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Decoding alternative investing | Saurav Ghosh and Vineet Agrawal @ Jiraaf
401 Plays2 years ago
Jiraaf is helping the common man tap into the exclusive investment deals previously reserved for the elite few. Saurav and Vineet talk about how Jiraaf lets you put your money to work directly in corporate debt instruments, bypassing the banks.
Additional links:-
1.How Fintech Startup Jiraaf Is Helping Indians Diversify Their Fixed Income Investments
2.Debt mutual funds tweak helps alternate investment platform Jiraaf
3.Bengaluru startup Jiraaf enables retail investors earn high-yield returns
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Transcript
Introduction to Giraf and Founders
00:00:00
Speaker
Hi, I'm Vinit Agrawal. Hi, I'm Saurav Ghosh. We are the two co-founders of Giraf. Giraf says India is one-stop alternate investment platform.
00:00:20
Speaker
The difference between the rich and the ultra-rich is simply this. The ultra-rich don't work for their money. Their money works for them. This essentially means that ultra-rich are much smarter about investing their money and using the power of compounding to grow their wealth.
00:00:35
Speaker
But thanks to startups like Giraffe, just about anyone can get access to the kind of investment deals that were previously only available to the ultra wealthy. Giraffe allows its users to directly invest in corporate debt instruments and eliminate the middleman, which is the bank. This can allow your money to earn double as compared to what you earn when the bank takes your money and lends it to corporates.
00:00:55
Speaker
Stay tuned for the conversation between your host Akshay Dutt and Saurav Ghosh and Vinita Garwal, the founders of Giraf. And remember to subscribe to the Founder Thesis Podcast and any audio streaming platform to learn from some of the smartest fintech founders in the country.
Saurav Ghosh's Career Journey
00:01:18
Speaker
So I was born in Calcutta, but that's, you know, just, but grown up in Mumbai. Growing up, I always had some inclination towards corporate setup. I stood first in my school, went to good 11th, 12th junior college in Mumbai, Ruparel, then joined BITS Pilani. You know, I went for my engineering to BITS Pilani, the Goa campus. Post engineering, I went to do my MBA at IMM Dabat. And over the last decade now, prior to starting with Giraf, I was essentially in the corporate environment working for different companies.
00:01:46
Speaker
I started my career in the infrastructure sector with a company called Feedback Infra, and then I moved on to a few real estate companies in Bombay and Bangalore. So when I passed out, I was essentially through campus placement, I got into Feedback Infra, which was into the infrastructure space. They also had a real estate division. And towards the end of my spring there, I was essentially consulting real estate companies at that point in time.
00:02:10
Speaker
And one of the last things I had was with Wadhwa group and you know, they offered me a job then, and then I actually moved into core real estate in that sense, right? So Wadhwa group was one of the top five developers in Mumbai and started my career there. That's my foray into real estate. But while being in real estate, I was always in finance. So my core job in all these companies was always fundraising and, you know, very capital intensive sectors, you know, I think.
00:02:36
Speaker
money has a big role to play in the real estate industry. I got a lot of exposure in financial, I would say capital raising, where I've raised capital now from international private equities, domestic funds, private sector banks, public sector banks and the likes, right? Vinith and I met through
Vinit Agrawal's Career Path and Meeting Saurav
00:02:52
Speaker
our professional careers. So, because I used to raise money for the company that I worked for and Vinith used to be an investor or a lender and we did approximately
00:03:01
Speaker
more than 15, maybe totaling 2,000 crores over the last 10 years. So how did you end up in the world of finance? So see, I was just post MBA. So I did my engineering in mechanical engineering. And the world of business is something which always excited me, even when I was doing my engineering.
00:03:18
Speaker
So post engineering, I had two choices whether to do, you know, an M tech in either automobile or aerospace engineering, which a lot of my batch parts did, or you could go into the world of finance via doing an MBA. For me, the choice was clear because this is something maybe being a Marwadi money is something which always, you know, naturally comes to you. And even post the MBA, you know, I was very clear that I wanted to do some sort of a job, which is very closer to understanding different types of businesses.
00:03:43
Speaker
So the natural choice while you know applying for job was that there were certain opportunities in banks where you could work in the credit space and the job was that you will analyze different types of businesses and you will you know basically actually eventually lend them. So initial part of my career which is around three years I spend in the corporate banking space.
00:04:01
Speaker
I was part of mid corporate team and then large corporate team in the state bank of India, followed by access bank. And then in 2013, I moved to a smaller set up, the Ramal fund, they had just started then it was private equity sense, NBFC kind of a set up that they had started.
00:04:16
Speaker
That was an opportunity to actually build something of our own from scratch because I was like the 10th employee to join them in 2013. And we grew that company from almost like a $15 million a year to almost $8 billion a year over 7-8 years. And that gave me, I was like one of the first employees to be hired by them in the entire South India. So
Founding and Evolution of Giraf
00:04:36
Speaker
we built the entire team in six years. We changed offices like five times. We grew from a two-member team in South India to almost a 70-80 member team.
00:04:44
Speaker
Okay. So it was almost like a well-funded startup where a lot of authority and empowerment was given to us at a young age to build the business. And that's how like you were lending to Saurav's employer, which was a real estate business. So that's how the relationship got started.
00:04:59
Speaker
So, tell me about the birth of Giraf. So, just to give you some context, Vinita and I, we actually both quit our corporate jobs just post-COVID. We were still largely corporate professionals. We still didn't have the risk-taking appetite in some sense, if I can put it in that way, to directly start and go to a full-fledged startup. I think the easiest time that we took was basically quit and start a services company.
00:05:23
Speaker
So which is a very different business because you're a few people who are running a small setup, you get monthly cash flows, you can still draw some salary, you know, actually working with quite a few of the large developers in the country. And that was a steady business, you know, giving steady cash flows.
