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The 4 Phases Of Building Scalable Businesses | Bhavin Turakhia (Zeta)
601 Plays2 years ago
"Entrepreneurs need to have a healthy dose of delusion." This striking insight from Bhavin Turakhia underscores the immense self-belief and resilience required to navigate the uncertainties of building businesses from the ground up. He explains that this mindset is crucial when facing the vast "unknown unknowns" in the early stages of any venture.
Bhavin Turakhia is a highly successful serial tech entrepreneur who co-founded Directi in 1998 with his brother, a venture they bootstrapped and later exited for $160 million in 2014. Since then, he has founded Zeta, a banking tech unicorn; Titan, a business email suite valued at $300 million after a $30 million investment from Automattic; and Radix, a domain registry business he started with a $25 million investment, now valued at around half a billion dollars. His journey is a testament to identifying market gaps and building scalable tech solutions.
Key Insights from the Conversation:
- The Four Phases of Business Building: Bhavin outlines his framework for taking a business from idea to maturity: Planning, Discovery, Scaling, and Steady State, each with distinct deliverables and levels of founder involvement.
- Solving for "10x Better": A core tenet of his product philosophy is to create solutions that are demonstrably 10 times better than existing alternatives to solve a clear customer problem for a specific persona.
- Importance of Market Selection: While focus is crucial, Bhavin emphasizes selecting the right market with significant potential, as some industries have inherent upper limits on growth and valuation.
- Profitability and Bootstrapping: Directi was profitable from early on and never raised external capital, showcasing a path of sustainable growth.
- Building "Business in a Box": A key strategy for scaling Directi's reseller business globally was providing a comprehensive platform that enabled partners to easily start and run their own web presence businesses.
- Legacy Tech Disruption: Zeta's mission is to modernize the banking industry by replacing outdated, monolithic core banking systems with a flexible, cloud-native, microservices-based platform.
Chapters:
- 0:00:00 - The Pioneer of India's Startup Landscape
- 0:01:56 - Early Influences: From Biographies to Building Businesses
- 0:05:26 - The Genesis of Directi: Identifying Early Internet Needs
- 0:15:16 - Scaling Directi: Profitability Without External Funding
- 0:22:33 - Navigating Product Failures & Pivots: Lessons Learned
- 0:26:34 - The Strategic $160M Sale of Directi
- 0:29:45 - Radix: Building a Domain Registry Powerhouse
- 0:33:52 - Titan: Reimagining Business Email for SMBs
- 0:44:02 - Zeta: The Ambitious Journey to Modernize Banking Tech
- 1:02:02 - Securing Key Partnerships & Funding (Sodexo, SoftBank, HDFC)
- 1:08:12 - Bhavin's Playbook for Organization Building & Hiring Talent
- 1:10:48 - Approach to Investing: Building vs. Passive Investing
Hashtags for YouTube Description:
#BhavinTurakhia #FounderThesis #IndianStartups #Entrepreneurship #TechEntrepreneur #Zeta #TitanEmail #Radix #Directi #Bootstrapping #SaaS #FintechIndia #BankingTech #StartupJourney #ProductMarketFit #ScalingBusiness #VentureCapital #Leadership #BusinessStrategy #Innovation #Podcast #AkshayDatt
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Transcript
Introduction and Directi's Influence
00:00:00
Speaker
Hi everybody, I'm Bhavik Turat here. I'm the CEO and co-founder at Zeta. If you run a search on LinkedIn of all the people who have ever worked in a company called DirectEye and currently have the title of founders, you will get more than 250 results.
00:00:28
Speaker
This amazing company called directai is equal to the PayPal of India, just like you have a PayPal mafia in the US, which includes people like Reid Hoffman from LinkedIn and Elon Musk. No need to introduce him. Similarly, you have directai in India and directai was founded by Bhavan Turochiya when he was just a
India's Internet Evolution
00:00:50
Speaker
teenager.
00:00:50
Speaker
He was still in college when he decided to put his innate curiosity and intellect to use by building a business, by writing code, developing websites. And this was way, way back in an era where internet had just about entered India and people were not even aware of how to go online.
00:01:12
Speaker
This episode is really tracing almost a three-decade evolution of India's internet landscape, India's startup landscape by the pioneer, by somebody who, according to Wikipedia, is among the 100 richest people in India.
00:01:29
Speaker
And Bhawan, amazingly, did not raise any external capital while building Directai. Directai was eventually sold for about 150 million on dollars. And today, Bhawan is the founder of multiple businesses with the biggest one being Zeta, which is a unicorn in the banking tech space. Listen on to this amazing multi-decade journey of the man who really is the pioneer of startups in India.
Early Influences on Bhavik
00:02:05
Speaker
And about back in school, dad would buy four or five other books in the curriculum, written by different authors. When I started actively programming, he thought I found a computer science book and I devolved them cover to cover. And then he bought a lot of biographies. So during that school time,
00:02:21
Speaker
I spent a lot of time reading. This was the time when you had biographies of like Apple, IBM, Microsoft, Xerox, so was the Google, Facebook, still computing 1.0. And I had had Amazon read like more than six or seven biographies on Bill Gates and Microsoft, several on Apple, several on IBM, Xerox, Chrysler, McDonald's, even non-tech companies. So in that phase, going sixth grade to 10th grade, two decisions got made.
00:02:45
Speaker
One is when I do, I want to do sort of something in computer science. And second is I want to do something on my own. I really like the entrepreneurial bug bit me early on. I'm like, I want to do something on my own. Don't want a job, want to teach, you know, large impact. And so that got decided pretty early on. Now, of course, my, my parents encouraged the notion, but their perspective was if you want to do something in computer science, then you need to join good computer engineering college. And so post 10th grade, I was a medical student at 10th time and I basically joined
00:03:12
Speaker
college college in Mumbai, did my junior college where I was studying for my I.D.A.E. I started looking up the curriculum for computer science and that's when I got a bit disappointed. I don't want to spend four years studying stuff that in some sense I already know because I already studied advanced computer programming. And so I think at that point I started down this path of like I'm going to drop out and start something on my own. And then at first it became a negotiation exercise with my parents.
00:03:39
Speaker
And eventually settled into, I think I ended up getting joining Sydenham after my SYGC to get a B.com degree on site and started my first company at that point in time. And so I guess getting my undergrad, because that's what parents wanted, but didn't end up pursuing these sort of standard engineering medical parts. So I started early and trains of what eventually came to that time that me and my other brother co-founded then secretly. So yeah, turn it back then.
00:04:06
Speaker
In what way? Did someone come to you and say, I have this problem, solve it for me, and you realize that a lot of people have this problem and I can make a business out of it?
Journey to Web Hosting and Domains
00:04:16
Speaker
Was that the origin? So me and my brother were already in some consulting, you know, they're basically a software and a code, and I threw some web design for somebody that time, and he said now, sort of, what do you feel it's untrivial, these TCP and shell accounts from VSNL, and I was, again, hooked on the internet,
00:04:31
Speaker
Both of us are sort of either doing some various software stuff, trying to get something, setting up people's networks, setting up people's lines, assembly computers. What's your age difference? He's younger than you, right? Yeah, he is younger than me. And so, we're diving in all this stuff. I actually started this, I mean, I started designing drug sites for a bit.
00:04:46
Speaker
like really in short bit. And then I started building this job site software back in 1996, 97 for about a year and a half, starting with first building a visual basic and then the DSP, which was the web application programming language back then. So without this whole sort of tool that would enable people to post vacancies and individuals to post resumes and the system would sort of match there and provide recommendations and all that stuff. But the truth was there were less than a couple of hundred thousand people on the internet back then, like seriously on the internet. So.
