extreme is the services exporters. And in between these two is marketplaces. So it it's not a messy list because marketplaces also has goods or services. But the reason I like to think of these three separately is because marketplaces is just growing unbelievably crazy. It's like doubling or more than doubling every year. Goods are growing slightly slower. Marketplace? marketplace on the On the manufacturing side is let's say an Etsy or Amazon or a Walmart, et cetera, where somebody is an aggregator who's buying from a lot of small people and then you know selling to others. Now there are also vertical specific marketplaces that are coming in for handicrafts, like somebody called Bizar is there. Or like Laltin. I don't know if you've heard of them. Laltin, absolutely, yes, Laltin. Then there is a company called Artisaga, which only works on artifacts and art you know arts and handicrafts.
00:55:18
Speaker
Then there are many companies in the chemical, specialty chemical space now coming up, furniture space. So these are vertical marketplaces. Then those are horizontal marketplaces, which do everything. On the services side, similarly, Upwork, Top Tal, these are all services marketplaces. So these are growing massively. And so that's why I'd like to carve it out separately and talk about it.
00:55:45
Speaker
So business is basically you know anything from an individual freelancer exporting services to a remote worker working for a company globally as a contractor, to small dev shops, small digital marketing agencies, travel, tourism, financial services, advisory, content writing, many, many small services businesses. On the manufacturing side, it's everything from you know engineering companies like the one I was used to running, to Jameson jewelry, furniture furnishings,
00:56:15
Speaker
textiles, fabric, Ayurveda and so on and so on. So many, many fields there. So this is a $300 billion dollars TPV tank. TPV is basically total payment value. It's like the GMV of this space. So so that's the exports. The margin that is that the payment processing companies earn is what, like 1% or less than a percent?
00:56:44
Speaker
Yeah, less than a percent. So the industry averages for all big players would be somewhere in the half to one percent range. So you as you as you find more and more ways to extract profits, you can get closer to one percent. a If you are just ah giving a point solution, it may be closer to half percent. OK, got it. Yeah. So this is the business in terms of time.
00:57:12
Speaker
And right from the beginning, we also were clear about one thing, which is that we would not be an India only company at all. We would be global. So we set up the company in the US. s We set up an India subsidiary. It was very complicated and painful for us to do that ah because of regulations and all that. But we still said we'll do this because and we feel like very soon we will be global. So no point in at that time struggling to take this India entity global and so on.
00:57:38
Speaker
and Because we also read and studied deeply other transport companies and how they evolved. And we could see that this business was going to be built corridor by corridor. So you would build strength in one or two corridors initially, keep growing volumes and keep growing your risk management, your compliance, your bank partnerships, everything. And then once that comes to a certain critical mass, then you know quickly adding more corridors, both on the sending side and receiving side is not that hard.
00:58:08
Speaker
and Like you build India US or India EU and then then you go into South America or like other places. Exactly, exactly. OK, OK, OK, got it. OK, and OK, so that's about the the time question. And you also explained why global from a regulatory perspective. What is the way to do this? Like how how does it operate? Because you cannot.
00:58:36
Speaker
Like you don't you're not a member of Swift, I assume. And Swift is how international payments happen, as far as I understand. but Maybe just do it like a one-on-one on how international payments happen first, and then where a company like you would fit into that framework. Yeah. So international payments basically happen through two ways, very, very simplistically. One is through the credit card network.
00:59:05
Speaker
So companies like MasterCard, Visa, etc. have built their own proprietary networks. So you could move money through them. These are also ultimately, you know, held in banks, but they don't need a Swift messaging system because it's MasterCard on both sides or Visa on both sides. So they act as a messaging network themselves. The other one is the the Swift system. The Swift system is just an international messaging system and not a money movement system.
00:59:34
Speaker
So Swift basically says you know who is sending money to whom and what is the underlying amount. That's all the Swift says. But it's a common language that all banks can understand globally, irrespective of their country's the country finance the system, regulatory standing and so on. So the way actually money moves is that, um let's say you want to move money from the US to India. The US bank can only send dollars.
01:00:04
Speaker
and The Indian bank can only receive rupees. So this is the mutually unintelligible part there. So then there are some global banks, a few global banks who have the ability to internally you know market make. So this is like the likes of Bank of America, Standard Chartered, HSBC, Citi, Barclays and so on.
01:00:31
Speaker
who are the like there is a probably a handful of banks globally who actually are able to hold currencies hold different currencies and these are the guys who are actually making the market. So, whatever conversions etcetera that we see are made by these guys the big guys who exchange money. So, ultimately anybody has to go via these people. So, these are these banks in a transaction these banks are also called correspondent banks.
01:00:57
Speaker
So when a sender in in Europe, let's say, in UK, let's say, is sending money to somebody in India, he might be sending the money from, let's say, you know Sheffield Community Cooperative Bank in in England. That bank would be plugged into the Bank of England system, but they may not be able to deal with anything other than UK pounds. So this bank then has to send pounds to barlays and tell Barclays that, you know, can you send these pounds to, you know, this person in India who needs to receive it in rupees? So then Barclays would send that money to, let's say, HDFC bank in India. Barclays and HDFC bank would have, you know, an account with each other, where Barclays could keep pounds in HDFC bank and HDFC bank could keep rupees in Barclays. And at the end of the day, you know, every day these things are settled.
01:01:55
Speaker
And that settling is how the ah currency rates and other things are finalized. So ah then the HDFC bank would you know receive that money in their account. They would have received dollars. And then it's not like they there is no nothing which can physically convert the dollar into rupee rate. They would basically say, OK, this is the dollar. Today, this is the prevailing rate. So I would actually use my and another another account, house account, and give rupees to this customer.
01:02:23
Speaker
that this is exactly in a very, very basic way how international money movement happens. Okay. And now added to this, there are a few layers of complication. So in this conversation, like I said, you know, because the small UK bank now in India, also if the ultimate bank is not HDFC bank, but let's say, Saraswath bank in Maharashtra, Saraswath bank may or may not have the ability to you know receive dollars. So they would be dependent on an HDFC bank in between.
01:02:52
Speaker
very simple case of UK to India, which is a very liquid corridor, UK pounds to rupees, you can still see that there could potentially be four banks involved. ah Now, if the complication is like, let's say, you know, somebody is sending money from Peru to India, then that, you know, Peruvian currency has to first get converted to a common currency like a US s dollar, US dollar to Indian rupees.
01:03:18
Speaker
so So this is how it starts getting more complicated and this is the complication which Swift is solving by at least having the information transfer in a standard way that everybody can understand. So the Swift would tell every player in this chain ah where the money is eventually headed to, like HDFC and Barclays, all of these people would get, like HDFC would get the money from Barclays along with the Swift information that this is eventually headed to.
01:03:47
Speaker
okay okay okay garden shape Now, there are regulatory systems that then complicate this further. So, a country like India, for example, does not have freely convertible currency. The RBI actively or passively manages the currency. So, therefore, RBI needs to have full control over every dollar that is coming into India and every dollar that is going out of India also.
01:04:17
Speaker
um Unlike the other example is, let's say, you know, a country like the US or UK where the regulator is not bothered about this, their currencies are freely trading and freely convertible. um So when you send money to when you send money to somebody from US s to UK, it's almost like a local payment, although it is still an international payment, that' therefore a little more complicated than a local payment.
01:04:41
Speaker
It is not as complicated as sending money to somebody marine in India or a Philippines or a Vietnam or a Malaysia or any other market where the regulator is more restrictive and has capital controls and the free movement cross border of currency is not allowed.
01:05:01
Speaker
What does that mean in practical terms when a currency is not freely convertible? like the Is somewhere in this chain that you explained to me ah from Sheffield Bank? Correct. So, RBI is not directly in the chain, but RBI controls this through its licensed banks. So, RBI has nominated banks to be the sole converters of foreign currency.
01:05:26
Speaker
And they call these guys authorized dealers or ADs. So an AD is required in this chain to convert money. um In the absence of this, for example, if I had a payment license in a freely convertible country, I could actually receive the money in foreign currency and I could convert it into Indian rupees with my own treasury. But in India, I can't do that because RBI needs to know every dollar and why it has come into the country.