00:05:38
Speaker
you're doing well, when in fact, I think in one year, what we build with unit all was, you know, commendable and great, even, you know, when we think about it today. But what that helped us to do in that once is that once you start doing something of your own, it suddenly gives you an order in a month flexibility to experiment.
00:05:55
Speaker
We are trying to figure out how do we build our expertise in the financial services side while we are a part of this services or consulting setup. And that's when actually it so happened that Vinit had written a LinkedIn mail to one of the founders of this startup called Eel Street which is
00:06:12
Speaker
there in the US. It's actually very similar how giraffe is set up today is just that, you know, obviously, they are three, four years older, and they are focused in a lot more exotic assets, because the mainstream that instruments in the US are very easily available, right. So but we had that conversation. So when we looked at real estate, we're like, hey, we have the expertise to do, you know, this, exactly this in India as well. And you know, I think quite well equipped to do this, because we have that expertise.
00:06:38
Speaker
So, Siddharth Shaul, the founder of FarmEasy, he's a batchmate of mine and a close friend from IMA. So, he wasn't buying load. We need that. I met him for dinner. We bounced this idea off with him. He was really interested. He said, hey, this is fantastic. I think there's a big market out there to build something like this in India.
00:06:55
Speaker
Yeah, both Vinit and I are not tech founders, right? We don't have that tech background. So, you know, building a tech platform is something that we felt was challenging for us. But speaking to a lot of people, you know, post our conversation with Siddharth, gave us a lot of clarity and idea on how do we go about doing that. And then that point, you know, four of us met, we kind of took a decision that, you know, Sivin, Navin, who are, you know, who are ender than us and who are with a more traditional mindset are well, you know, geared to running a services business because that's where their expertise is.
00:07:24
Speaker
and Vinita and I are being younger and having that I would say a more experimental mindset should take the plunge with Jira. So you like let go of your equity or like did you give them equity in Jira or how did you structure the exit? Our thought was quite simple. So Vinita and I had...
00:07:41
Speaker
like I would say played a role in the early days of Uniterity in the first one and a half years to build that as a business, right? But we kind of, since now we are moving out, we renegotiated and reduced our holding in Uniterity and then moved on to Giraffes. And obviously Saini and Navin, they come with, you know, 25, 30 years of experience themselves. They can support a lot in the initial days of Giraffes and building Giraffes as a platform.
00:08:07
Speaker
And so they were
Identifying Market Gaps and Giraf's Mission
00:08:08
Speaker
on the board as advisors and mentors, and they had a certain spread for playing that role and adding that value to get up. So that's the way the thing was structured. So what was the opportunity you spotted, which you thought that could be built into a large business?
00:08:23
Speaker
Yeah, so as Saurav mentioned, it was like a small office with four of us sitting and just debating ideas half of the time. In my previous job as well, we did a lot of structure transactions. So there was specifically one transaction which was the Embassy Read transaction which we keep on referring to.
00:08:38
Speaker
That was the first tweet in India and it was pre-funded by us and it was like a 16% IRR deal backed by read securities and we wanted as an employee we wanted to participate in that transaction. But the minimum ticket size for participating in the transaction was around 3 crore. We thought if people are given opportunity to invest in good quality transactions there will be a market for it.
00:09:00
Speaker
The only places where people tend to invest is equity, real estate or gold. Apart from these three asset classes, there is nowhere else where common folk can invest. And if there is a platform where we can provide those sort of opportunities, there will be people who would want to invest a portion of their wealth.
00:09:16
Speaker
Just to break down the REIT deal, which is the birth of this idea. REIT is like a real estate investment trust in which a company takes money from public like a mutual fund, I believe, and then they buy real estate with that and therefore the public has a fractional ownership like you would have in a mutual fund. Is that the concept?
00:09:35
Speaker
It's approximately what you're saying, but not exactly the same thing. The only difference is that you already have an asset, somebody already owns that asset. You basically lease that out and then you move that asset into an SPV and then people then become a unit holder in that sense. Okay, so it's like an IPO for a real estate asset, basically. Obviously, it's real mobile. Yeah, right. You make that real asset, you fractionalize it into bits of ownership and those become publicly tradable. Okay.
00:10:04
Speaker
And so what was this opportunity which gave you a 16% IRR? How is the REIT traded? Is it on the basis of the value of the underlying asset? Is there like a fixed formula for the price of the shares of the REIT or how does that happen?
00:10:19
Speaker
The pricing is like any other equity, right? I mean, it's a supply demand kind of thing. At the underlying, you have an asset and you have an yield, but if people believe the yields will rise in future, then obviously the price of that particular read keeps on increasing. So it's going to the market that way, the pricing of the read price. So essentially what you're saying is,
00:10:40
Speaker
There are corporate debt deals which earn as much as 16% and maybe even 20% rate of interest, which is the beat equity also. I think long-term equities give less than 20%. But a normal person cannot access it because of the minimum ticket size and you need to be like an NBFC or a certain type of an entity to really get access to those kind of deals.
00:11:04
Speaker
So there is an opportunity there to make that kind of a deal available to, let's say, someone who's just about an HNI. Yeah, not only the ticket size. One reason is the ticket size. Second reason, that is knowledge. So there are not many people who are aware that there is something like this. You might have money, but you're still not aware. And the third would be the accessibility, right? So those three things is what we are trying to basically solve.
00:11:26
Speaker
So there is no one out there who's actually structuring proper net opportunities, keeping retail investors in mind and, you know, opening it up for their issue. And if you look at corporates also for them, today, the only source of capital is institutions. So even corporates don't have access to retail as a source of capital.
00:11:43
Speaker
So just joining all these dots, you know, so there is, you know, where we thought the big opportunity is. And like I mentioned, you know, it was a intersection of our expertise of a large opportunity and, you know, creating some value and impact. Okay. So I did a BECOM degree about 20 years back in which we learned about something known as a debenture, which is essentially something that public can participate in corporate debt. Right. So what is the need to create? Why doesn't that debenture concept work?