00:05:15
Speaker
The software for the idea was a bit too early. It was due to sort of failures from the start. Well, I guess probably not necessarily, but at least I tried peddling it for about a year and a half. Got some interest, got some clients, but nothing really took off. And then that paved the way to saying, well, actually, you know, what is the early days of the internet? People need to set up a web presence. A friend of ours, but actually running a small, when you go to a company that one time, that gave us the idea and said, well, why don't we create sort of a platform?
00:05:40
Speaker
became technologies and enabled people to sort of send a web presence from end to end. So we borrowed about 25,000 rupees from that, bought first server sort of in the U.S. and a company called Alavansa, and started selling web space, web hosting space, started selling domain names. In fact, then he spied them for $70 for two years and sold them for $100 to customers. So we started doing that, became a reseller of Hookhouse, which was enough domain to start the wholesale one, and then really provided the most cost effective way to get on the global domain name country.
Global Expansion of Domain Registration
00:06:10
Speaker
I'm in one nascar conference where we we had this yellow colored coupons discounts on red string to be named seven was like finite nine rupees or whatever which is an unheard of price but it was already 30% cheaper than the lowest price and we must have sold like thousands of them he just that one conference we had our
00:06:25
Speaker
More than 20,000 of these coupons floating around in that conference, most of the floors were covered with them. The people who had basically kicked them up from the booth and dropped them somewhere. And that actually gave us the budget to become our own icon to the domain registrar. So we became one of the first fully-off based domain registrars.
00:06:40
Speaker
from India made it to the wholesale business ourselves. So we started signing up these resellers in various countries, ended up signing up more than 50,000 resellers, about 5-7,000 really active resellers across the globe, would sell our products and services to their installers, you know, customer base everywhere, like from Turkey to Toronto, everywhere
Challenges in Early Domain Registration
00:06:58
Speaker
across the globe.
00:06:58
Speaker
I'd like to kind of zoom in a little on this. So, the initial days when you were reselling, like when you were buying for $70, selling for $100, how was that happening? How were you getting customers? How did you build it up? So, very interesting question. So, interestingly enough, where KCTNIC started selling domain names back in 98, and we were reselling through it today, you know, took our scheme of data.
00:07:18
Speaker
The only registrar registering the world was actually in today. It was owned by a company called Network Solutions, basically. And the US government had given them contracts to manage the DNS, and they were the only ones selling to them. So anyone who buys them had to go there. And most customers would come to an agency like us and buy from us.
00:07:33
Speaker
So we had a website, so by the way, if you didn't get no API, it was a templated email. So the email had like some 30, 40 pages. You have to fill it out exactly, send that email into a particular email address. You may fill the deposit account with them. If the email that you send is properly formatted, that email entry process on their side registers the domain name.
00:07:53
Speaker
And then sent it back. We were the first company, I think, in the country, to create a simulated fault-based experience on top of it. So we actually programmed this form, which would collect this application on a webpage. Now it seems trivial and simple, but back then again, it was kind of relatively new. And then the form would automatically create a workflow. Somebody tried within the organization, which is, I say organization, she was me, my brother, and we are one of the person. We would actually review that everything is fine.
00:08:18
Speaker
we would collect the money from the customer by voicing them and then process it by somebody that would send out the email, and then receive a confirmation about where the bus. Then we went to two cars, two cars will pull API. Because by then, by the time two cars launched, iCan actually reorganized the process by saying that,
00:08:35
Speaker
the internet will manage the registry and they will make i think ten dollars under that for eight dollars under that for registrations and then anybody can cover registrar and interact with the registry through an api and expose another api and that's that's what two cows did and we then use that api and i remember packing the dates as much after even after he became two cows we set up one quick problem it's a big fight we had was collecting money for people
Creation of Transacute Payment Gateway
00:08:58
Speaker
And so there was no payment gateway. There was no payment gateway. I remember the Epiphany was sitting outside and this was India, this was like the biggest problem, right? Even for small checks of like 3,000, 4,000, 5,000, we were selling service worth lakhs at some point. But sometimes we'd have to go and sit in client's place and sit outside their office for four hours to collect one tiny check. And I literally remember this. I remember the point where we went to this client's office
00:09:25
Speaker
I was sitting out to collect the jacket. That was inside. They would meet me for three and a half full hours. And it's such a waste of time. So we actually flipped and we built one of the first payment gateways when I was called Transacute. D-R-A-N-S-E-C-U-T. They mentally sold that resist CC Avenue out of seven years.
00:09:40
Speaker
But we built one of the first payment gateways on top of Citibank and then eventually on top of Access and HDFC, I think were being used at some point, et cetera. And we started selling it to other players, but originally it was built simply because we're like, oh, we're going to steal this business. We can't afford to sit in, you know, be bothered with collecting money. So yeah, spend some time kind of automating the process.
00:09:58
Speaker
But how did you build demand? Was it that there was nobody else doing it and therefore the demand was organic? I think we spent a bunch of time, these were old school traditional methods back then. The very first quarter, I remember when I bought that server in Alainza, the very first quarter, which year was this when you burnt that server? I think somewhere 97, late 97, the latter half 97.
00:10:20
Speaker
So the first quarter of 1998, they used to miss annual NASCOM conference in Dundee at Palli Mehta, which was like the largest IT conference in the country every year. And so I didn't have money by friend to participate as an exhibitor. But I remember I took the Rajdhani, spent that one day travel, et cetera, and I went from both to both. There were more than like 300 or 250, 300 from exhibitors. And I spent those two days going to every exhibitor and selling my product to them, as you can see on the way down.
00:10:49
Speaker
And in that one exhibition, I made enough sale to both recover our initial investment and pay for the next year for the service without actually, like literally in that one conference in two days. And so we repeated that, we participated in every conference subsequently with our own boots and succulents. The one I was talking about when we sold these two girls' domain names, that was in Mumbai, again, a NASCAR conference to place the World Trade Center. And we participated in these conferences with
00:11:14
Speaker
tacky-looking boots back there. We had this generous, golden sort of logo or website. So we had this cloth that we covered on these sides. It was a pretty tacky-looking boot. And by then, we had a few salespeople. So that was one approach. We do some tiny bits of advertising, and you were selling, like, get your business online. That was the sales pitch. Like, we'll give you a domain. We'll host it. We'll do the web development also, like you're doing the web note.
00:11:40
Speaker
No, we don't do any web development. So only the domain, hosting, email, shopping cart, all of this sort of backend software, backend platforms with no website design. We fought a bunch of designers. You wanted to be a product company. You didn't want to get into a services. Couldn't scare the services model at all. So we didn't want to bother there.
00:11:58
Speaker
And then we also started. So one was the exhibitions conferences where we would directly have entrepreneurs and sponsors to operate us. And then a lot of resellers started finding out what was there. Secondly, we went out to our music, yellow pages back then, and directories. We went and met up with the one-two web design companies and web development companies. Started us getting them to buy four occasions' debts. We had channel partners. And we grew pretty big, very fast. We had like NASCAR hosting with us. We had CMIE. We had like some really big names, like a bunch of different big brands. 150 big brands.
00:12:26
Speaker
That became like, both your word of mouth, online PR, as well as sort of conferences, etc., that became kind of like the way to get customers. What kind of revenues were you doing by the time you hit, say, 99, 2000, like, two, three years down the line? I don't remember exactly. I think we had four, five lakhs in the first year, or the first few months.