01:05:54
Speaker
So irrespective of whether it's an individual remittance or a business remittance, every dollar that gets converted comes into an AD bank. The AD bank needs a purpose code against which it will classify that amount. And then every day, end of day, they have to report it to the RBI saying that, you know, this is how much dollars I have, which was received from, you know, this currency across these purpose codes. And then this information is aggregated by RBI across all over the year. and you know, if I go into into a little more detail, RBI also needs to know what is the balance between goods shipped out of India and money receivable versus the money that came in. And these two numbers, they constantly try to reconcile to the largest extent possible. I mean, even if at a national scale, they're able to reconcile it to 95-96%, it is still great. But this is what they try to do. The logic being that black money
01:06:49
Speaker
that that sort of black money black money going out yeah dollars. Exactly. One is black money. Second is that, you know, hey as an emerging market for me, the currency is very important for me to carefully keep the currency in a certain band. I don't want it to be too much import friendly that it becomes very, very expensive. I also don't want it to be too much export friendly that it becomes expensive for me to import goods. It has to be somewhere in a range which I'm comfortable managing.
01:07:18
Speaker
So, which means that the dollar liquidity versus rupee liquidity is critical for me. So, I need to know this and therefore, this is a very important signal to give back to the government and all the various deep ministries on, you know, should I have duties, tariffs, trade restrictions, trade relaxations, etc. so that, you know, I am able to selectively incentivize exports versus imports. So, the yeah, that's the thing.
01:07:43
Speaker
Okay, got it. Isn't the currency rate managed through demand supply forces? like market Doesn't the market decide what is the exchange rate? How does RBI influence the exchange rate? um by so in the In the short term, RBI manages liquidity of the dollar versus rupee and manages it. In the long term, RBI gives a signal to the government to take policy initiatives that will manage the structural demand supply mismatch.
01:08:14
Speaker
So so if if we let just the market forces go, ah there is no telling whether the rupee will stop at 100 or 200. So we don't know that. I mean, if you let you and I freely buy whatever we want from anywhere in the world, or if you if if people let us you know freely invest our money anywhere in the world, we might think that you know okay everybody might want to just go and buy Nvidia stock and just keep sending millions of dollars from India to you know that So every rupee that I use to buy a dollar is making the dollar more and more and more expensive. So, so definitely it is managed tightly. It is not left to demand supply forces. and That is the answer for your question on free convertibility. So in a country like a UK or France, etc, it will be much, much more freely convertible. Well, you know, as an individual in France, I may be completely OK to just you know send money and keep that money offshore in a foreign account. Whereas in India, we can't. Right, there is a limit on how much you can send abroad. Correct. And ah you spoke of a purpose code. Who feeds in that data of purpose code? The the exporter who is receiving money or the buyer? or like Where is that data coming from? The purpose code data? The exporter who receives money has to fill it in. so and After he receives the money, at what stage is that happening?
01:09:38
Speaker
while he's receiving the money. So you're asking a very relevant question, which which which helps me to also explain what Skydo is doing, which is different from what a bank can do themselves. So these are all small, but significant pain points that an exporter and encounters in their journey. So let's say tomorrow you, you know, you're doing, let's say marketing services, marketing consulting services for some customers globally. um You know, you only know marketing, you don't know you know, banking and financial services, right? So you do marketing and you know how to get clients globally, and you've been reasonably successful, and you're growing that business. But when you receive payments, you would think, okay, I'll tell the guy how much my service has charged a cost, and then I'll give him my bank account, and he'll pay me. You will think it's as simple as that, and you are not wrong in thinking that. Unfortunately, because of all of that, we just spoke about. The reality is not as easy as that.
01:10:37
Speaker
So when you send that invoice to your customer, first of all, when you just send an email, it's not okay. You have to send an invoice. Then when you send an invoice, the first question comes in with it. do i know Should I charge tax or not? like Is this is tax applicable on this? Because you will always say you know marketing services, then GST 18%. So is GST applicable? If so,
01:11:04
Speaker
will an international customer pay GST because he can't take credit for the GST. So what happens here? That's your first question. Then once you send the invoice, that guy looks at your invoice and then he sees your bank account number. You're given your HDFC bank account number, IFSC code. He doesn't know what to do with it because he doesn't understand what IFSC means. He'll reply to you saying that, you know, hey, I don't understand your banking terminology. Can you please give me your bin number and your SWIFT code?
01:11:35
Speaker
You don't know know what bid number means. So you go and ask your HDFC bank, what's your, what's my bid number? He said, you don't have a bid number, a account number is everything, but this is our Swift code. So then you will send account number and Swift code. That guy is, you know, routinely used to sending international payments. He can now work with this information. But if not, if he's also a you know person like you who knows his business well, but doesn't know international finance well.
01:11:59
Speaker
He's going to now tell you, hey, if you give me a US account number, it will be much easier for me. Or if you give me your PayPal ID, it's easier for me. I don't know what to do with this HDFC stuff i because my banking system is not allowing me to add an international payer, a payee. So there's a lot of mutual unintelligibility here, right? And PayPal is expensive, right? I think PayPal will charge you. PayPal is expensive. So you will think, OK, maybe PayPal is easy to avoid all of this complication. So you go up and sign up on PayPal.
01:12:29
Speaker
Your customer pays you $1,000, you receive $990, first of all. And secondly, that $990 also is converted into Indian rupees at a atrociously bad in exchange rate. So eventually you feel like, hey, I should have got 84,000 rupees if no charges were there. I actually ended up getting 77,000 rupees. Like, you know, if I'm going to lose 6, 7%, then next time onwards, let me mark up this thing, right? You will mark up, then your next customer will not pay you that much. He'll say, hey, how are you were charging so much?
01:12:57
Speaker
and so on. So this is this is the friction. Then let's say the customer agrees to pay you by bank. He's also figured out how to add you as a payee. And then he has added you, he has sent you a SWIFT. He said, I sent the money. You will say, hey, I've not received the money. you go to your bank Then he'll say, you go to your bank and check, yeah, I've paid it. It's got debited from my account. So you will go to your bank and check, you know hey, this customer is going to send me. Then they'll say, please ask them to send you the SWIFT confirmation.
01:13:24
Speaker
ah So, first of all, both of you don't know what is the confirmation, then once you figure it out, then he'll send you some document, which will be just unintelligible gibberish to you, it just have some number and something, you will not understand it. Then your bank will look at it and say, okay, this is sent confirmation, but unless the Swift hits our nostril, we can't, you know, do anything about it. Exactly. So you don't know what is nostril. Right. So that's basically that I remember I said the Barclays would have an account with HDFC bank. That account is called Nostro. So Nostro oustro is basically you and ours in Latin. So your account with us and our account with you is banking terminology. That is what is Nostro. So basically any foreign remittance that comes into the bank first comes into a third party account within the bank called an Austro account. So once the money hits in
01:14:16
Speaker
Then the bank's back office will wake up and say, okay, we have now received some repentance in the name of Akshay. Now we'll ask Akshay what he he wants to do with it. So they'll send you an email or a SMS, or they'll have some notification in your banking system saying that, you know hey, you've received foreign repentance. Please give us you know disposal details.
01:14:43
Speaker
So you don't know what is disposal retail. You'll say, hey, dispose it to my account. is it It's my money. I want it. Right. So at this time, the bank will basically ask you invoice number, purpose code. They might even ask you to submit your invoice, because they now have to validate two things. They'll have to know whether you're receiving it for a legitimate purpose. Secondly, what is the purpose code against which you're receiving, because they have to report it to RBI.
01:15:09
Speaker
and and and They also have to do the KYC check, AML check and all of that of the center because tomorrow if it is known that this is proceeds of crime or this is drug trafficking or this is money laundering etc. They are liable by not only to answer RBI but also to answer financial intelligence unit which is the global you know crime fighting unit to you know to answer this and banks get fined billions of dollars if they know if they get found out that you know illegal money has passed through them.
01:15:41
Speaker
so So they are they are in a high risk profession, so they will actually ask you these questions. Now you will send them your invoice. That invoice will just say marketing services to Brian. And then you'll say, OK, who's Brian? What is marketing services? Can you really show us proof that this is really like there was something underlying exchanged? You have no proof. They'll say, OK, can you send us a purchase order? You will have no purchase order, because all of this was agreed over a Zoom call.