00:12:13
Speaker
So, debenture is an instrument, it's like an equity, it's like a share. Right now, this debenture, similar to any equity share, it can be listed or unlisted. And like you have today, privately held companies. Similarly, you have privately held debentures. You also have publicly held debentures. So now, I'm just drawing an analogy from the equity market to debentures and the debt market.
00:12:36
Speaker
So today, you will see a lot of these large scale public corporate bond issues, right? Like, you know, like all of these PR Reliance, they keep raving through public debt markets. All large, crippling rated companies today are raising capital from public debt market because it's cheaper source of capital. In India, the way it is that only your top tier corporates have access to retail as a source of capital, which is done through these public debt issues.
00:13:02
Speaker
Now, the reason why the next tier of companies don't have access to is because of three reasons. A, in India today debt products are only looked at only from the lens of rating agencies. You know that this is a AAA rated debt paper or a AA rated debt paper or a E rated debt paper and that is giving you some sense of the underlying risk of this opportunity. Now, and the biggest challenging in India is the lack of faith in rating agencies.
00:13:30
Speaker
suddenly today are triple A rated ILFS or triple A rated DHFL or triple A rated ES Bank. Suddenly if they default the next day, how do you build faith and confidence on companies which are double A, triple B plus, et cetera, right? So there's a genuine lack of faith or trust in rating agencies in India. And today you participate in Reliance and Tata because you identify with the brand, you identify with the institution. But if a lesser known company, the trust is there.
00:13:58
Speaker
the underlying trust is there because of the strong brand value. But if there is a company which is great business running profitably, great in its operations, but doesn't have a brand because maybe it's a B2B company. So, you know, it's not a common brand in itself. But how do you then build trust with a company like that?
00:14:14
Speaker
So, that's the core of it and because of this, I would say big lacuna, the debt markets have not developed. The, I would say the consequent effect of that is even the debt market that exists, then the liquidity is very low, the liquidity is low, so you are not able to exit your debt, you know, investments easily, right? So, these are all the effects of it.
00:14:32
Speaker
Third, I think the government itself has not done enough to develop debt markets, right? And the biggest challenge in debt markets is taxation. Like while we offer, you know, what we offer, and you know, that equity and debt can give you same returns. But once you give equities a favorable, post tax return kind of change, right? So I think the government needs to step in and do a lot to also help that markets mature, and open in for light of participation, and also, you know, from tax and other regulatory aspects.
00:15:02
Speaker
And then what happens is these small debt issues are all privately structured and H&S participate because they understand risk, they are able to take those calls. They will have these wealth managers like IFL, Indian lives, vendors, they will structure these privately closed transactions, you know, where 15-20 H&S participate for 100 crores. And that's a transaction that is specifically being catered to them.
00:15:25
Speaker
So this market is now then being privately built or very, in a very closed manner. And so, you know, what we are trying to do with Giraf is just open up this entire ecosystem and say that, you know, we will structure good quality opportunities for you. We will bridge that trust deficit you have with rating agencies. So you can build trust on a platform like Giraf and our credit process. And then we are opening up and giving equal access to such a good quality opportunities for everyone.
00:15:51
Speaker
You know, it doesn't matter that an H&I must have fluent on an average retail investor. The opportunity for wealth creation should
First Investment Deal and Platform Development
00:15:58
Speaker
be unbiased and equal for all. So why couldn't then Edelweiss just open it up as well to H&Is? It would not be too big a stretch for them to just build an online platform where it's not just the UH&Is but even H&Is and slightly below H&Is also can just come in with let's say a one crore minimum ticket or one lakh minimum ticket size.
00:16:20
Speaker
They can do it, but you need to have a mindset of being a tech company. So that's the difference. I would say at least 90% existence of fintech in India is because of the inefficiency of the existing banking solutions.
00:16:36
Speaker
So, like for example, Neobank, can a HDFC not open a bank account using tech? Yes, it can. But see, it's not a DNA of the company, right? And how does it edelweiss, sir, when they do a debt deal? Like, let's give an example that 20 HNI's come together for 100 crore deal, a debt deal.
00:16:53
Speaker
What is idealized certainly in this? So they do it in two ways. One is for idealized because again they have multiple vehicles at their disposal. They are also an NBFC. They have funds of themselves, similar, you know, IFL as well. So they sometimes they take these exposures on their books and then downsell it and they are on a spread. Like they'll do a 20% transaction and actually downsell at 18%. So making a 2% spread. Sometimes they are on a distribution from the company if it's not taken through their balance sheet.
00:17:23
Speaker
So there are multiple ways for them to overseas. You know, also, one more, like this, adding to our website, like the reason I did I saw, you know, I felt they don't do this or can't do this for the traditional mail, right, has been a very in person advisory and service model, I think business. So for them, they are like, I need to give the same service to a guy who's with 50 crores, five crores, or 50 lakh copies.
00:17:47
Speaker
So traditionally, then they are serving obviously, you know, from them, the ROEs or return on effort for them is a lot more if they serve as the ultra H&I and H&I. Now, the only way to make a profitable business by servicing low like retail investors is by being text first.
00:18:03
Speaker
And because of them being such large profit, they can't be a tech-first organization today. For them, tech will always come later. They can invest in tech. But it will always be secondary for them. So we kind of change that and turn that around and say we are a tech-first company. Now the focus is in creating nonlinearity through tech. So that's essentially just what we need.
00:18:24
Speaker
Okay. Got it. Got it. Okay. So now I'm guessing here's what you would have needed to do. Like you would have probably first needed to source a good deal, right? Even before you go out to source investment money, because the way to source investment money is by having a good deal, advertising a certain return to make it appealing and attractive. So, you know, tell me that journey.
00:18:45
Speaker
So see, the first deal was very easy for us because, as we said, because both of us come from a real estate background and we understand real estate investment really well. So the first deal that we did was a real estate transaction. It was with a counterparty, which is Saurav's X company, which is Vadva Group.