00:12:44
Speaker
I think every year we multiply by a team factor. I think we multiply significantly by a ton. We were two, three years out. We were already in these sort of obstacles of rupees in revenue because we started hosting some of the largest portals in the country. So that people started buying some massive equipment and servers. Before the crash occurred, some of the large web 1.0 portals and platforms were supposed to run all around with us.
00:13:08
Speaker
So when did you go global, like till 2000, you were India focused or like when did you become registered with ICANN as a domain registrar? As soon as we got our ICANN accredited registrar, so that was 1999, late 1999, and the boom was already starting to get through a bust. This was still, it hadn't yet gotten there, but 2000 onward, we could clearly see the demise, et cetera. But so in 1999, we got our ICANN accreditation, and the first version of Lactai resell a program, sort of launched
00:13:38
Speaker
And then right after that in 2001, yeah, I think it was either 1990, 2000 or 2001. Again, I don't remember exactly. But 2001, I do remember that I attended also the first ICAR accredited registrar's conference in Stockholm. It was actually also my first ever trip to Europe. And so then we started becoming global from there. We kind of took the wholesale model, we didn't have a presence in various countries.
00:13:57
Speaker
So built out our own API and webpiece interface where we searched self-service themselves and buy domains and buy hosting, either through the webpiece or the face or through our APIs, and kept optimizing the platform. It's called autoballs basically. So that was our first product. Like, essentially you built it to KAOS plus hosting kind of a solution.
00:14:17
Speaker
You guys were sourcing, but we went one step further. Predominantly, we started servicing resellers by not just providing them an API, so we built something called Supersight, which enabled resellers. It was a ready-made end-to-end website that we would just likely launch a website on. We plugged in the payment gateway, so you could also have the reseller collect payments on it. We built a ticketing interface, so you could actually gather support requests from your customers. We actually built a business in a box.
00:14:39
Speaker
So that small web design companies were mostly a lot of these companies that were reselling wholesale domains. They didn't have the web at all to kind of code everything by hand themselves. So we sort of built this entire platform out that wouldn't even them to fund a full business end flow. Amazing. Essentially, this is like the early digital version of what, say, McDonald's would have been doing through franchisees where they had like a franchisee in a box, everything processized. You built that same thing for the online world. You must have been the pioneers in doing something like that.
00:15:07
Speaker
Pretty much, yeah. For the hosting domain space, yes, we were pioneers. And for the longest period of time, actually, it was nobody else who had a full-fledged platform and full-stack platform at each other. And yes, I'm assuming it must have been a profitable business. Like, did you need to raise funds for it? Or like, how is that happening?
Profitability and Growth Limitations of Directi
00:15:24
Speaker
I mean, the first five laps from that point onwards, March 20, March 98 onwards, we've always been profitable. So there was another point in time when there was any year where we were negative cash flow. We were always positive cash flow through and through, all the way to the end. So it never is capital. Could we have grown faster, had we raised capital? In hindsight, perhaps. I think we were also learning while we were not in the early days of business. And we made our fair share of mistakes and made the wrong bets, building the wrong stuff.
00:15:47
Speaker
And so perhaps raising a lot of capital and we actually have good also like to optimize, you know, so, so in some sense, we have the option to grow at a steady pace and, and then need any capital to all that. So I want to understand how the hosting you were offering is different from AWS. Like typically the word cloud computing, I think.
00:16:04
Speaker
people started talking of it only post AWS launch. And I'm not exactly like a computer science engineer or something. So help me understand what was that evolution where post AWS people started calling it cloud computing and pre AWS people use terms like hosting.
00:16:20
Speaker
I mean, all things still exist, I guess, in some sense, but cloud is a different paradigm since back in the day, what you had was if I bought a server or if I eventually we had our own data center, cages, and our own location boxes, and got a Dell box, and we installed Linux on it, we installed Apache on it, then we created our own control panel.
00:16:37
Speaker
What we're doing here, we're digging the disk space and we're basically allocating a certain amount of disk space to a website whose configuration sits in Apache. We're creating a user on that platform to which you can do an SFTP upload of files. Those files can meet PHP file code that can essentially run on that computer, use the source of the computer, and then install a MySQL database, and then again, create a user and a database on that MySQL database and give you a certain amount of space and a certain amount of database capacity. Fundamentally, you're getting these small slides within existing applications.
00:17:06
Speaker
Whereas with the cloud, what you're doing is, you know, you've got a virtual machine, which is fully isolated from other VMs. Please logically fully isolate from other VMs. And you have operating system control. So in shared hosting, you wouldn't get operating system control. You're getting a portion of it. Say you're getting shared services. It's like application service providing basically, you're getting a shared application service.
00:17:27
Speaker
Whereas in Intel computing, you're basically getting an isolated virtual machine and you're getting operating system access. You can install your own operating system, but you can control everything all the way down to the kernel via this. So that's the key distinction. There was a phase in the middle where the hosting industry also started offering something called BTS, virtual private servers.
00:17:45
Speaker
Which in many ways was, I wouldn't even say precursor, it was exactly that virtualization layer. But it never caught on until basically cloud is a paradigm and came up. But with cloud, you also go beyond just infrastructure service. You also go to pass. So you've got RDS, you've got S3, you've got not just compute plus what are these things? RDS, S3. So RDS is the database of the service. S3 is storage of the service.
00:18:08
Speaker
You get this platform as a service now, such that you don't have to worry about the scalability of the database and the underlying system take care of it. You're using it as your service as opposed to using the operating system to install your own database, manage the scalability and uptime reliably yourself. So you're almost outsourcing the SLE now of a database or storage or things like through Amazon, instead of managing it yourself.
00:18:35
Speaker
But even today, it would be that tens of millions of websites that I just started every quarter still use shared hosting as their fundamental way of setting up their online presence. So, you know, it's like the internet doesn't give you radio. It just, you know, legacy still continues to stick around. So there's a lot of people that still use that.
00:18:54
Speaker
So I'd love to hear about some of those bad calls you took, some of those mistakes you made, what you learned from them. What was the reason for you to make them bad calls? Like you were saying just now that you had the journey of making wrong calls, making right calls. So what are some of those learnings that you had? I
Lessons from Failed Projects
00:19:10
Speaker
mean, the biggest one is the biggest set of bad calls, not classified under buildings that nobody needed.
00:19:15
Speaker
for the clearing businesses that nobody needed. The product didn't really have traction. But I didn't manage to get traction for them. By that example, we started selling domains, hosting, in actually three different models. So we started with these sellers. These website companies, web hosting companies would buy from us and sell to their customers.
00:19:33
Speaker
Then we said we go one level upstream. So we took the entire platform we built out of Box. We started providing it to other ICANN accredited registrars so that they could actually, in a sense, compete with us. That was called Logic Boxes. And we got a series of close to 100 different domain registrars around the world using that platform. So that was kind of an upward integration in some sense. That was like a SaaS service. Basically, you were charging a subscription.
00:19:56
Speaker
Yes, it was a SaaS service. You were charging a revenue share of a percentage of their revenue based on your fee for the unit that they sold.
00:20:04
Speaker
And then we also went down into the internet and said that we launched an end customer brand called BigRock, which sold hosting and domains directly to end customers. And so we started selling to end customers, resellers, and registrars. And then we sometime in 2007, 2008, I think thereabouts, I also decided to launch another brand that would cater to affiliates, bloggers, or anybody else who wants to resell.
00:20:29
Speaker
not resell under their own name, rather resell after our name, but on commissions, etc. And that we ran for about a year and a half, failed miserably and would have been for Big Rock, right? Like bloggers and all these. So Big Rock was direct customer. This was a separate brand created for affiliates. You would do affiliate marketing and gain commissions.