01:16:08
Speaker
right And then you will now say, hey, I only have an email chain. Can you take that as proof? And they'll say, OK, fine. Then you will actually have to compile all the email and send it. Then some credit officer there who is not a very senior intelligent person, but who's like you know who's been given a job of following an SOP. That person will say this does not you know match with our SOP requirements. So we'll need either one of A, B, or C documents, none of which you might have. So all of this nonsense happens. And finally, you get your money.
01:16:37
Speaker
Because all of this has happened, you now don't even... What about the purpose code? How do you figure it out? The purpose code, again, then you will ask your CA or you will ask somebody or you will go to Reddit and you will type saying that, you know, hey, I am a marketing freelancer, what purpose code is used? Then you will get three different answers. Somebody will say, bye, I use Carlo. Then somebody will get this, somebody will get that. This is truly the reality of the game, right?
01:17:03
Speaker
By the way, once you figure it out, after a few years, you are a pro, right? You know something works and you you don't need these things. But in the initial period, this is all really nightmarish. um So this is what we are actually solved now. So if now instead of bank or PayPal, if you had signed up with Skydo, what Skydo would have done is according to Indian RBI regulations, we would have signed you up, um done your KYC, KYB, linked your bank account.
01:17:31
Speaker
done a penny drop and tested that that bank account actually belongs to you and Now you are all set here to receive money then based on this KYC We have now tied up with banking companies all over the world to give you local virtual accounts in different countries So you would get a UK virtual account or you will get a that account is not a full-place bank account You can't write checks from that account. You can't make payments on that account But you can receive it said it's a PO o box or a post office box into which you can receive money meant for you for the For your customer in that country, for your customer, let's say in Germany, he now has a no complication of an international number with a different in know numbering system than he is used to. Instead, he gets a German account number with a banking terminology that he is used to. He can just go on to his local bank account, add you as a pay and make a local payment. It's instant because any FT, RDG is extra instant. So in a few minutes, the money transfer is made.
01:18:32
Speaker
Skydo has now API integrated with all of these you know accounts. So as soon as the money hits the virtual account, we will get a ping. And we will tell you, hey, Akshay, your money has been received in your German virtual account. And if you have already not uploaded your invoice into the Skydo portal, we will ask you at this time, you know can you upload an invoice? So you will upload an invoice. If you have uploaded the invoice, then that's it. You're done. Because from that invoice, we already know your purpose code.
01:19:00
Speaker
We know the invoice number. We know the sender, receiver, everything. We would have done all the money laundering checks. We would have done all the KYC checks, terror financing checks, everything. And we bring that money into India. We tell our banking partner through an API that this money is meant for this receiver.
Product Features and Challenges
01:19:16
Speaker
And these are the fields that you require. You will require to know sender, receiver, currency, these money laundering checks, blah, blah, blah, all done.
01:19:27
Speaker
You will require a purpose code. Here is the purpose code. So the bank now need nothing from you. So they will not disturb you. This is not even your bank. This is our bank. This is our partner bank. They have received the dollar. And by the way, the conversion from dollar to INR also, we have pre-agreed to some rate. So it will get converted to INR. And the NEFT will hit your bank account. All of this in a touch free experience to you. And I also, by the way, remove one other main anxiety that you have, which is, is my bank fleecing me? What trade have they applied?
01:19:56
Speaker
because I got I mean I'm back calculating so this guy sent to me thousand dollars I got 81 thousand rupees but today the dollar to INR seems like 83 so I should have got 83 thousand where did 2000 rupees go your bank will say sir we only have charged you like you know 1200 rupees remaining 800 rupees you have to ask the sender bank right if you ask your customer that guy will say I don't know man I paid the you know a thousand dollars I don't know if the bank charged something I don't know right so now we remove all of that crap And we tell you that, you know, hey, your customer paid you $1000, 1000 multiplied by today's live Google rate is 83, you got $83,000 in your bank accounts. Skydo has taken a $29 fee, $19 fee from this, $19 multiplied by that same exchange rate is so much. This is what you will get. So you know exactly that ah there is only one deduction from my account and everything underlying it Skydo takes care. So the international money movement fee, the correspondent banking fee, the SWIFT fee,
01:20:52
Speaker
the currency conversion fee all of this I absorb and I give you only one single rate. So, and then this um this transaction does not end here because remember I had mentioned GST initially. So, for a export transactions you do not have to charge GST you will you will charge 0 GST and you will say that this is an export transaction so no GST applicable.
01:21:13
Speaker
though There are some nuances to that, right? I used to run an HR business and I remember my CA telling me that if your place of service is India, which means that you recruited an Indian candidate for your foreign client, then you have to charge GST, something like that. Correct. So if the service is delivered in India, then GST is applicable. If the service is delivered internationally, then it's not applicable. So if you hire a candidate,
01:21:42
Speaker
and that candidate works in India for the international customer, then GST is applicable. but on Not on your service fee, but on the and you know contractor's service. OK. OK. Yeah. so So yeah. So there are some nuances. But let's say in simple terms, this is zero rated. So there's no GST problem. But to the GST department every quarter or every year, you will your CA will make a filing.
01:22:11
Speaker
that this is my business all of this is export and therefore, 0 GST. So, he will file a deal return, but for that will return one of the important backup papers is a foreign invert remittance advice that you need to have. This foreign invert remittance advice is a document that your bank will give you saying that this was an export transaction and we received the dollar payment. So, with banks you have to chase them for it or a different bank give you a different formats some some of the global payment platforms which originated outside the country and don't know all of these nuances, don't provide for it, and so on. So in in our platform, we have solved for this also in a seamless manner. So as soon as you get this payment, the FIRA is also downloadable and it's readily available. Then you can download this for a you know date date range. You can download this once a year, once a quarter. You can email it to your CA. All of these things have been done. So in a sense, what we have built is
01:23:06
Speaker
an invoice to cash solution, where you can come to platform, raise an invoice, send that invoice to your customer, send payment reminders. Once the payment comes in, you can track the payment at each stage. And then you can reconcile those payments to your invoices by downloading spreadsheet version of invoices and payments. You can send that those details along with the FIRA details to your CA and so on. So i we also, by the way, build accounting integrations. So we have tied up this to Zoho platform. And we are in the process of doing the same with Kali.
01:23:36
Speaker
So which means that you don't even have to you know go back and do the repeat work of reconciling it there. Once you do it here, it's reflected there. Or once you create an invoice there, you can bring it here seamlessly and so on. Okay, fascinating. ah You need your own, ah you need access to an Austro account then, because you said you are... but so do Through a banking partner. So we can't move any ourselves and we can't convert currency.
01:24:03
Speaker
So we need a banking partner. So the the reason it took us seven, eight months after we started the company to launch the product was that we had to find a bank who would partner with us, both on the sending side and the receiving side, because we need a bank to provide us those local virtual accounts. And we need a bank here in India to receive this bulk from aggregated funds and then convert it into Indian rupees and then, you know, send all the NFTs to different customers. Which bank did you tie up with in India?
01:24:33
Speaker
DBS bank. Okay. Okay. Okay. ah So essentially their nostro account, you are make like, they're lending it to you. know and i lose rent Okay. Got it. or And, uh, the virtual account numbers that you generate, uh, are these like charged to the exporter or it's all covered in that $19 fees. It's all covered. So, um, as a small startup, you have to think, you know, what's the least friction way for somebody to start using me?
01:25:03
Speaker
So if you start having annual charges, upfront charges, maintenance charges, etc, then there is more and more thinking points and more and more drop off points. so So we say anything up to sign up and creating a virtual account is fee of charge. And I am also not going to charge you a maintenance fee or anything because the moment you start giving people reason to think, why not to use that person?
01:25:27
Speaker
that per product, then they're not going to use you, right? Because already you are fighting many things. You're fighting a perception that this is a FinTech, is it more risky than bank? It's a new company, whether next year it will survive or not, who knows? You know, these guys haven't yet appeared on Shark Tank, so maybe they're not even good. All of these things are already there in people's minds. So you don't want to add more reasons to confuse them or, you know, dissuade them from trying you out.
01:25:54
Speaker
So we only charge everything that we charge is only that you know transaction fee. So we say only when you get money, we get paid. Otherwise, you know, there is no other charge. And they would have been pros and cons of doing a fixed dollar amount of $19 versus a percentage because then Somebody might say, OK, I am just charging my customer $500. So paying $19 seems like a lot. Whereas somebody who's charging $5,000 for him, $19 will seem very reasonable. what What is the way you think about that? So I think there we kind of went with what is our ICP. So um remember I said we started you know with manufacturing exporters.