00:19:01
Speaker
So it was like one of the top developers in the country. We wanted to obviously bring the first opportunity, which is really exciting. So it was a very good IRR, short tenure with a very good brand name and for a sector which we understand really well. These were the criteria for us. And that was the first deal that we did. It was a 20 crore transaction. It was actually a 120 crore transaction, the entire transaction. And because we were just starting then, we were not confident as to how many subscribers will subscribe to this paper.
00:19:28
Speaker
And what we did was that, you know, we spoke to like GM Financial to subscribe to a large portion of the entire debt. So the crore of this 120 crore was taken up by GM Financial and we subscribed to 20 crore and this 20 crore was then listed onto our platform. And then obviously, you know, it took us some time to sell the entire time.
00:19:46
Speaker
And what was the rate of return? 16%. 16.5%. Okay. So what is the process for her to get onboarded? Is there a certain, can anybody buy this paper and by buy this paper, it means essentially give this money to Giraf to further lend it out. So can anybody do that or is there a criteria? What is the way in which you onboard investors?
00:20:07
Speaker
Yeah, so basically anybody can come and invest in VJRAF platform. The only threshold is that we have a minimum ticket size of 1 lakh rupees. So that is the only criteria we have. Apart from that, we don't have any restriction as to who can come. Obviously, we do follow the prescribed KYC guidelines as prescribed by RBI and all. So that process has to be done.
00:20:27
Speaker
Okay. Okay. So just the basic KYC, which is like Adar and Pan, right? So that you need to do. And then one lakh, anybody who's ready to invest one lakh or more can access this investment opportunity where they get a 16% rate of return. What was the duration for this first one?
00:20:42
Speaker
That was a two year transaction, but it got prepaid in less than a year. So tell me how you sold this. How did you find investors who would want to invest in this? Initial investors were obviously friends, family, friends of friends. But you know, when you start platform like Giraffe, obviously nobody knows about what Giraffe is, right? So you try and reach out to whomever you know, and then you try and explain them about the transaction.
00:21:06
Speaker
We were lucky enough that, you know, especially in the financial world, there are a lot of people who know us and, you know, are aware of what the transaction is. So a good portion of the said transaction was subscribed by, you know, people from GM Financial itself and from, you know, Wadhwa Group itself and, you know, our friends and families.
00:21:22
Speaker
So that was the first deal. We said that no one knows giraffes. And investment is a very trust-based process. So while there is no trust on giraffe, because it's actually not even existing before that, so where do you derive the trust from? So the trust then comes from people who know Vinit and me, and the trust comes from people who know Varvagroop at the counterparty.
00:21:43
Speaker
right? Because then they appreciate that, you know, there's a good quality, good quality underlying and, you know, product, etc. Right. So that was, you know, and then that's the kind of strategy that followed what we need. Right. Like we reach out to our friends, network, people who understand real estate, well, people who understand finance, well, explain the product.
00:22:02
Speaker
We reached out to the other group and they are employed because they were like, hey, you know your company the best, you know how good that is, why don't you try and participate through us. We reached out to JN Financial because they are employed because they were anyway co-lending in the deal as well. So we are like, your organization has done a credit, why don't you come and participate. So it's a mixture of how do we derive that trust from which are those aspects and
00:22:25
Speaker
I would say opportunity is for people to build confidence on the product and that's the thing that we followed. And was
Revenue Model and Business Expansion
00:22:31
Speaker
the tech ready before the first product? How did you do the plumbing of getting the money from retail investors to vadva group? Yeah, so tech was ready. So the tech journey, it's also an interesting one. We got reduced to this firm called MVP Rockets and they were also starting up in actually providing services to startup to build their MVP. They were a great team of Praveen and Giriya, their founders.
00:22:52
Speaker
They were a great team who helped us get off the ground and build the product. And in fact, we started engaging with them in July. And for September, the product was ready. 10 September, 21, which was Ganesh, that year we launched Giraffes. And 20 September, we launched our first build, which was in Padma Group. So in fact, the transaction was done online. Our very basic tech was ready, it was very basic then, but you could come view the opportunity
00:23:18
Speaker
invest your money through a payment gateway and net banking and we would allocate the securities. So that was a very basic infrastructure which was ready when we logged that deal. And how did you structure it? Like the money would go to an escrow account and then it would go to Wadhwa group. Was it directly going to Wadhwa group and Wadhwa group was paying you like a sourcing fee? So again, we took GM financial help over here. So because we had structured the opportunity, we had told them you need to warehouse this transaction for us for two months.
00:23:49
Speaker
In fact, J.M. Financial held this, so they had given the entire money, 120 crores to Varvav's run, and then they held these debentures on their books for us, and as and when they, we used to find investors to sell it to, they used to transfer the debentures to them. So it was, you know, so that was the, so from that perspective, they got a single short check from J.M. Financial.
00:24:11
Speaker
And that time was kind enough to, you know, warehouse it for us and help us get started. And what is the price of what? So that time it was four lakh rupees. Yeah. So the first product we made was a minimum of four lakhs.
00:24:26
Speaker
Today you brought this down to 1 lakh. So essentially the way it would work is you would find a party which needs debt and you would structure with them debentures which are worth a lakh each and then you would find people who will buy those debentures and how would you earn in this?
00:24:45
Speaker
So because we structure the entire opportunity, right? So again, we are able to take a processing fee, a platform fee, which is a typical investing balance. So we take a one-time fee from these companies for structuring the transaction and providing them capital. And so if you look at it now from a company's lens, when we structure transaction, a company agrees to a cost of capital that the company is willing to pay.
00:25:11
Speaker
And we feel that this is the IRR or yield at which I should list it on the platform, so that it's a fair pricing for retail investors. And then there is a differential, the cost of capital that the company is paying, the yield or IRR with the investors earning, and that differential in between is what we make as a one-time fee. Effectively, that's the way it works.