00:20:50
Speaker
And just yeah, yeah, it's so you don't have data, we shut it down. We had to let a few people go at that point in time. The team knows working on it because we didn't need them for other projects. So then there was a dark road to the RAM where we created this website design marketplace. So we were like, okay, people come to us, they pay our domain and host a and a lot of people come to us, then consumers, but they're not finishing their entire, like this is by itself not sufficient. They also need a web designer.
00:21:15
Speaker
So we created this marketplace where we enable website design as a cross entry to register with us and send their services and we try and get permission along the way, etc. And that also, we took it to a certain level, but it didn't really materialize much. And something like an Upwork, yes, explicitly for however, just website design. So those are the early days, stunts and other stuff.
00:21:35
Speaker
I had a breathing smock. Before that, I built out this end consumer chat app called talk.to as a master application and enabled series of chat and send messages across various channels, you know, Java, Google, et cetera. And that was like a, we spent several years on it and didn't really have any likes. I spent a lot of time and effort and investment buying it. And then we like, so this talk.to was like a WhatsApp competitor, is that?
00:21:59
Speaker
What's up competitors back in the day this is two thousand eleven thousand fourteen thousand ten thousand fourteen basically so yeah that was disaster and lots of product failures where i end up picking up things that i thought people would need and i had a huge degree of confidence but to be honest it was there wasn't a clear persona and a clear value proposition.
00:22:21
Speaker
a clear problem that we were solving for, how we were making a 10x difference in that front-wheel space, all that was framework came afterwards, meeting all those mistakes. I'm like, now I know how to go about templatizing a business plan. What was the way in which you were thinking about Directai? Were you thinking of it as a holding company under which you are creating?
00:22:39
Speaker
business units and each of which will have its own P&L or were you thinking of it more as like I am a P&L
Strategic Sale of Directi
00:22:46
Speaker
company and I have different products that I am selling like what was the way. It started out with the latter only. So it was an operating company and we had research and logic boxes and all these brands.
00:22:57
Speaker
and different personas, different products, basically. So it started out that way. But then eventually, you know, we sold Directi in the class of 14. Sales process started in 2013. So then after that, the other companies would be sort of independent companies. Okay. So basically some of the products within Directi you did not sell, but spun them out as independent companies. Well, there was one that was already independent company called Radix that I still own. Radix is a new top-level domain registry. We own various top-level domains. So we own our online.store.tech.space.
00:23:30
Speaker
So that I started in 2011, started fanning for it. 2012 started basically, participating in the options to buy an ICS one, some of the best ones in the market. That was already spun out, but started as an independent company.
00:23:43
Speaker
My younger brother Dave had already kind of straight out and started MeteorNet as a separate company in the ad tech space. And we did the long product type, per se. So he started that as a server-ability-dependent enterprise. Grew that and eventually sold it for $900 million to another company in China in 2016. And then this chat software was running as a product on the site. And then we converted into a company after pivoting into Flock, basically, which just became an enterprise messaging tool. We had pivoted. We became kind of an organic process. There wasn't a
00:24:12
Speaker
a clear structured plan which did what strategically made sense. Looking back, do you think you spread yourself too thin? Maybe like with more focus on a few product lines, those would have scaled to bigger height or like was it the nature of the market and the business that you needed to continuously find more product lines? Gone to my head, I would say the fall were out of the ladder and even today I believe
00:24:35
Speaker
In some sense, I started. Radix, by the way, right now is self operational to a point where they don't need me. They haven't needed me for many years. Some of the CEO, there are tons of people out there who are super capable and they actually run the company. I provide some strategic guidance and an ongoing basis kind of assist.
00:24:51
Speaker
So I really predominantly work on Titan, which has two products, Titan and that's the communications business space where we provide email and chat and a couple of things to micro SMBs and SMBs. And recently WordPress partnered with us and invested in that company.
00:25:06
Speaker
And on Zeta, which is a banking tech company with software and MasterCard now as our investors, and that provides technology to banks and fintechs. But going back to your question, I would certainly say focus on doing one thing. So let me actually clarify. On the one hand, I would say most part, focusing on something invariably will help grow much bigger because
00:25:30
Speaker
You end up solving through all the unknown unknowns in that space and you can follow the effect of those learnings over time. But at the same time, the other thing I found in many, many entrepreneurs is you have to select the right problem, the right space also. If you end up selecting the wrong space and that the potential opportunity in that space itself is small, like micro assembly was seen today, it was one direct I was into.
00:25:52
Speaker
The largest bunch of companies combined across the globe, each of them are between $5 to $8 billion in valuation and peak time. So technically, there's an upper cap there because MicroSMP hosting has that much revenue period. If I turned into cloud, that would have been a favorite thing to a completely different company. So it would still be the same notion that I'm starting a different company. So you select it. So certain spaces have upper caps. You select the right problem.
00:26:14
Speaker
Zeta and with Titan, you know, it's communication and email, which I think is a big space. Six million email accounts across the globe. With Zeta, payments and banking is a big space. If you've got a big space, I think focus will definitely help. So I would always prescribe it, even though I might not necessarily have practiced it every single point in my life. But I will say that spreading yourself thin is not beneficial. Why did you want to sell off word erectile? I didn't actually. So we were running it for from 1998 to 2012.
00:26:42
Speaker
14 years, and then two more years until we actually sold it. In 2011, I was starting Radix. And I, because Radix is a GTLD registry, which registrars work with, so direct I was a customer, for instance, of Radix. But in 2011, 2012, I was like, why don't I get some partnerships out there preemptively before I start the business?
00:27:04
Speaker
So I approached Hari, who's the CEO of Indurance in Nashville. That's the company that ended up buying, who was the CEO of Indurance. That's the company that ended up buying that. Indurance is a large, now new fold, actually. They will change their name because they merged with Time.com, but they had acquired more than 20, 40. Most of the companies grown to power billion dollars in revenue.
00:27:22
Speaker
And so I approached him as somebody connected us and I approached him saying, do you want to invest money in Radix? And I still remember I met him in a botanic to buy. I said, you know, I met him or something like that. Gave him a two hour pitch on what Radix can do and all that stuff. And 48 hours later, I think he calls me up. He says, I'm not paid to say investing in Radix, but will you sell me your company? Will you sell me direct action? And I said, that wasn't the plan. No intention blubber. And recording period went on.
00:27:46
Speaker
How what was the director doing at that time i want seventy million sixty sixty million sixty five million. And so he could do quoting us a few months and both me and my brother kind of look at all the things you could do together in the sense that. Even after selling it it is the norm with a daughter's word.
00:28:04
Speaker
Re-sell Radix domains and there were one-two other strategic possibilities and so we took a strategic call and so what started as a courting in 2012 took until February 2014 I think to close so so there wasn't any intention to sell it just it just happened to be the case. How much did you sell in front of that public knowledge?
00:28:22
Speaker
Yes, I think it's a total of $160 million, meaning that there was some cash, there was some stock, and there was some strategic deferred revenue aspect. So if you had an honest account, we sold that stock, and we wrote cash we had at some point in time, all together. So as a multiple of revenue with today's multiple, seems on the lower side, right?
00:28:43
Speaker
Oh, it's insane. Today's multiples are insane. I think they've sold MediaRock for $900 million. I believe the company at peak was making $250 million or $270 million in revenue. I might be off by a little bit here and there. But after the company, making about $50-60 million, I don't know the exact numbers, but I think it hadn't sold it for every word, maybe five, seven times more. But back then, the multiples were on realistic DCF. You do a discounted cast of water.
00:29:08
Speaker
do an mpv based on the weed and average cost of capital. Nowadays things are changing a little bit but at least the last year and a half like it was just like revenue multiples for no fundamentals necessarily. People weren't following the fundamentals necessarily.