01:26:44
Speaker
But as we did all the study after fundraise and we went we went ah to all the export hubs in India from Tirupur to Panipat and Ludhiana and Surat and so on and we realized that manufacturing exporters would be difficult to convert on day one. One, because as a third party payment aggregator, RBI has a certain ticket size restriction for me today. This was back in 2022. Now that restriction has gone away because RBI has you know further evolved that regulation and they have made us part of the payment aggregator framework.
Target Market Strategy and Pricing Model
01:27:19
Speaker
We'll talk about that separately but basically when we started we were part of a more restrictive regulatory framework under which we could operate where the maximum ticket size per invoice that we could process was $10,000. So that directly gave us a signal that we should go for the really small guys to start with. But we also said let's not go to the
01:27:43
Speaker
very very small guys who are comfortable you know receiving payments through credit card um right because that again is a very different use case and there probably you know the the need of the hour is instant the payment and instant received and so on whereas, bank payment is going to take a day whatever you do. So, so then we said let us look at that sweet spot of anywhere between thousand thousand dollars to ten thousand dollars which means that it is actually invoice payments It's not a checkout online or it's not a large manufacturing exporter. It's a small services company or a small or maybe even a small manufacturing company who's charging on an invoice, a few thousand dollars per invoice. So that kind of is where we felt the right sweet spot was.
01:28:32
Speaker
And and you know it's not like we were so smart that we identified this niche. It was a trial and error. We wrote on LinkedIn. We wrote on Twitter. We ah spoke to friends who were exporting, friends of friends who were running small IT dev shops, et cetera. And we realized that these ah this is a large enough market to go after on day one. This is another thing that I i think a lot of people
01:29:02
Speaker
you know get confused by when they start right so one is obviously the TAM has to be large there is no doubt about it but just because the TAM is large doesn't mean that you can solve everybody's problems on day one right you are a very small company with a very small solution so you should look for a very specific sliver where you can actually truly win and instead of trying to be a also ran in 10 different segments you be a master in one and so so so that's what we did we just said we We cannot solve for the credit card use case. That is not our ideal customer. We'll actually say, sorry, we can't help you. Or we can't solve the large manufacturing problem like Steve Edson's family business. We'll instead stick to this $2,000 to $10,000 thing, and we'll make them really happy. So that made life easy for us. So in that ticket size, then removing the percentage fee was an easy decision, because there we said,
01:30:00
Speaker
um Let's make life very easy for them and say we'll just give one number. So it's easy for us to sell. It's easy for them to consume that information. And it's easy for us to prove that what we're saying is correct. So your $19 pricing works for your ICP, your target audience. I'm wondering though that you took a choice to charge fixed instead of variable to simplify it for them.
01:30:28
Speaker
ah But are your costs fixed or variable? So I'm sure you would need to pay the bank who's giving you a no stroke out and there would be other sort of conversion charges. ah So are they fixed or are they variable? How does like what kind of cross margin do you earn on this $19 piece? Yes, there are some part of it is fixed and some part of it is variable. In fact, most most of our costs are most of our cost heads are fixed because they all are about you know,
01:30:57
Speaker
per transaction, collection charges, or per transaction payment processing charges and so on, irrespective of the ticket size. The partner banks, they are charging you a fixed amount. Yeah, from the sending bank or the receiving bank. ah However, the FX conversion is actually a variable cost. right So it is actually dependent on the ticket size of the transaction. And there we pay you know a pre-agreed rate, but it is still a non-zero number. So we will have to incur some of it. so therefore um you know my cost is variable whereas my revenue is fixed, which obviously gives rise to some challenges. But that's okay because that's, I mean, I don't think of any business model where you know people will create the unit economics perfectly on spreadsheet and then be able to implement it in reality. It's always like you figure out what works for the market, what works for the customer, and then you figure out a way to make money from there.
01:31:56
Speaker
okay And though your cost you said is largely fixed except for the Forex conversion charge, the rest of it is all fixed. Okay. And that Forex conversion charge would, I assume, be like a single digit percentage of this $19. Or is it like much higher than that? You know, o see, overall, while I don't want to be very specific about the margins and other things, I think overall we make a ah very good gross margin. In fact, payment companies are supposed to make 70-80% gross margin because their friction i mean the friction that they have to overcome to make that payment should be low. Only then they can build a large business because by definition, payment businesses are small basis points business, so which means that you have to move a lot of money to make profits.
01:32:47
Speaker
but But within that small basis points if you end up paying a lot of it to other people in terms of the cost of moving that money then you will not be left with making much money. So ah payment businesses are low take rate but high gross margin businesses and that's how we are also. So our gross margin is actually significantly north of 60% now and will actually become closer to 80% as we scale. So okay that's fascinating that payment businesses typically have high margin though but in India the UPI network doesn't yet allow that right because the UPI payments are very low. There's no merchant discount rate there for a large percentage of the transactions and
01:33:31
Speaker
Yeah, I mean, ah like I said, you know, payment businesses are ah low take rate, but high gross margin. So low take rate can be as low as, you know, zero or near zero, which is what the UPI is. I think it's it's a little unfortunate that, you know, it kind of became absolute zero, as opposed to, you know, some small margin, which could have been fixed, it should have truly made it interesting.
01:33:55
Speaker
um which is also one of the reasons why we started with cross-border than start with domestic because we said somewhere let's start where we can make a little bit of money and obviously cash is the oxygen right you have a little bit of cash then you know you are able to reinvest that into expanding your business find more customer segments And anyway, any business P&L is a combination of smaller P&Ls where you know you make different amounts of margins. So as we scale, there will obviously be parts of the business where we'll make a lot of margin, parts of the business where we'll make very less margin, maybe even some small parts of the business where we may not even make any margin or we may lose money.
01:34:32
Speaker
But overall, as a portfolio, you know you will start making money. So you can think of this as you know starting with the one segment, which is which we know there is a margin that is there to be disrupted and therefore a reason for us to exist. Make some money and then go on from there.
01:34:47
Speaker
Okay, interesting. You said your gross margin will go up from 60 to 80%. This is on the back of more negotiating power with your bank partners. Two, three levers I can think of. One is obviously as we scale our negotiating power goes up and we'll be able to get better and better FX pricing.
01:35:08
Speaker
Second is, as we open up two-way payments, so today we only support money coming into India. It's only a matter of time before we also support money being set out of India.
01:35:20
Speaker
The regulatory stance there is a little different. The ah work we need to do there is a little different, which is why we have not taken on all the challenges together. But as we start that, then you know you can when you have two-way flows, you can ah maintain a small internal treasury and you can really net off. So to that extent, you know you can reduce the cost of your FX conversions. And finally, bit scale.
01:35:46
Speaker
You will also be able to have other opportunities of making money, like, you know, have a small carry that that the bank can give you because they are holding your money overnight. So they may give you a little bit of that share of that carry and small. So yeah, I mean, there are a few ways to increase this.
01:36:04
Speaker
ah yeah Can you zoom in on the treasury point? You said you can save Forex conversion cost oh and that is because some Indian exporters are sending out rupees which you have to convert to dollars. Some dollars are coming in which you have to convert to rupees. So you can do the matchmaking there without needing to go to another like a Barclays or someone for the conversion. That's right.
01:36:30
Speaker
Okay. This, of course, you are ah the the bank, which is giving you an no stroke out, they will facilitate this and therefore save you the money. Okay. Okay. Okay. Understood. Interesting. But otherwise, the margins will be saved, whether it's money coming in or money going out.
01:36:45
Speaker
Like that $19 will be like the pricing will be similar. The gross margin will
Growth Ambitions and Customer Acquisition
01:36:50
Speaker
be similar. It can be different on the India out because the India out has got far more pain points for the players. So you can actually solve more pain and therefore make more money.
01:37:02
Speaker
oh yeah Pricing can be higher on the payouts. Interesting. Interesting. Okay. And what are your other costs? So one is of course the cost of maintaining the plumbing, which moves the money. What are the other costs like cost heads broadly?
01:37:24
Speaker
You mean variable costs? No, all total. Like one cost is the cost of the the pipes and the plumbing, which you pay to your bank partners. Yeah, then there is customer acquisition cost, which is probably the most important variable cost. So cost of advertising to get leads, ah cost of sales team and marketing teams to convert those leads.