00:25:32
Speaker
Okay, which you directly charge from the company. So like the company will say, okay, I'm willing to pay 18% for access to debt and you think that 16% will be a good pricing for it and that 2% you will charge the company as a platform fees and you are earning from the company or you don't charge the investors. Okay, got it.
00:25:52
Speaker
So, doesn't this have an inherent conflict of interest that you are not representing the investors, you are representing the borrowers? Because we are charging fee from the borrowers. I think what is important to understand is, you know, we are trying to be in a business, build something within last decades, and Jira believes in this credit quality and that's why we are offering it to you.
00:26:14
Speaker
We can charge investors as well. It's just that it's easier to deal with one counterparty than with 100 investors. Essentially, if you were to charge investors, then your cost of sales would go up quite a bit because there's a little more friction to make an investor understand why you're charging him, etc.
00:26:31
Speaker
Right, you know, there it becomes that, you know, we list something at 18%. I will charge 2% fee. So I would tell the investor you're getting net 16%. And a lot of question around, you know, can you give me a discount of 1% I don't
00:26:47
Speaker
So, we are like, you know, we want to give you one C, which is clear, no terms and conditions attached to it. You get what you see. We also price it based on what we feel is fair risk, right? Like in point is that investors should get a fairly priced product. So, they are taking some risk, they should get a fair yield commensurate to the risk that they are taking. Now, how do I tell our investor why I am charging half a percent spread in one transaction versus the one percent spread in another transaction?
00:27:16
Speaker
It was very difficult to explain to people who don't understand the structuring aspect of it as well. So we want to make it simple for retail. So you have started buying on your own balance sheet now, like what GM did for you earlier where they bought those debentures and then they kept transferring to your investors. Today you do that on your own balance sheet.
00:27:35
Speaker
Except that one transaction, I think everything you have done. Okay. So after this
Diversifying Investment Offerings
00:27:39
Speaker
one deal, what next? Did you then try to raise seed capital? Because if you did subsequent deals on balance sheet, then you must have needed seed funding. Actually seed is what we had done when we started off that $1 million. Okay. And after that, we did our larger round of around $6.5 million, which was led by Excel partners. Yeah. So we raised capital, which is helping us to do the transaction that we had.
00:28:01
Speaker
Okay. Okay. And tell me the journey. So you did that one deal in two months, you know, subsequent to that next couple of months, what was the journey? Like how many deals were you doing each month? How much time was it taking you? How much amount were the deals worth? How much were you like, just, you know, take me through that journey to where you are today. So initial four, five months was quite challenging, I would say. Right. So we launched this first deal in September, right? You know, we thought that we will be able to distribute it maybe faster than what we eventually ended up doing. Right.
00:28:30
Speaker
It took us 75 days. Then the second thing that we were very clear about that we wanted to set up Giraf as a multi sector or sector agnostic and product agnostic fixed income platform. So we didn't also want to keep bringing real estate opportunities because by we knew we could build a very large exposure there. But the idea was to ensure that we are able to set the stage for Giraf to be a multi product horizontal fixed income platform.
00:28:56
Speaker
So the next one, and we also wanted to obviously also demonstrate that, you know, we are able to structure product bring opportunities, you know, in varied asset classes as well. Right. So the second transaction we did was then completely different and the focus, you know, kind of shifted. So we said, we'll not do corporate that we did a product called leasing.
00:29:14
Speaker
This was with, you know, Everest fleet, which is Uber's largest fleet operator in India today. So today they have 6,000 cars on the Uber platform, but back then when we spoke to them, which was in October 21, they had, you know, almost 1,200 cars, you know, back then. So they are not as large as, you know, what they are today as well.
00:29:33
Speaker
you know, we went and met their founder through that large area, got a lot of comfort on the business that they're doing. And then we were able to structure a very small five crore opportunity because it was, we had seen the challenge we faced with our first opportunity in distribution. So we wanted the second one, we realized let's take smaller. So we took a 20 crore transaction, transaction on the first one, but we said we now chose smaller ticket sizes subsequently till we build our own strength.
00:29:59
Speaker
So, we did a five-prune transaction in the first week of December, which was the next opportunity to post the end of September, almost after a two-month break. And then, this also took us about 60 days to kind of distribute, almost a 20th of January, first week of February, 2020.
00:30:18
Speaker
So this was essentially like money to lease cars. So it was like an asset debt load because the car is there as a collateral. So and this car, we really like cars as an asset, right? Like today you can lease computers, you can lease, you know, variety of things, but cars, especially in the Everest concept was very good because it was an operating revenue generating asset.
00:30:40
Speaker
Because the car was being run on an Uber platform, every car generated revenue and it generated more than enough of revenue for the lease that they were paying us for the fraction of that. And the secondary market for an asset like car is well-established, the pricing is well-established. So this, from a D-Link concept, it just picked on our boxes. We really like Time Race as a counterparty. I think they are one of the more efficient
00:31:06
Speaker
car operators, you know, that Uber or Ola has probably today in the country. So all boxes picked. And again, I think you were able to structure a really good. So Everest has drivers or the payroll, is it like, like they buy cars and then they employ drivers and then this is deployed in Uber's network.
00:31:22
Speaker
Yeah, they are not exactly on the payroll and a contractor in some sense, right? So not on the payroll, but yes, like, you know, they are the drivers on their salaries, you know, through Everest. So I think what Everest adds value to drivers and obviously the car ownership, you know, is then taken care of. So driver doesn't need to. So, you know, that's a big hurdle or roadblock for most people who want to start driving.
00:31:44
Speaker
Right? So the capital problem is solved. And then Everest also takes care of a lot of their ecosystem, right? Like for insurance, to just health benefits, to, you know, place of stay. So the entire ecosystem is then very eased out for the drivers. And, you know, we see the drivers get money committed at the maintained and, you know, they see.