Radix as a Top-Level Domain Registry
00:29:25
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion-dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts, and subscribe to the show.
00:29:45
Speaker
They help you understand what is Radix exactly, like what is a top-level domain registry. So just like you register domains in the .com space, you have achare.com, or .net or .org. These are called CRDs, the com, net, and all. So if you register atchare.com, nobody else can. And so there's a central registry that maintains the fact that you have registered atchare.com, and babins register at babin.com, or draca.com, so on and so forth.
00:30:11
Speaker
That registry contract, if you remember, I told you back then, ComNet or PDU were given by the US government to attend it. That's a contract because there's a DNS registry. Eventually, in 2010, I can open up this notion that anybody can apply to a string. You have to pay about $200,000 in application fees. You have to have a financial soundness, a business plan, almost like a 200-page business plan that you've created with proper forecasts and things like that. How are you going to run this business?
00:30:37
Speaker
And I can kind of board the application to you. If you were the sole applicant into multiple applicants, it goes into an option and you win it an option. So we spent two years building our business plans in 2010, 2012. It was me and I was smart team of four people. We researched. So I picked every, I picked a dictionary of 33,000 words and strengths. And we manually went through it for like 10 hours, days, and selected about 600 of them that we felt would be good top for the domains.
00:31:05
Speaker
With dot600, we did all the possible research. So like, like, like I said, dot agency, like names which people would want. Yeah, dot doctor. So we had lots of bills that we basically looked at and things with. So typically, let's say if you don't get Akshay.com, the next thing you might register in AkshayOnline.com.
00:31:21
Speaker
So therefore, we felt like online could be a good thing because you could watch it on online. So all professions like doctors, et cetera, we went to Google and looked at what we would search for. So lots and lots of sources did. We finally narrowed it down. We created the projections for about 100 of them, selected 30 bio, apply for those 31. And we won about nine objects out of those 21. And so what that means now is that we run the dot store registry.
00:31:45
Speaker
So every domain name that ends in .store, you would buy from, you know, network solutions or board ID or Wix or whenever you buy it from, but they are registering the knowledge you're buying it from us. So that $10 fees, which what used to be a $10 fees, that comes to you now.
00:32:02
Speaker
That's correct. So like a dot store, first year might be like $5, $6, such as a promotional fee, but every renewal is about $25 to $40 depending on the different DLDs. And so that annuity income comes to us, the registrars market up and basically sell it to their customers. But yes, precisely. So this business of selling domains doesn't seem to be profitable. If it is still a $10 annual fees, because you can buy a domain for even $2, for example, or $5 or stuff like that.
00:32:30
Speaker
You can, but the cost is nothing, right? So today, in Radix, our gross profit margin is 95%. So every domain that we sell, our cost on that domain is 5%. And then, the overall price is also fixed. You know, we have a team of about 70 people in Radix.
00:32:46
Speaker
That means never going to grow to like 700. 70 people will be able to manage all of its trees in perpetuity. So it's actually a very high margin business. So we're generating, I think, currently $20 million, $22 million profit every year, growing at about 45% year on year.
Maintaining Profitability in Domains
00:33:02
Speaker
And we invested $25 million. So the company is now worth half a billion dollars in less than 10 years of investing $25 million.
00:33:10
Speaker
Also, what I was implying was not at the Radix level but at the level below it, like say a GoDaddy. For those folks, do they make money selling the wins? On legacy dearies like CommonNet, they make margin of maybe over a couple of dollars. Sometimes maybe two and a half. On renewals, maybe a bit more. On new dearies, they actually make almost 70 to 100% profit margin.
00:33:30
Speaker
So when they sell, if they sell them a dot store for 10 bucks, they sell 20 bucks. But they're making like a 10 bucks margin on that directly. Plus with GoDaddy, every time you buy a domain name, average cart value ends up being, I think $1.50, something like that. Meaning that when you buy a domain name, you buy a hosting package, you buy email.
00:33:48
Speaker
Like you buy all these other associated services, the average contract value will end up being $150 or from what? Tell me about Titan. So Titan is basically an email service and email calendar contacts. It's a modern email platform for micro SMBs and small businesses with unique capabilities where small businesses can actually better manage customer relationships because most small businesses don't have XCRM software, video calling software, and all these 20 other things. So the email.
00:34:12
Speaker
like a multi-account email at the pace with some unique getover fees, lead receipts, some CRM features, for follow-up reminders, that enables them to actually manage their business needs. We sell it in partnership with actually registrars and hosting companies, website design companies. So we've got WordPress, Newfall, and name silo, name.com, all those stuff, different partners that sell it. WordPress actually now is also an investor apart from EU strategic partners. You go to WordPress.com, you buy WordPress hosting along with the email one bit will be tight in the garden.
00:34:42
Speaker
So essentially, it's like a G Suite competitor, but probably the pricing is more suited for SMBs than G Suite pricing.
Titan's Position in Email Services
00:34:50
Speaker
Yes, and partly because the fact that product foreign standpoint, put to a better than Google, used a female plan. But we don't have a full suite, so we can't charge the impact. So we don't have docs and spreadsheets and slides and a whole host of other things that Google has in its suite. So we have calendar contacts, email, we have chat, and we have some level of video calling, basically.
00:35:11
Speaker
those three things that we have. For the most part, it's actually email calendar contacts. That's the package we sell. It's just email basically. So yes, it's priced more affordably, has some unique features. We use it basically ourselves. And so we replaced Google Mail with Titan and only ourselves. And it works like a breeze at the chancel.
00:35:26
Speaker
For me, reselling partners, essentially it's a way for them to increase the cart size. And I was assuming they would get a healthy margin. Is the pricing decided by you or they can price at whatever they want and you charge a certain amount? We charge at any channel, whatever they price in your finance or what we think it should be priced at. So we give a range and some minimum amounts, et cetera. It does result in a higher margin, greater controlling capacity to them to reselling Google because it can be co-branded and it basically provides some other integration set to their platform. So that's about it.
00:35:56
Speaker
Okay. This is again, something you built for in-house use, and then you decided to platformize it in a way. No, actually, we started building it out specifically for that one audience market. When we were selling Flock, we wanted to integrate Flock into Smear. So we started exploring, can we integrate into some accessories to provide them, leverage them to kind of reach them, our services.
00:36:16
Speaker
And in the process, we felt like there was nothing explicitly put out there, except for Google and Microsoft. And so when just like, instead of sitting and integrating somebody else back, I'll just build that all. And we end up building the whole thing from scratch. Okay. So Flock is like, what talk do you already do? Tell me about that. It competes with Slack for Microsoft Teams, but much smaller right now. We have a few hundred thousand paid users and it provides instant messaging, video calling, chat channels, et cetera, for small businesses. Okay.
00:36:46
Speaker
And what is the pricing of Rockler? It's about $3 per user power. I mean, $2 to $3 per user power. I think it's priced a bit lower than that in India. And in developed markets, it's priced, it's like here. And Aten is, again, like, run by a team, or are you actively involved in it?
00:37:01
Speaker
I mean, I am actively involved, yes, but I have some senior leadership, personal heads, go to market, go around, personal heads, not an individual that's called Karpish heads on engineering team. And they're veterans, I mean, Karpish work with the 1480 plus sales respectively.
00:37:17
Speaker
Amazing times for us work with me for a few years but again so reading that entire piece and so three of them with all with HR and finance leadership who are in the fourth together basically we follow us so okay I was waiting this week in the organization a strong proponent of it and so they work with the jointly developed strategy and both zero and then essentially assisting with check-in all of the bases.