01:37:47
Speaker
cost of operations and customer support, you know, functions to service those customers and so on. So these are all variable costs. And then there are some fixed costs that we'll have to incur, like, you know, we'll have to have a large product in the compliance team, which makes the product keeps continuously improving the product and so on. And cost of support functions like finance and HR and so on.
01:38:13
Speaker
which is then every other business, then tech costs, so cost of AWS, cost of other software tools that we use and so on. Okay. and How many transactions do you do monthly right now? We do about a thousand transactions a month today. And at what level will you be profitable?
01:38:35
Speaker
I think we should be profitable. I mean, I'm not talking about any intermediate funny levels of profitability, but real profitability, where you are actually covering all your costs, including fixed costs. We should be profitable somewhere between 5x and 8x of today's scale. Okay. And what's the roadmap by when do you think you will reach there?
01:38:59
Speaker
our our goal is to grow 5x the next 12 months so end of 2025 we need to we should realistically be 5x of today so definitely 2026 is the year and where we see that you know we should be able to break you okay okay amazing ah so 5x of today means you would be at a yeah ARR, like what would be the ARR? What would that work out to? well we We should be at about six million dollars of ARR. Six million, okay, amazing, amazing. how How do you, like you have fairly aggressive growth targets, ah what's the what are the levers that you have in your hands that make you so confident of setting such aggressive growth targets?
01:39:46
Speaker
Yeah, so actually I'll answer it in two ways. So this is not you know just a random ah number. So there is there is some logic behind it. but But that is still the second part of the answer. The first part of the answer is um just the ambition. right So yeah we are so small, the market is so large. a And the pain point that we are solving is real, which is proven by you know the customers who are transacting today and the money we are moving today.
01:40:16
Speaker
that it would be a shame not to be aspirational and ambitious and grow 4, 5x year on year. that's the That is how we frame the aspiration first of all. Then we can always say why not 5x, why only then why not 50x. There are practical limitations on how much customer acquisition cost I can spend.
01:40:41
Speaker
ah because I spend the money to acquire the customer today, but I get returns from the customer over many months. So there will always be a cash flow mismatch between spending today and earning tomorrow. And that for our current level of scale, we can only spend ahead that much, light so without becoming profitable. So that is what dictates the 5x and not the 50x.
01:41:00
Speaker
And the second thing obviously which is practical human conditions of um you know your team and yourself able to scale yourself up to managing that complexity where there is a limit on that. So, these factors broadly give me a range of anywhere between 3x to 8x is the kind of scale you can make. Last year for example, year over year we have grown 6x.
01:41:24
Speaker
Wow. But that's a very, very tiny base. So you can almost argue that, you know, that's not even predictive of whether we can do the same thing one more year. um So this is the first part of the answer, which is huge market, a lot of you know potential. So therefore, you know, you better grow fast. Second part of the answer is, you know, what makes you believe that you can actually do it. So if you 5X seems very big, but if you think about it and break it down month on month, it's actually about 16, 17% month on month.
01:41:54
Speaker
ah That's it. and So that's the power of compounding. right You grow 17% every month and then you know in 12 months without even you realizing it, you're actually at 5x of previous year. Can we grow 16, 17% month on month? That's the question. And we are able to see over the last six, seven months that we have been able to grow.
01:42:14
Speaker
even in our current business and there are new growth engines slowly coming in. For example, till yesterday we were only serving small dev shops and other tech exporters. Today we can actually serve Amazon e-commerce exporters because and we have been approved by Amazon as a you know payment service processor for Amazon sellers selling from India to the global marketplaces. That's certainly one more growth engine gets added.
01:42:40
Speaker
Then um we also have now realized that not only can we support payouts, sorry, pay-ins into India, we can also support payouts from, let's say, a US or a UK to India. That means that you know instead of acquiring only the receiver, can you also acquire the sender ah for whom you know it's a big pain point to make 10-15 payments every month. So you make their life easy by just saying that, you know hey, you make me one payment and I'll make sure that all of these 15 people get paid.
01:43:09
Speaker
So we just started that, this is not a new customer segment or a new use case, but a different go to market approach. And we just started doing that and we are seeing, you know, slowly and steadily some progress there. So yeah, I mean, it's a combination of proven growth over the last few months plus new growth engines getting added, team getting more mature, and therefore, you know, being able to handle slightly more complex problems and so on.
01:43:32
Speaker
Interesting. How much time does it take for ah the CAC to be recovered from a customer? Like the the customer acquisition cost that you spend, in how many months does that get recovered? Nine, 10 months today. We know that you know it can probably be better as we get to larger customers. Similarly, it can be better if we ah squeeze out some more efficiencies in multiple parts, but ah it is still not bad. It's nine, 10 months right now.
01:44:00
Speaker
Okay. Okay. And these are customers who have like monthly transactions generally. It's not like a one-off transaction. So there's like a recurring revenue coming from. Definitely. Okay. Okay. Okay. Okay. ah Why would Amazon need you? Wouldn't Amazon provide the payment pipes? like It's not their business, right? So they actually have multiple payment service his providers like us. See, they they are in the presence of making 20% margins. Why would they get into a business where they make 1% margins? Okay, okay, guarded got it, got it, got it. Okay, interesting, interesting.
01:44:34
Speaker
And I guess for acquiring centers, you already have an existing base of people who've used, who've been billed by the Indian exporters, the buyers, they would be an existing base to sell to, to start with. Yeah, that's the starting point. And then you, everywhere it's like that, right you you first prove your business model with some small sliver of people. And then the whole game becomes finding more such people and in a cost efficient, time efficient way.
01:45:05
Speaker
What's been your go-to-market strategy? like and These SMBs that you want to acquire, how have you been acquiring them? It has evolved over time. We started with my co-founder and I just going on LinkedIn and you know shortlisting people who have tech businesses, giving them a pay friend request with a short message. you know you know I was looking you up on LinkedIn and I realized that one of those messages you had said to me also. See, so my yeah ah so my targeting works then. yeah
01:45:40
Speaker
okay Yeah, so that that was our starting point. We started with that. Then gradually ah we realized that you know we now understand what the customer looks like. So maybe this customer can be targeted through paid advertising as well. In fact, before paid advertising, we also did a bunch of events and seminars, both physical and webinars as well.
01:46:03
Speaker
So we went across the country. Those were highly inefficient, non-scalable ah you know ways of a customer acquisition, especially given these are small customers. So it's not that you know each webinar would give me enough number of new customers to make that webinar or a seminar.
01:46:18
Speaker
financially viable but it actually allowed us to understand customers very deeply and you know in person because you actually go to an event in Ahmedabad or Jaipur or Chandigarh and you understand that you know these are the kinds of people who actually are setting up tech dev shops or digital marketing businesses and this is the reason why they are currently underserved and this is what appeals to them this is what does not appeal to them.
01:46:41
Speaker
And then you know you're more or less than your paid advertising pitch writes itself because you understood these customers up close. And so LinkedIn plus ah these seminars and webinars allowed us to understand how to talk to these customers and what to tell them when we talk to them. Then with this, armed with this, and we also had kind of promised ourselves that we wouldn't spend a dollar on paid advertising till we got to 500 customers.
01:47:09
Speaker
so So, we started paid advertising only after 500. And by that time, you know we had a reasonably good idea of what what we should tell them. And then, obviously, that has been its own journey. Initially, we started only with Meta. It took us a few months to stabilize Meta. Then we started advertising on Google. And also, this business is not a consumer business. So it's not like you know um headphones or shampoo or sneakers, et cetera, that you know a lot of people are searching for it. It's a niche use case. So fewer people are searching for it. So then how do you you know how do you figure out
01:47:45
Speaker
what to tell people when they actually searching for it, how to bring them into the sales funnel etc. So the Google has been its own challenge. um But quickly these two have now become kind of like about 60% of our acquisition comes from paid.
01:48:00
Speaker
about 30 to 35%, 30% actually comes from organic, that is people searching for us through our blogs, you know, reading our social media feeds, either my co-founders or my LinkedIn posts or you know, our Instagram, we have like a Instagram handle where we actually put funny reels on the life of a freelancer and life of a small business and so on. and People actually do react to it. Some people do come and search for it. Similarly, we are participating in a lot of you know communities, so Reddit communities, Slack communities, et cetera. And we answered questions there. So we are patient. We are not going and selling there, but we are actually trying to be helpful there.