00:32:03
Speaker
Because of Everest and the way they run the car efficiently, also the utilization of the car is higher than, you know, what probably, you know, the driver would have done themselves because they are deploying cars based on data. So, you know, they exactly know how many cars to deploy, which city, you know, where there is a demand, etc. Right? So, from a driver perspective, like then tying up with Everest is quite meaningful.
00:32:24
Speaker
So, that was our product 2 and then product 3 we wanted to then again further say that we will go to a new industry with a new product. So, we did corporate debt in the real estate sector, we did leasing with Everest. The third opportunity we said we will wanted to do an invoice discounting transaction, you know, so where we are funding working capital and receivables.
00:32:45
Speaker
So for this, essentially then what we did was the challenge with invoice discordant receibles, it's a 16, 90 day product. And while you don't have demand predictability, if I take 60 days to distribute a 60 day product, then that's challenging, right? So we had, you know, work reverse in this case. So what we started doing was we had a company called Addison, which was also a startup, but they had raised significant amount of equity. We had common shareholders, you know, so we got introduced to them. And we knew there is a need for working capital over here in this company.
00:33:14
Speaker
And then we started pitching it to, again, H&S to begin with, to say that, hey, are you interested in participating? If yes, I have this opportunity. So whenever we got a commitment from these H&S or large investors, we used to then structure and back to back do the transaction so that you don't spend time in distributing that product on the platform. Because like you said, we know otherwise we had no clarity or visibility on, you know, it is listed how much time we will take to kind of distribute.
00:33:41
Speaker
So we started building scale then by servicing these initially, you know, 710 HNI is doing these involved discounting transactions, parallelly distributing Everest, which took us two months. And then in Feb, we did a fourth product, which was again a corporate debt, but we now did it with an NBFC. Right. So by Feb, the other thing was, you know, we had set up a decent team. So, you know, when we had done our first opportunity, we were a five member organization.
00:34:07
Speaker
When we did our second opportunity MRes, you would be a 12-13 member organization. By February of 2022 this year, we were an 18-20 member organization. So then we had the head of investments, Vikas, who joined in. He came with a great pedigree prior to starting out with Iraas. You know who was the batchmate of mine came with a great pedigree in the venture ecosystems.
00:34:30
Speaker
So the team and the leadership team also started falling in place. And we were then able to, I would say, spread our wings and actually deliver on all the expectations that we had of ourselves. So we said we wanted to create a multi-product platform. So by February, we wanted to create a sector agnostic platform. So by February, we had done a corporate debt in real estate.
00:34:51
Speaker
In February, we did our first corporate debt with the NVFC called home credit. We had done an easing transaction already. We had launched our first inversing with noise discounting product already. So by February, if you see our first four products, they were all different, each with completely different size and scale of counterparties. And you started delivering on what we essentially set out to just create a horizontal platform.
00:35:15
Speaker
And after
Growth Metrics and Marketing Strategies
00:35:16
Speaker
that, it was just trying to then build and scale each of these verticals independently. Can I do so much of corporate debt in real estate? Can I do so much of structured corporate debt? Can I build a leasing book? Can I launch venture debt as a product? And can I also launch, can I scale inverse discounting in parallel? So then it was kind of things started falling into place, and we started then focusing on. So I would say we had done 0 to 0.5 of the journey, which is just the initial thing.
00:35:44
Speaker
launch the platform, launch one product in each of these categories. And then to say that, can we really create a business out of it? Can there be action in each of these products? Can we do it seamlessly? Can we start doing this month in, month out? Those are the aspects that we started focusing on. So what is the unit for? The unit for corporate debt is a debenture, which maybe one lakh is what you would price it at today. For leasing, is the unit one car that an investor comes in to lease one vehicle?
00:36:13
Speaker
No, so you can invest like one lakh in that also. So in that also, there are two structures, it can be debentures in that again, you can have one lakh or if you are forming an NLP or a private limited company, the value, you know, the partnership interest is basis, the amount that you invest in need not be the minimum investment of a car from an investor's perspective. Okay, okay, got it.
00:36:33
Speaker
So it's not like if I'm giving one lakh, it's not like there's one car mapped against me. It's like the overall debt is broken down into lots of one lakh. And the same would be there for invoice discounting also. It's not like there's a particular invoice which is mapped against me, but it's like an overall thing. Yeah, no, particular invoice is mapped, but in one invoice you might have 100 investors. So that's the one.
00:36:57
Speaker
And if it's not a round trigger, it was like, let's say if it is something and 16,000 rupees, like say 5,16,000. Yeah. So there will be someone like sometimes we have that last 1% which is like odd number. So even if it's less than one, like we allow someone to participate.
00:37:15
Speaker
And most of the time what we try is that you have a margin concept. So suppose if the invoice value is 105 rupees, we actually find 100 rupees only. So 5 rupees is the margin. Got it. And so what is the traction now today?
00:37:31
Speaker
How many people have so far invested through Giraf and what is the monthly amount that is getting dispersed and so on? Currently, we have almost 40,000 registered investors with us. Almost 4,000 of them are unique, transacting investors on the platform. Very healthy engagement metrics.
00:37:50
Speaker
you know, with all our investors today, so almost 95% of people who have participated on the platform are active, you know, with us and they continuously, you know, transact. Lot of every month, like 4000 user base every month almost, and you know, this itself is growing, right? So every month, 50% of our user base transact, you know, so that means, let's say we have 4000 investors today, in the month, we will have 2000 unique investors participating.
00:38:16
Speaker
And that's the same next month and the month after. And this is a trend now that we have seen over almost a year. So the engagement level with the users are very high. Almost every investor invests three to four times from the month they join to month three, month four itself.
00:38:33
Speaker
Right. And we knew that we are not going to a very mass retail segment. So, you know, by keeping a threshold within one lakh rupees, it's a significant amount for a unknown platform for someone to translate digitally. Right. It's a significant amount of money. You know, so we, in spite of that, you know, we see healthy engagement metrics. People are transacting. They have an exposure of almost six to eight, 10 lakhs, you know, with giraffe and a platform, you know, on an average.