00:37:41
Speaker
How do you decide which businesses need your attention and
Importance of Focus in Entrepreneurship
00:37:44
Speaker
which don't? For example, Radix doesn't need your attention, but Titan does. You have chosen to be involved in Titan and not Radix. What is the framework that you use? Now, in hindsight, it's a pretty standard framework that has evolved over time. Zeta is now like fourth or fifth bang on three, look at the fast business. So this is what I've done all my life.
00:38:03
Speaker
But every business that I've seen, every product or company or opportunity that I've sort of pursued has gone through four phases. So there's planning, discovery, scaling, and steady state. There are clear deliverables at the end of each stage. And a clear one is the distinguished each stage. In the early stages of planning and discovery, there's a lot more ambiguity, a lot more uncertainty.
00:38:26
Speaker
And there are still outcomes to be achieved. By the time you get to study state, service, you know, friendly, stable and steady state. So planning is where I'm deciding whether I want to do the business. And fundamentally trying to validate the hypothesis that I would have on who's the persona, what is the problem? How does my product solve it 10X better than anybody else's? What is my go-to-market strategy? So at least one traction channel. What is my revenue model?
00:38:49
Speaker
and what is my mode? So, trying to validate these with as minimal effort and as much research as we can. When we move from planning to discovery, that validation moves from theory to practice. So, we've gone past the stage of theory and now we want to build the first product, MVP. We want to get product market fit. We want to get the actual traction channel where our theory is greater than cat. We want to get a decent NPS, high retention, and these are the four deliverables that this company creates. Once we get all these four, we move into the scaling field.
00:39:18
Speaker
where basically now I'm like, I can put in capital behind the company and continue to scale because it's got product market feed, it's got attraction channel and so on and so forth. And once you've exhausted and gotten to a reasonably sort of high in the leadership market position, now it's 10% easier. We grow at 15%, 20% year on year, and there's no issues after that. I am very deeply involved in planning, discovery, and halfway for the early stage of scaling.
00:39:44
Speaker
By the time we are midway through skating, I can be reasonably hands-off, some really brilliant people who will be working with me through those spaces to take over completely and deliver the outcome. And so those are my, on a full product, a full business basis. I think those are the spaces where I'm deeply involved.
00:39:59
Speaker
Like essentially for Titan right now, what is, is it at discovery or is it at scaling? Are you happy with the product or do you think that more is needed? So Titan actually has, the first product is email for micro SMBs. That product has actually gone past discovery. We have a product pocket fit. We have high NPS. I think right now it's about 52 or 53 in NPS for target to get to 60 by the end of this year. We have really good traction with this partnership traction channel, et cetera. So.
00:40:26
Speaker
Most of the business is now focused on scaling, and I am already to a certain extent hands-off in that scaling process, basically. And I've already started working with the team to kind of swap, go down that path. There are two other products that are tightened over contemplating, one for paint consumers and one for mid-market and large-size companies. Those will start out with planning and discovery, so they're not yet at the scale stage. So that end consumer would be like a premium offering, like, say, a Hotmail, like what Hotmail pioneered in a way.
00:40:54
Speaker
Well, I guess it's what we pioneered. We're still early stages to figure out what the persona problem should be. But yes, it will be some sort of streaming model, et cetera. And how will the enterprise model be different, like more value-oriented features?
00:41:10
Speaker
Well, I think in the enterprise model, it's a different model that we're contemplating, which is that with a small business, the actual email of the domain is hosted with us. They mostly started out their journey with us. With most enterprises, they are currently already on some emails I was provided with. And we can't make a thousand people organization without people organization should shift their email service for what it was. There's not much tangible value there.
00:41:32
Speaker
So when looking at a model which would be more amenable to being able to use the capabilities of a creative or unexisting event source product. Now, this is still in planning stage. So we may not even get to discovery because we feel like there's no merit. And there are also instantly products with it tightened over building out, but they're not in discovery stage. So now that we have a lot of problems of certain users, we're also looking at add-on products that we can build to upsell traditional products and services. So those are two discovery parts of planning parts that are happening this year and the next year.
00:42:01
Speaker
And what about Flock? Where is Flock at? So Flock is at that same steady state level where a couple of hundred thousand users, most of the organization's attention is sort of focused on title. So we haven't actually spent much time in growing it. It did fast product market trade, where we perhaps, I wouldn't say we stale because we didn't properly attempt, when we attempted it, but we haven't.
00:42:21
Speaker
completely given up there. But at the end of discovery, as I said, we need good NPS, good product market fit, and update traction channel. I think we had the pulse too, but we didn't manage to crack the traction channel perfectly. In the meantime, Titan took over, so we kind of spent a lot of time and attention there, and block continues, basically. There's tiny bits of development, the product is fairly ready. It never formally entered full scale scaling stage as yet. And Radix is obviously a steady state. And Radix is a steady state, yes.
00:42:48
Speaker
In Radix, you would be competing against, say, Google. Google is also going after top-level domain registry, right? So Google has some, but the main competitors, of course, VeriSign, which is the comnet registry. The company called Donuts and Affiliates, which merged with each other. They have, I think, a few hundred TLBs. So those are our two main good titles.
00:43:07
Speaker
Is this a business in which there is continuous competition? Will this continue to be more top-level domains being given? And do you continuously need to research and keep bidding and all that? Or is it like once a decade, something like an event happens in which more domains are added?
00:43:24
Speaker
So the first round of domains got added in 2012. The next round was supposed to happen in 2020-ish, somewhere, now it's 2024 or 2025. And after that, at some point, they do want to make it all fair. But the truth is that there is no new competition possible. And the reason for that is not because the world is being announced or not, but because all of the best strings are already taken. We have the best genetic spoons since we had done our career. Donuts have the best specifics. They have all of the, like, doctor, not agency type, not the main names, et cetera.
00:43:54
Speaker
All the good streams are already taken, so there is no competition now that's possible. So it's a fairly steady state business with a model that won't really change in characteristics at all. So let's talk about Zeta now. What was the origination of Zeta? Because I can understand Randiks and Titan are very closely linked to
Zeta's Disruption in Banking
00:44:10
Speaker
Directai. They are, in a way, extensions of what Directai was doing. It's a better way to solve problems of customers of Directai. But Zeta is completely different. So how did that happen?
00:44:21
Speaker
Banking is sort of an area that I've been passionate about myself for quite some time. From the time I started to trans-acute itself in the first place, I was kind of up in the gateway, so it was a famous play.
00:44:31
Speaker
And my co-founder Ram Ki, he and me worked together on a couple of other things before he was taking a break. And during that time in 2014, we both started exploring this notion of, shall we start something in payments? So think of that as the planning phase. So one of 24D, the early 2015, we're like, it's the massive opportunity that's meant to use all this sort of legacy tech and software. They're not going to be able to find more experiences. They all have
00:44:56
Speaker
the best platforms, how do we disrupt banking? So that was kind of our original thought process. So both of us wanted to do something in the payment space. And there were, I guess, a couple of paths that when we went to exploration, started reading a lot on regulation, what's possible. And one of the first instincts was, should we start a new bank or a challenger bank or some tech of some form?
00:45:16
Speaker
And shortly after we kind of discarded the idea because you're firstly getting a full-fledged banking license in India was next to impossible. Second, banks actually have a limited return on capital, right? So limited return on equity. So you have to have a certain amount of equity to be able to lend a certain amount of money.