01:48:42
Speaker
We answer questions around compliance, we answer questions answers questions answer questions around ah payment risks, about banking terminologies and so on. And eventually some of that you know feeds back into organic leads. So all of this put together is about 30%.
01:48:57
Speaker
And the last 10% is referrals. So we have a paid referral program where each time you refer, you get one transaction fee waived off and your recipient, if they sign up and do a first transaction, the first transaction is free. So that works nicely for some of the smaller customers. We haven't yet been able to translate this into how to motivate larger customers to refer because, you know, free transactions is not necessarily motivating enough or exciting enough for them, but something else might be. So we are still in the process of finding that out.
01:49:27
Speaker
But overall, this 30% to 40% of organic plus referral, if we can somehow make it greater than 50% and paid, we shrink from 60% to less than 50%. I think that will be an ideal mix and that's what we are trying to work on. Okay. How much do you spend monthly? What's your like marketing spend?
01:49:46
Speaker
You can't spend about please don't ask me how many customers we acquire every month and then you know back but forget because that's. hu No, that's fine. That's fine. Okay. Okay. Got it. So interesting. Now, what is ah like, you know,
01:50:11
Speaker
Is there like a community play of your own here that you're planning? Because like these your cohort is all people with a very similar and need to grow. ah You're essentially like like businesses who want to grow by exporting is like your cohort, right? i Doing so some of your own community initiatives and stuff like that.
01:50:32
Speaker
That's a great question actually and you know it was one of the first things that stuck us as we started doing these you know field seminars and so on. The people are very you know united by a common mission.
01:50:48
Speaker
um It has been challenging to build our community so far because obviously we are not large enough to have that convening power. And it also requires a lot of long-term focused investment into that. So it will not pay off immediately.
01:51:05
Speaker
we We have made some attempts, so we created a global growing global you know newsletter. created So we called it Growing Global. We also created a Slack group where we tried to add a lot of people and you know get them onto that. These haven't taken off yet. So us participating in other communities and being helpful and answering has been easier for us. That's what has scaled so far.
01:51:31
Speaker
Our own community efforts have so far been you know not successful, mainly because we have also not been able to put in that much of bandwidth on making it successful. But we
Competition and Differentiation
01:51:41
Speaker
are very keen to do it. In fact, we are very keen we have very clear and tall ambitions there. So we also want to create like a know ah data repository of small business because such things doesn't exist. We want to track this industry. We want to reward great exporters and great freelancers and people like that because they are truly unsung heroes. They actually bring in profits into the country every day.
01:52:06
Speaker
It is basically a small individual multiplied by so many people and which is a sizeable industry by itself. Tech startups which are venture funded but actually make losses, they are all written about all over the media. They get a lot of coverage simply because you know it just seems like millions and all these big words are newsworthy. Whereas you know small businesses who are actually bringing in profits into the country they don't have anybody to sing their praise. So we also want to create like an award awards showcase and all of those things. So we have um we have that aspiration. I think we just need to probably grow a little bit more to be able to you know significantly and systematically invest into this. Okay. Got it. Interesting. I want to understand a little bit about who you are competing against. I mean, you know one would be like, say, a Thomas Cook. ah Would a Thomas Cook be a competitor?
01:52:58
Speaker
like this money exchange? Not especially Thomas Cook or Western Union, et cetera, because one Thomas Cook ah helps in foreign exchange, but for a specific use case of travel. And that too primarily for consumer use cases. Similarly, Western Union is a consumer remittance platform. But the the way we look at competition is there are three kinds of competition. The first and foremost, which is 80 plus percent of market share is actually banks.
01:53:28
Speaker
So that's the primary competition. The second set of competitors are well established global payment platforms. Starting from PayPal stripe on the small ticket size end to companies like Wyse and Payoneer and so on who are also more B2B in nature. So this is the second category.
01:53:47
Speaker
And the third category is you know companies live similar to Skydo who have started recently in India and are trying to build. And here there are also mature platforms like Razorpay and Cashfree who are a big otherwise but small in cross-border payments and trying to build a business. And also other you know really new startups similar to us who have come in.
01:54:09
Speaker
So in bank transfer, essentially, then it's either a like a wise slash PayPal or banks. So banks, I understood like how you're improving the user experience as compared to the banks. How are you competing with a wise or a PayPal?
01:54:27
Speaker
So, there the the biggest ler that there are actually there are three reasons why we are different. But I think only one of them like really appeals to people before they sign up. The other two, they get to see only after they start using the product.
01:54:43
Speaker
um So, what they understand when they sign up is that you know their post payment compliances remember we spoke about all the ah trade compliances and GST compliances that you have to do. With that we have built a seamless workflow and since we are an Indian platform you know working to work working to solve the Indian receivers problem.
01:55:05
Speaker
We have built it in a way that you know truly is seamless for them from a tax compliances point of view. So that's what tilts the bargain in our favor when it comes to these platforms. Second is that we are genuinely you know cheaper than these guys. So their product experience is excellent, but they also end up charging a lot. And this sometimes is a ah little bit of a hard sell initially because they don't understand it upfront. like Because these platforms are also over time figured out very smart ways of putting their pricing in such a way that you know you don't understand how much they actually charge you.
01:55:40
Speaker
So, for for example, Razorpay now says, you know, we you know for this month we are offering you at no fee, you know, forex payments at no fee. But the fine print is that, you know, the there is no fee, but there is an FX markup. I'm going to transfer it at some FX markup rate, which is like very different from the ongoing rate.
01:56:05
Speaker
So people say, hey, you're charging me a $29 fee, whereas Razorpay is no fee. So why should I move to you? um And so on. so So the second part is a little tricky. there So that is where we need a sales force. Otherwise, you know it can easily be a dis fully digital self-serve product also. The sales force then tells them, OK, tell me how much money you're going to actually bring in.
01:56:27
Speaker
And then we have we have calculators. The calculator is actually available on our website also. So people can also do it self-serve. But mostly we just then quickly share the screen, show them on the calculator that, OK, even after no fee, this is what you will get bought online in your bank account from your company X. And this is what you'll get from Skydo.
01:56:44
Speaker
So that then people are skeptical because in general people have you know gotten and used to financial services companies misselling to them. right I think that's built and burnt into all of our psyche that you know if somebody says something which is too good to be true then basically I'm being taken for a ride.
01:57:00
Speaker
So, only when the first transaction happens and they really actually see that you know they got the Google rate and and so on, then they realize it. And the third thing which also they realize after they start using the platform is the fact that I am not just built as a point of service, a point of sale payments platform, but I've actually um've actually been built as an account receivable management software.
01:57:21
Speaker
So, for a really small company, life becomes very easy. You can raise the invoice with me, you can send payment reminders to your client, track those payment reminders, get paid, and get step-by-step tracking, send to your you know email and WhatsApp, and store all the foreign inward remittance advices in one place, send it to your CA, send it to your accountant, and download it as a spreadsheet for recon.
01:57:46
Speaker
ah Connect your Zoho accounting software with it like there are multiple small things that make your life easier Which you will appreciate only when you start using the software So yeah, so I would say in general when anybody asks me I always say people come for the lower fee people come for the compliance Then once they start using the platform people stay for the you know convenience and people stay for the transparency Okay, okay interesting ah Would the Bitcoin will also be a competitor like crypto because crypto and Bitcoin will be will be you know rails for us. So there could be yet another way of moving money.
01:58:28
Speaker
um So, in fact, let's say we tomorrow expanded to, you know, instead of US to India, we support US to, I don't know, Venezuela or US to some African country which supports, you know, crypto. We could straight away start using crypto or stablecoins, you know, overnight to move money. And it can make our payments instant, it can make our payments even low on even lower on fees and and so on.
01:58:56
Speaker
and okay okay But in India, because of the tax regime, crypto will not work. Correct. And regularly also, I think RBI is still not you know open to stablecoins or anything else as a way to move money. And in general, I think um our regulator is know safety first, compliance first. um So they would take their own time to evaluate this and figure out a right way to do it. But whenever it comes, it just becomes yet another way for us to move money.