00:38:57
Speaker
And because of which today, almost now, you know, we've done about 650 crore of disbursements in our, you know, I would say first 12 months of our journey. Today, we are at a rate where we are doing more than a hundred crores a month. Right. So, and you know, we work with almost now the unique companies, you know, that we have built relationships with in the past 12 months. We also returned significant amount of capital south of almost a hundred plus. In fact, a few days back, we crossed a hundred fully repaid opportunities as well.
00:39:27
Speaker
So, where we fade out capital, like in power of interest and principle, almost 300 grows back to our investors as well. So, I think a lot of the, I would say a lot of Indians are firing, a lot of things are falling in place. We are trying to ensure that all growth that we achieve is also sustainable. So, we are able to deliver these numbers now on a month-to-month basis also and kind of see that how we take that next leap of growth. So, that's always a focus area for us.
00:39:57
Speaker
So, you know, your initial set of investors were through your personal network, but you must have formed like a more, like a go-to-market strategy to acquire customers. I would love to hear about that. Yeah. So see, there are, you know, basically two channels that we generally employ to get our customers. One is our digital direct channel that we use to get our customers. And other is that we work very closely with the financial advisor ecosystem. And we do get a lot of investors from, you know, that channel as well.
00:40:24
Speaker
So the digital channel would be like, if someone is searching for, like, say, invest money, then he'll see a Google ad, something like that. Or like, best rate of FD, for example, someone says, then you know that if he's looking for an FD, good rate, then he would be interested in your products. Those would be like the approaches there.
00:40:41
Speaker
Yeah, we have our own display ads as well. And obviously, there are certain keywords that if people do such about that, then HRAF as a platform comes up. So in the digital space, there are two or three things. One is the people who invest and who have already participated on the platform or registered, there is a certain persona of these people that you can identify.
00:41:02
Speaker
So then you can also, you know, kind of through Facebook, Instagram, you know, today, Google Facebook, they provide a lot of, I would say, advanced algorithms to actually then target people of these personas out there in the world. Right. So we know that these have been early adopters, how many of, you know, like similar kind of people can we target through our, like we need mentioned display ads, Facebook advertisements, so this is, you know, a digital acquisition rule.
00:41:27
Speaker
where we focus on some keywords and you know, what people are looking at, but really also targeting some user personas that have done well for us and people who are. Right. So, and this is something that you can scale. And yeah, the third thing is you can also have a lot of these, I would say non-digital ways of acquiring customers as well, which we need those initiative. Like, for example, investment clubs, HNI groups, a lot of these associations, and we again, you know,
00:41:53
Speaker
active you work with them, a lot of corporate webinars, right? These are again things that you can do through non-digital channels to acquire customers. Okay. Okay. So the financial advisor channel would earn something in it, right? Like you must be giving them some amount of the, some of your margin you must be sharing with the financial advisors who get it.
00:42:11
Speaker
Yeah, so we are sharing a part of our tea that we earn. So we earn, you
Future Plans and Democratizing Finance
00:42:16
Speaker
know, certainty on, on every transaction that we do. And, you know, we are happy to share, you know, 50% of what we earn with the financial advisors, right? So within the distribution fee that we pay them for, you know, taking our products through that.
00:42:29
Speaker
What's your roadmap now? What is the Northstar metrics which you track? What do you want to hit as numbers? What categories do you want to get into? Just help me understand the road ahead. So the Northstar metric that we track is number of customers and EUM per customer. And for us, customer is both companies as well as investors.
00:42:52
Speaker
And so effectively, month on month, we want to increase the number of customers that we have, either both on the supply side as well as the demand side. More number of companies that we work with, more number of investors on the platform. And we need to keep servicing the relationship that we have built in the past, to ensure that we are growing our exposure with them, or they are growing their exposure with the RAF and the platform.
00:43:17
Speaker
You know, so that's the most, you know, I would say critical metric for us. For example, you know, if we acquire this using this as an example, you know, if we acquire 100 customers and on a new month in a month and those 100 new customers invest 1 lakh, that means that I have brought one crore of additional money on the block.
00:43:36
Speaker
And this 1 lakh customer is likely to invest up to 10 lakhs in the next six months, one year, two years, three years. So by acquiring these 100 comers, I build a potential, you know, these map normal scale to the tune of 10 crores. Right? There's data back this like one is to 10 ratio that whatever is their first time investment, they end up investing 10X of that over lifetime.
00:43:59
Speaker
So we typically see, you know, someone investing almost, I would say eight, nine X by a month, three month for itself, right? So that's the data that we've seen. So, you know, typically, like if you are a new customer, you invest in month one, like the data that we've seen is 50% of the new investor invest a second time in the same month itself.
00:44:16
Speaker
and they, on an average, people transact three to four times in the first three, four months. So basically, they're transacting three, four times just because of without getting any capital back, because we don't have any product which is less than three months. So without getting any capital back, they are reinvesting just because of the confidence. Obviously, the ease of transacting on the platform at Tech is very, very seamless. They're reinvesting again because our customer service and success team, I think they do have a fantastic job of onboarding new clients onto the platform.
00:44:46
Speaker
And they're also reinvesting because of the transparency and communication that we have with them. So without actually having capital coming back to them, they are building that confidence in a few months itself to build a decent enough exposure. And how do you source deals like companies seeking money? You have like a team which is going out and like, what is the strategy? That must be relationship based, right?
00:45:09
Speaker
Yeah, we have a proper investment team and the job of this team is to, you know, source transaction for us. They do maintain relationship with various companies. So at any point of time, you know, they will be in touch with 40, 50 companies on a constant basis. They keep on evaluating our transaction. They do the, you know, our job of structuring the transaction and doing the due diligence, getting more of our transaction approved internally from our risk and credit committee. So we have a team in place to do that job.