00:45:32
Speaker
And because that limitation you can only earn a certain amount of return like the best fans will give you forty forty five hundred dollars most of them will give you twenty twenty two percent returns on equity so very very equity heavy play very regulated we felt like if you want to expand across the globe we'd have to actually set up the regulatory and so many different jurisdictions so
00:45:49
Speaker
Lots and lots of, as I said, very, very regulated. Limited-run equity, a heavy-run equity industry can't expand across the globe. We'll never get majority market share. We're never going to be a bank which has most of the market share across the globe. So we felt like our ability to disturb banking in a high-return manner, in a scalable manner, is by really revamping the entire technology stack that operates banks today. And the more we dug into it, we just
00:46:12
Speaker
We were at least shocked with the monolithic softwares that most of these banks currently use. Some of them either were written in the 1960s, 90s, 70s, basically, and have not changed much since then. Most of the tech, at least in the late 90s, not even early 2000s, before the cloud existed, before smartphones existed. Vision Plus, which runs most of the credit cards of India, the upgrade cycles are like four years before you get a new version.
00:46:37
Speaker
Versus today, when we think about cloud detail, continuous integration for this development, microservices architecture, 100% API-driven and headless. Now, there are all these modern software paradigms that enable flexibility, emptiness, need of innovation, configurability, self-service, ability to create modern experiences, provide infinite scalability. Now these things existed.
00:47:01
Speaker
And we sat out with this naive ambition of reuniting the full stack. So co-banking, issue processing, payment processing, everything banks and protects. And we have over the last seven years, actually great, the best, most modern full stack banking platform that can run a full banker of free tech.
00:47:20
Speaker
across retail and commercial banking, across deposits, credit cards, debit cards, prepaid accounts, loans, et cetera, that basically can provide a much more modern and strictly scalable, next-gen co-banking and even processing platforms, banks and people. We launched it in India, in Europe, and now in the U.S., and we're only focusing on mid- to large-sized banks and front-end tech. So that's really our focus area and providing this, basically, full-fledged modern platform to enable them to create modern experiences for their customers.
00:47:49
Speaker
What do you mean by monolithic software? You said that the legacy software is monolithic. What does that mean? So it's single-use, single-purpose built as a non-modular, not loosely coupled Microsoft-based architecture. What I mean by that is Pfizer, which is one of the largest legacy tech institutions, they're big, massive as a company, gives them that credit, grown to dominate to that position. They have, I think, 20 plus to three to four banking platforms.
00:48:14
Speaker
maybe three to four different credit card processing platforms, a couple of different debit card processing, a couple of different prepaid processing. So when you go as a bank, you're buying a credit card processing platform, you're buying a four by three platform, you're buying a prepaid platform that does just that. In a credit card processing platform, the entity modeling is created such that
00:48:30
Speaker
A card is an account holder, is an account. All three are clubbed into one entity. We have the opportunity to sort of reinvent banking from scratch. So we actually decomposed banking into its most fundamental components, what we call the foundation model. So we built a
00:48:45
Speaker
Infinitely scalable, ledger and bookkeeping service called Aura, which basically handles all the common concerns of any asset or liability product. So it'll basically manage a ledger, manage divinity bookkeeping, cycles, statement pink, interest computations, fees and charges. So that's our ledger source.
00:49:03
Speaker
Then we have a card service, which basically handles all kinds of cards, openized cards, high-grids cards. It's actually an instrument, payment instrument, so it's all kind of a payment instrument. And there's a account holder service that can handle a beer person, legal person, full life cycle account holder. There is a transaction switch, which handles all of the nuances of any transaction. We can connect with Visa, MasterCard, IFBS, UPI, ACH, et cetera, but it handles a full transaction from authentication, authorization, clearance, and settlement.
00:49:31
Speaker
And using these components now, it actually constructs on top that we built the account module so that they would be which started while we could record the account module, pull which stuff we did with your account modules. Sapphire is our savings account module topaz that term deposit module, but it essentially operates as this.
00:49:49
Speaker
set of loosely coupled microservices that are what we call polymorphic. So in one single stack in a modular manner, in a flexible, configurable manner, you can essentially launch the most creative possible credit card products with every card format, so deposit or known products.
00:50:05
Speaker
Unlike with sort of monolithic soft files, that you only solve that one purpose, not flexible, not configurable, not cloud native, not C key decision. Okay. Okay. Okay. So, Polymorphic essentially means highly configurable. You can create whatever kind of product you want to create as a band using this stack. You can influence behavior without having to write for. So, if you take Aura, which is an Azure service, credit cards have a revolving monthly computed address that's debited to a customer's account.
00:50:33
Speaker
Savings accounts have a daily balance-based interest that's credited to a customer's account. But Aura doesn't have to bother or care. It can essentially behave like a credit card ledger, or it can behave like a savings account. That's the way it's built. We don't have to write new code.
00:50:48
Speaker
to make it behave like a savings account. Or rather, we can influence behavior through configuration, through basic plug-ins, so externals that essentially provide that behavior. Because everything in banking is essentially a ledger. So you build one strong ledger, and then all the various product forms are... But to be honest, everything in banking is around these four entities. So fundamentally, everything is a ledger. And then transactions coming through a payment network, the ledger is upheld by an account folder.
00:51:17
Speaker
And the instruments serve as a token vector for authentication authorization on the network. The two main pieces would be payments and accounts. So Athena, which is our switch, and Aura, which is the name of sounds. And then the other two basically are on top, like account holder accounts. What made you confident that you can figure this out? This is something that would need a lot of insight and information to understand, for example, what a switch is like, how it would connect to Visa and Mastercard.
00:51:44
Speaker
Like this is stuff which is typically done by insiders who have been in this space for a while and you had like a complete outsider perspective here. Well the confidence goes back I guess to some sense to sixth grade I would say I think. I have always believed and that's partly also thanks to our upbringing. My father used to keep saying you know you can achieve anything you set your mind to. That's his most quoted mantra basically. He keeps repeating that all the time.
00:52:07
Speaker
at least kept repeating it back then. But, and also the biographies that I read, the more biographies, I think my favorite genre of books, the more biographies you read, you realize that most of these books who started, some of the latest ones that I read, Elon Musk's biography, Steve Trump's sort of latest biography, etc.
00:52:23
Speaker
You realize that, fundamentally, there are individuals who are passionate about the problem space. And of course, when you start out, which is why I said there's a planning phase, a discovery phase, and so on and so forth. By the way, the other elements of those phases are that by the time you get to an early stage of scaling, you've also understood most of the unknown unknowns. When you're starting planning, there is a very small set of known knowns and a very large universe of known unknowns and unknown unknowns. By the time you finish product market fit, you get to scaling, you've covered most of the known unknowns,
00:52:53
Speaker
and a reasonable chunk of the unknown unknowns. And I think early on, you basically, as entrepreneurs, you have, I also say entrepreneurs need to have a healthy dose of dilution. So you have to start with this, this level of confidence. Like, yeah, if you, if you work towards it, you can achieve anything in life. So that belief always exists. Okay. So tell me about the zero to one here. Like I'm assuming the direct sale would have given you enough funds to
00:53:17
Speaker
and not initially look for any external funding, like you would have been able to send funding. Yeah. So me and my co-founder, we put in 40 billion capital. That's what sort of was the initial capital raise. We built our first version of the core platform and then built a use case on top of it, which was employee benefits, you know, meal benefits, corporate benefit, transport benefits, fuel benefits, et cetera. And that was our first use case built into our platform.
00:53:41
Speaker
started selling it to enterprises in the country and got massively into Accenture and Capgemini and Amazon, you know, whole host of some really large customers. And then subsequently, they also entered the part which was XO, which has now been a long-dong part which should last five years. They actually invested in a 30 million dollar company a few years after. So sometime in 2018, it shows up as a strategic investor and a customer.