01:59:25
Speaker
What is your take on crypto? Are you like pro-crypto or neutral about it? I am pro-crypto in the sense that I'm pro the technology that enables crypto because it creates you know distributed the ownership of assets which can be easily verified at a very low cost. And like I was giving you the trade finance example earlier in our conversation, today you know there is so much of money lost and efficiency lost in people making very simple verifications. right So just to verify your shipping bill, verify your you um
02:00:01
Speaker
You know, payment and verify your documents. There are huge trade finance shops and factories set up by big banks to essentially verify, you know, third party information where it's not like they are doing any great intelligence in verifying it. they're just know manually or operationally rechecking it, running them past certain sanctions checks and so on. So if all of that actually kind of you know was able was but was being done in such a way that the the veracity of these documents and all of this is done you know in a distributed manner, then you could save a massive amount of money and remove massive amount of inefficiency.
02:00:39
Speaker
So I truly believe in the technology or the blockchain technology that underlies crypto. Its manifestations are still very, very early. i think I would say that, you know, we are just beginning to see the early manifestations of this technology.
02:00:51
Speaker
and over time it should be fantastic. I also see why governments are a little skeptical and you know are also throttling this technology because it kind of ah flies against the face of the whole concept of a centralized government and authority and control.
02:01:10
Speaker
so So I think it's a, I would say it's it's much larger than you know a small financial services use case. It's a fundamental philosophical question for humankind. But I believe in the underlying technology and I'm interested to see what all manifestations it will take over time. Like how in India we now have each Alani invoicing, which has automated all of that. oh okay doga So something like that for a global scale would only happen on a distributed ledger.
02:01:39
Speaker
exactly Like it would be hard to have a central agency managing it. Okay. Okay. Interesting. You said financial services is a supply starved market in India. What do you mean by that? um I mean, if you look at any financial product, whether then loans or, you know, even investment advice or, you know, insurance everywhere, I think, you know,
02:02:08
Speaker
the the market is under penetrated. Everybody wants it, but they're not able to get it at the right price. So if we are if you are a 750 plus credit score person, obviously every bank in the country wants to lend to you.
Company Culture and Hiring Philosophy
02:02:24
Speaker
But if you are between 650 and 750, the number of people who want to lend to you just dramatically drops. If you are below 650, absolutely nobody wants to touch you.
02:02:33
Speaker
But literally like 5% of the country's population is actually that in that way credit worthy rate. So the remaining 95% people don't have access to financial products at all.
02:02:45
Speaker
um in fact if we just you know If we move outside our bubbles, we're all in a fancy apartment complex bubble or a startup bubble or a well-paying corporate bubble and so on. But if we just move outside of our bubble and meet people, they could be even friends and relatives who are working in small private companies or who are self-employed and own a bakery or own a restaurant.
02:03:11
Speaker
i or are in the logistics business, whatever it is. Even doctors, lawyers, ex-service personnel, ex-policemen or existing policemen, ah you will see that you know it's just impossible for them to get credit. It's very difficult for them to get credit or any financial product for that matter.
02:03:31
Speaker
so So India is massively supply starved. um everybody um and And just imagine there are so many multi-billion dollar financial companies who are just built on serving the you know top of the pyramid. And there is still so much port potential left to serve the rest.
02:03:52
Speaker
Okay, interesting, interesting. You had ah ah spoken about what matches between you and Mauvin in terms of culture, like you are both very focused on creating a good culture and you spoke of how Ola's culture was very abrasive. Tell me about what kind of culture you have built here and how you built it at Skydoh.
02:04:15
Speaker
Yeah, ah it's a work in progress, obviously, but our intention is to build a culture where um it's a very high ownership and high accountability culture. Right from the beginning, we believe that
02:04:30
Speaker
It's very difficult for two people, however smart, however driven, and however hard-working they are to build a company. It takes a lot of people to build a company. So the game is actually in finding a set of like-minded people, giving them extreme ownership, and also showing them the path that you know hey this extreme ownership Carries risks and you know challenges, no doubt. But it's a path of extraordinary reward, primarily for your self-development and growth as a person, as a professional. Secondarily for you know your career in terms of your experiences. And then finally, as ah as a very, very healthy by-product, you know you can you should definitely be able to make a lot of money. and So if if this resonates, and if you feel like you know I want to take on that path of high ownership, high outcome,
02:05:22
Speaker
That's the kind of people we want. And ah by the way, whatever I just now said, I would say you know no founder would actually disagree with it. Everybody would want something like that only. But then walking the talk is very hard. right So being able to implement that is not easy. So how do you consistently hire great people? Pay them really well. like Pay them way beyond your means. So for example, our leadership team right now,
02:05:47
Speaker
We pay them way beyond our means. Like if I compare our company's leadership cost bill versus other companies at similar scale, I would think that we are at least at 3x, 4x in terms of leadership cost. But that was a conscious decision. We said that, you know, and great people only can build great companies. Two founders with a bunch of you know smart but completely inexperienced youngsters or, you know,
02:06:15
Speaker
just average performers will not be able to achieve anything. It will only create more and more stress. Instead, let's actually build a great team. If we win, we all win together. and you know then So, sort of which means that, you know, first of all, finding great people who in their areas have to be better than we are, then paying them really well, sometimes way beyond your means with the aspiration that, you know, with scale this will get normalized.
02:06:42
Speaker
And then you know in good and bad times so holding it to it because that's very challenging. And then third is giving them you know good ESOPs and then constantly topping up those ESOPs so that you know they feel continually invested in the mission. This itself is tough. Then the other thing that we are also trying to do is implement our own version of being radically transparent and you know
02:07:11
Speaker
you know polite yet you know honest in how we give and receive feedback. So we don't try to varnish the truth or say half truths or outsource the bad message to to a HR person or something like that. We try to tell people when it's not working had We are also open to receiving that feedback. and we First of all, we practice it but between each other. So, Movan and I meet every Saturday. um you know Whether we have work or not, we still continue the two of us continue to work on Saturdays. And among all the other things, there is 30 to 45 minutes that we set aside for just giving each other feedback on various things. There are certain parts of the company that I run, there are certain parts of the company that he runs. But we make sure that
02:08:01
Speaker
we let the other person know what we actually think of those areas. And if we have any concerns there, like for example, if I feel like he's probably hiring one or two people too many in some particular area, I actually bluntly ask him, why do you think you're building so many people in this team? Do we really need and then ah he doesn't think of it as an affront, he actually is happy to then sit me down and explain to me why he's hiring. Similarly, if he thinks that, you know, growth is slower than what we think, or probably I'm being softer on, you know, ah the team which underachieved targets, he doesn't mince his words, he just directly and bluntly tells me that. And then I also tell him my point of view on what I'm thinking and so on. So I think this, we practice among ourselves, we practice it with the team. So all of this is still around the leadership team.
02:08:46
Speaker
which is very important. Then the other thing that we also do is we are extremely transparent with everybody. So everybody in the team knows the full P&L. They know exactly how much money is left in the bank. what And last year when I was fundraising, I was continuously updating the team on what's happening, what's not happening.
02:09:07
Speaker
and so on and i I don't think there is any secrets within the team. So we just tell everybody everything. This is also very difficult and it has been continuously challenging as we have expanded the team because it is very easy to do this when you are 10-12 people and most of them are of a certain maturity and intellectual caliber that they can handle information well. But as you expand the team and you bring in new youngsters, new frontline team members who may not be that experienced to handle information it is challenging, but we will continue to do that and we will continue to believe that people will be able to rise up to the occasion and handle that information.
02:09:44
Speaker
um So, whatever we do, our all hands is fixed and we never, you know, not do it. And our all hands are, you know, like every once a month, it talks about company strategy, it talks about what we achieved in the previous month, where we did not meet our goals, where we did what we struggled with and so on. So, I think we are just being open, vulnerable and candid with ourselves, with the team.
02:10:08
Speaker
and We pay them well, we we think that we should be industry top quartile paymasters right from the beginning. That's something that we have set ourselves to do.
02:10:20
Speaker
And wherever we think that you know we are underpaying, even if the person doesn't recognize it, ah the moment we know it, we actually like fix it. so And we've done it a few times, and then that creates a tremendous trust you know reinforcement loop, which then people know that, OK, these guys will not screw me over on purpose. If at all they're doing something you know which is suboptimal, it is probably because it's a blind spot. So let me go and highlight it to them.
02:10:46
Speaker
so So yeah, this is the kind of culture we're trying to build. we may I don't think we'll be perfect, right? So there may be some areas here and there we might miss out on, but this is at least the intent and the actions behind the intent. Amazing. how do you What's your hiring process like? How do you identify he's the right fit for us?