00:45:34
Speaker
What could be a black swan event for giraffe? I just want to understand what could be the worst case scenario. I think the thing which you are most I would say cognizant about and that we face is obviously any risk of default of the product that we do.
00:45:52
Speaker
From day zero, we knew that when you're trying to build a retail investment platform, managing risk is the most critical aspect of scaling a platform like us. When we set out Giraf Excel, we, you know, mitigating this risk that was the cornerstone of it, right? Like how do I protect the impact of any, like you said, like a platform, like I'll try to default, how do I protect retail investors from it? Right. And there are some three things that we do fundamentally to, you know, ensure that, right. We do only short-term products.
00:46:22
Speaker
So my products in Dira for one year on this, right? And I don't go short term because under I think that or evaluating that for short term is easier because I'm not taking a five seven year view of the company that I work with, right? I hear, you know, how they are today. And I'm taking approximately a one year view of, you know, where they will be. It's more in that.
00:46:43
Speaker
Second, all our products, we have periodic payouts. So that means even if you invest for one year or 15 months or two years, you will get some money on a monthly or quarterly basis. What that means is that your exposure to every investment of the platform keeps reducing with time. Third is we have a very well-diversified book. Today, we don't have more than 3% exposure with any of the company that we work with.
00:47:08
Speaker
So, that means we have a very, very diversified book at RN, that is something we constantly keep tracking and managing. And fourth is we expect the investor to be diversified at his or her end. So, if you are investing 5-6 lakhs on the platform, the idea is to do it across 3-5 opportunities. If you are investing 10 lakhs, you do it across 5-6 opportunities.
00:47:30
Speaker
And what we hope is that if now there's an investor who keeps participating with giraffes over a 10-year period, the risk of corporate default in a very, I would say, done rightly and managed well is less than 1%.
00:47:45
Speaker
So if you're investing consistently again and again and churning a portfolio, you're diversified at your end, you're a diversified at our end, you're expected to investment keeps reducing with time. And effectively, we are in short term date where the chances or the probability of default is less lesser than the regular corporate default numbers or rates. We believe that when an event happens, the impact to an individual investor at the portfolio level will be minimal.
00:48:14
Speaker
Right. And they even appreciate the consistency that that can give you over a long period of time. We started with a month like threshold because we were targeting a bit more financially savvy customer base because we knew that the product in current shape and form is not ready for mass retail participation.
00:48:31
Speaker
We don't want to open it up for participation to an investor who's investing 10,000, who doesn't understand financial products, who's not had a long enough investment journey of his or her own money. Because everyone who's had that journey has gone through cycles, you know, understand risk, reward and all that.
00:48:49
Speaker
And so the idea was that we kept the threshold high. We said we will, you know, start with a more savvy base where we can explain and educate them, you know, in a easier way to start investing these. And as, as we keep innovating on products, keep building products, which are inherently less risky, structurally less risky for retail participation, keep opening up our platform and reduce the threshold for participation.
00:49:13
Speaker
Right. And our vision is to democratize the space and help as many individuals out there to participate in six systems. What do you want to bring it down to your threshold from one lap? I really, if you ask us like 20 years later, it should be 1000 rupees. That's every month. Okay. And probably on the roadmap for the product, you would also want to create then some sort of an SIP so that every month, whatever you say, you can go into the platform, some sort of automatic reinvestment.
00:49:43
Speaker
All of these things are in our minds. Unfortunately, mind to execution takes a long way. We want to deliver everything tomorrow, but unfortunately, it's a journey of many years. So, you've raised 7.5 million so far. Do you need to raise more funds?
00:50:00
Speaker
So, you know, again, we have one of those businesses which are fundamentally not very OPEX, you know, ops heavy, right? So we are a very high margin business, you know, we are, you know, basically are beyond our fixed costs, which is people, you know, bit of digital marketing, there's not really much, you know, that, you know, we spend on, right? So we are a very low cost business in that sense, our ideas to break even in the next 12 to 18 months.
00:50:26
Speaker
you know, business like us, money is always a raw material. So while we are profitable, you know, obviously capital gives us significant strength to grow, you know, and that's... You need capital, you need that balance sheet strength because you are on the basis of that strength is how you are giving assurance to the borrowers. So if you want to, for example, start dispersing 1000 crores a month, then you need a balance sheet which has at least 200 crores in it or some such ratio.
00:50:51
Speaker
a few things. So, you know, for example, we want to participate in risk with along with our customers, right? So today we don't do that. But you know, one of the things we say that what is the difference between traditional melt from like, again, let's say, either by mail bringing an opportunity to you and Jira's right now, the difference is that
00:51:09
Speaker
and wealth is distributing a third party product. They have no skin in the game. They are, you know, they are not manufacturing the product themselves. They are just a pure negus. But we are saying that, you know, hey, this is a product that we believe in. We believe in the credit quality. This is something that we have manufactured curated, especially for you.
00:51:29
Speaker
And, you know, and hence we want to also put our money where about this. So, we say that, you know, we will participate to some extent in the risk, you know, alongside you with our own capital. So, if we have some balancing strength, then we can aggressively commit capital and push, I would say demand.
00:51:45
Speaker
Right. So that's very good. And how high-touch is the business? Like, you know, as you said, Edelweiss is very high touch. In your case, do you have calls and so on happening or is it entirely online, the workflow of investing? Like you go online, you choose a product online, you pay online, everything online.
00:52:02
Speaker
It's majorly online, but the first time investor, obviously, you know, when you are investing for the first time, they do tend to talk to our customer carer or an iron. But what we have seen is that, you know, once they have done a couple of investment, then it's very low touch. Then they know where to look at, what to look at, how to invest. I would say 99% of their queries have been answered unless it's something very specific challenge that they're facing.
00:52:25
Speaker
And do investors have the option to, in an emergency, withdraw what they invested? Not right now, but we are trying one of the problems we are solving. And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them.
00:52:45
Speaker
Do you have questions for any of the guests that you heard about in this show? I'd love to get your questions and pass them on to the guests.