02:11:06
Speaker
it's It's hard. So we are ah slow in hiring. So I would say at all points of time we are perennially short stuffed. And i'm I'm happy to be in this position than actually be overstuffed.
02:11:21
Speaker
um So first of all, for each role, the process starts with first of all justifying whether that role is required. um So at a philosophical level, one thing we have decided is that until we reach a reasonable scale, and we should not hire even a single person who does not directly contribute to the revenue. right and Which means on day one, we did not hire any founders office or generalist or some kind of like these vaguely defined roles where they would just be leveraged for me.
02:11:53
Speaker
automo and Instead, we said on day one, the only thing required is an engineering team, one product manager, and then you know one person for compliance and one person for finance. If we were running an e-commerce business or a software business, etc., even the finance role we might have delayed. But because this is a payments company and there are lots of regulatory stuff involved, etc., we thought finance was critical from day one.
02:12:17
Speaker
And we did not hire anybody for sales, etc. We hired the sales people only after we ourselves could sell to 100 customers and so on. so So that has been one constant philosophy. So which means that we did not hire anybody where we were not 100% convinced. Many times I have seen even my past roles. Poor interview process is usually because of poor clarity on whether that role is even required.
02:12:43
Speaker
right but But the moment you are 100% clear that I need this role, then it actually fixes a lot of things. It fixes then what level you have to hire, what persona you're looking for, what is the exact thing that person will do. So you can write a very, very good job description. So the second thing then we do is we write the job description as detailed or as clear as possible. And along with that, the interview process. And no interview at any level for us is less than three rounds. So we typically do between three to five rounds, sometimes even six rounds.
02:13:10
Speaker
um And for the more frontline roles, there is always a written component, ah where we actually ask people to work hard on the internet, finding some information, compiling that information, etc, which teaches a lot about their ability to actually sweat it out, ability to actually compile stuff and so on.
02:13:29
Speaker
um so So first is so fastte philosophy. Second is clarity in job description. Third is clarity in the interview process. And fourth is then ah having every interviewer feel like they can veto it. Veto the ah whole process. space So basically, we say we say yes only when all of us are convinced. Even if one of us is not convinced, it's a no. So we are saying that you know we are very, very happy to make the error of omission, but not the error of commission in hiring.
02:14:00
Speaker
Okay, that's that's a good philosophy to have. ah Let me end with this. You've done multiple types of entrepreneurial expenses from a family business to a highly funded startup environment to now your own. what are you know What are some learnings that you would like to give to young aspiring founders?
02:14:28
Speaker
Yeah, so in general, I think advice is at the toughest part because it's highly subjective and contextual. I think honestly, instead of advice, I would actually reframe it as what are some of the you know things not to do. So I think going in with a very fixed mindset on anything is actually not a great idea.
02:14:56
Speaker
Because you know and I have made this mistake multiple times. I've actually like just boxed myself into very very narrow ah Positions very early on in my career instead of just letting things happen to me and just taking things a little to a little more open-ended So I think that I would say It's better just to because you know see life can surprise you a lot and mostly in the positive direction because Great, you know what are the great things possible with yourself, your own time, with business, with the job experiences and so on. It's very difficult for you to predict because you don't even know it. i So if I have never seen a skyscraper and then somebody asks me to actually draw the tallest building I can think of, then there is no way that I would ah ever actually think of it. So I should not fixate on something just because you know this is the boundary of what I know today.
02:15:52
Speaker
So that's one thing and it manifests itself in multiple ways. It could be about taking a particular job. It could be about exploring a different role or a new area of work. It could be about friendships. It could be about traveling to a different country and working everything. So I think having that ability to just let life teach you rather than just going into fixated, I think is the first thing I would say.
02:16:20
Speaker
a Second thing I would say is co-founder is very important to start a company. um There may be certain you know amazing people out there who are able to do it all themselves. But for most of us, entrepreneurship is too painful, too hard, too lonely, and too scary to do alone, to do it alone.
02:16:43
Speaker
And I think having even one other person, it just just makes the job infinitely easier. Because then you're no longer actually ah conjoining yourself and your business. and You're you' are happily able to see these two as two separate things.
Funding Strategy and Future Plans
02:17:01
Speaker
Sivacen, as an individual, today comes to Skydo to work and then goes back home, has his life, his family.
02:17:07
Speaker
three words in a moment together have built this entity called Skydo which they're trying to make it successful. So that separation in my mind, in my psyche is so healthy, it's so important. This is the number one thing that a co-founder brings to the table. um Of course, apart from that, you know, the ability to push each other, the ability to be, you know, taking complimentary roles. Somebody can play A plus game one day and then you can be a little bit down, then other day things can reverse. All of that are still, you know, secondary benefits, but the primary benefit is to then not, you know, conflate individual success with company success or failure. And that's that's very, very important. press And then the third thing I would say is not be too money minded or money focused. I think that's some somehow, you know, I feel like and
02:17:56
Speaker
And I think a lot of smart people have said it, including the Psychology of Money book recently, that you know ultimately the feeling of being wealthy is actually very different from actually being financially wealthy. and Both are completely dealing concepts. So therefore, if somehow you can make it not about money, but actually about something else, then it's also much easier to make very bold decision decisions.
02:18:21
Speaker
And courage courage is actually the only thing that truly separates people who are actually entrepreneurs versus this who are not. And you don't have to be start a company to be an entrepreneur. You can be an entrepreneur in multiple things. You can just start a running group in your area and make it a 100-member running group and you are still an entrepreneur.
02:18:37
Speaker
having done something phenomenal. So I think courage and you know action orientation are the only two things and what really creates that courage and orientation to action is actually not worrying about consequences too much. And one of the kind of most important consequences that Cripples is actually worrying about financial consequences.
02:18:57
Speaker
So, if we can just not do worry too much about it, i of course, we all need money, we all need to have a good life. But if you can just put it in perspective and say, you know, what's the worst that can happen? Even in that worst case, I'm not going to ah really be penniless. It's okay. These things are you know really not important. I'm doing it for this purpose or for this goal and that goal is not necessarily money linked. Then I think you can be a 10x version of yourself and a much bolder version of yourself.
02:19:24
Speaker
oh You know, you you raised five million in your last round and five million in the first round. I'm sure in your last round, you could have raised a lot more money. oh Right. like ah Because as you said, this sector is a sector in which VCs have a thesis that there is an opportunity to build here. There are global examples likewise ah like like, you know, multi-billion dollar valuation companies in this remittance space. oh And as you said, this is like high margin once you reach scale.
02:19:54
Speaker
ah So what was the reason to not raise more? why Why did you only raise five million? I mean, you could have raised more, you could have targeted at 10 million ARR in a year's time and all of that. Two things. One is while in general there is a massive interest and VCs are definitely long on this space. I think there is also a temporary challenge in terms of valuations. and so um So I think We raised too much money in the first round in hindsight. There is no such thing as too much money, but what I mean is we raised money at and too high a valuation in the seed round.
02:20:36
Speaker
Not because we wanted it but those were the that was the going they're they violent yeah yeah that was a going rate at that time and so it just happened. Now valuations have tempered a lot. The US Treasury being at 5% for extended periods of time just completely changes economics for everything in the world. All other assets are priced against the US s dollar.
02:20:58
Speaker
so So, then we had two choices. We had a choice of probably taking very little money, a but at you know just a reasonable valuation so that you know then over time we become like a much more interesting company for the next round. Or we had the choice of you know diluting a lot more, taking a lot more cash, etc.
02:21:20
Speaker
i just felt like having a little less money would also keep us more hungry, more focused and bring the valuations down a little bit so that, you know, then we are also putting ourselves in a good position for a fantastic fundraise next time or the next two rounds, etc. So I felt like the longer game was better than the shorter game. So that's that's the reason.
02:21:41
Speaker
Okay. Okay. So this last 5 million was at like a flattish valuation similar to the. We we still got a 1.5X from the previous round. So it's not like it was flat. But I think, you know, ideally we would have wanted to do it at a 3X or something like that. but yeah But like it is not, it's, this is more prudent and more long-term beneficial. Makes sense. Makes sense. Amazing. Thank you so much for your time, Srivatsan. It was a real pleasure talking to you.
02:22:08
Speaker
thank