00:54:05
Speaker
So, Nexo was like a go-to-market partner for you or were you helping them digitize their technology because they are also into the same employment-effect space in a way? The first two years, we were comparators.
00:54:20
Speaker
And when we struck up the partnership, it became then a clear boundary of we will provide technology and they will own the customer. So we transferred whatever customers we acquired, we transferred over to them. And against that, we have a partial ownership of Sunexo India. And then the investor in Zeta Ferrant.
00:54:37
Speaker
And then they give us contracts in Spain, Vietnam, Philippines, Italy, UK, where we provide similar platform with the same underlying core to various entities of theirs. And then they became the operator of issuing business and we, RFPSP, and that's one, has always been the co-hostess. What is the problem that you were solving for corporates and employee benefits? What was the existing state that you were trying to improve?
00:55:01
Speaker
So two layers. So firstly, Zeta is a banking platform. So it's one layer to know that. But the product will be built and dubbed that benefits use product for digital issuance, issuance of what like we did benefit products. So you got a card when you as a as an Accenture, you can give a mobile app and a card, let's say 100,000 employees.
00:55:18
Speaker
And you can then create an entitlement. There's like a prepaid card. So this is something like, like instead of spending for a flight ticket and then submitting a reimbursement, you can get a card or an employee can get a card which they can use to spend on stuff. And there is no need to apply for reimbursement. There's something like that. Theoretically, yes, but that's an expense management product which works on the same platform.
00:55:39
Speaker
What we built as an employee benefits product where you basically give an entitlement to the employee. So that's in your sense that, oh, I want to give 5,000 rupees a month to a child that he can use at any restaurant. I want to give 50,000 a year that he can use at any gym membership. I want to give 2,000 bucks a month that he can use for Ola and Uber and trains and transport. And that's a benefit that I'm giving him.
00:55:59
Speaker
But I want to make sure that the benefit is spent for the purpose that I am prescribing. So he can't take the meal money and go and spend it in entertainment or cinema. So our system essentially ensured the enforcement of rules with zero manual intervention. So zero touch workflows to enable enforcement of spending. Same thing can be applied to expense management, which was the next product.
00:56:19
Speaker
that we were planning to build, but we instead end up setting the core platform to banks and that's become so big now that we haven't built that mishap
Evolution of Zeta's Platform
00:56:26
Speaker
yet. How would you ensure compliance? This would be because every POSS machine has a code that what is the nature of the business. Like say a POSS machine at a gym would have some sort of a
00:56:37
Speaker
code that this is a gym and then you therefore it would only approve the transaction if it was done in that core or like how does that happen. So there are multiple ways. One is that Visa Mastercard themselves have an NCC core for much of the category.
00:56:53
Speaker
Second is that we support close looping of transactions so where individuals can go and verify and validate categories. So whether it's our employees or select those employees, so we won't tie up with merchants and we onboard them merchant IDs and terminal IDs by swiping one transaction and then in the system we can mark that transaction as this gym transaction.
00:57:12
Speaker
So we had a fully curated list of merchants, so a bunch of three and a half flat merchants, three and a half flat merchants, and that curated list also enabled auto sort of crowdsource curation. So you go to a grocery store and you swipe your card and the transaction is declined. You can submit it to be added.
00:57:28
Speaker
And then we can basically do cloud curation. So multiple techniques and different benefits called for different techniques to be applied. And why do companies care that this is not misuse? Is there a tax compliance issue here? Like say, if you're giving somebody like money to spend in restaurants, then that is tax free for him. And therefore they need to care that it's only used in restaurants. One is that
00:57:50
Speaker
There's a tax reason, but second also has a benefit. The reason I'm giving a bank, I'm giving you a gym benefit. It's because I believe in the wellbeing of my employees. And so the rationale behind the benefit is that the users is for a particular purpose. The purpose is not met, then the benefit is, then I might as well give cash in a salary. So, so both of those are important aspects. How did you end up building a banking platform and use it for employee benefits? Like.
00:58:15
Speaker
So the goal was always to build a backbeat platform. We could have started with any one particular use case. So the first type of occasion was should our use case be a retail use case or commercial company basis case. We decided to go down the path of companies instead of end users. Because end user, CAC is very high. You have to raise a lot of capital, burn a lot of capital to acquire end customers and so on and so forth.
00:58:36
Speaker
And within the company path, we could have gone down like expense management or employee benefits or on to post your services. And the reason we took employee benefits is expense cards. If you're an Accenture, you typically issue them to like 500 of your top executives. But benefits you give to 100% of your employees. So we felt that the engagement levels would be higher, the adoption rates would be higher. So we chose a particular use. That's the rationale that we took through the site, which used to choose.
00:59:02
Speaker
How did the first sale to a bank happen? Like that SaaS for banks, how did that business get started? So we already had the platform. For the first four years, we were using it for meal benefits while building out the rest of the platform. In the fifth year, I think 2009, or fifth year, so fourth year, in 2019, we first started selling it to Fintechs. In November 2019, we had this big event in Bangalore. We invited all hundreds of Fintechs and banks, et cetera. They were full demo of the platform.
00:59:33
Speaker
signed up or who was to print text, who wanted to create their own prepaid cards or reimbursement cards or things like that. And in February, in Mumbai, we hosted a large event for banks. So we had representatives of about 50 to 60 electric banks that close to about 150 participants, senior leadership and so forth, where we gave a full demo of our issuance platform to banks.
00:59:56
Speaker
From there, we signed up. We already signed up our BN, the floor action event itself. So, we were using them, we were using IDFC. We signed up SIPE, our ACR service for industry, and signed up with HDFC's conversation started from that, basically, from that event. So, slowly, virtually, it started moving into that phase. And then, so, let's go to a few markets. So, Rexxo by themselves are also an issuer, and therefore, they're a bank and our system as far as working stuff, because they have a VPI license. So, we were already powering one bank in that sense, for a particular use case.
01:00:26
Speaker
And now recently we launched the Eurobo in the US, and we're seeing a lot of traction for credit card processing, which is the product that we've entered the US pockets with. So that's sort of step by step the blessing.
01:00:38
Speaker
Okay, what product did you see traction in India? In India, we actually saw it before the retail banking platform. So starting off with payments, which is pre-made and UPI, and then adding credit cards pretty shortly. That should launch by end of so pre-made and payments where this is always been like credit card should launch by September or so. And then sometime early next year, we're looking at launching sales cards.
01:01:01
Speaker
And how is it priced? Is it on per transaction or is it a fixed fee? Everything boils down to a single per active user per month pricing, for the most part. There are some small other fees like a setup fee and things like that. But the fees are SaaS and it's per user per active customer per month for each of the modules.
01:01:22
Speaker
Like your playbook here was pretty similar to director, right? Like in the sense that you built something and then you decided to make it a platform, make it available to others and like essentially similar to what you did
Growth During COVID-19
01:01:33
Speaker
there also. Yeah. And the key difference, and maybe not the key difference, it is similar playbook, but here we had always start up the notion that we're going to build the banking platform that we will actually send to banks and protects. Just that the journey took a little longer to get there because comprehensive banking platforms are fairly sizable, which is also the reason why
01:01:51
Speaker
The amount of investment that's gone by is fairly sizable in comparison to math companies and things like that. But fairly sizable kind of investment in time frame. Otherwise, the model has similarities. And how did the software environment happen? I believe that was the most recent term.
01:02:07
Speaker
Yes, that's the only external institution around. So, so Nexo was a strategic deal where we basically jointly decided that if they're giving us such a large contract, they wanted to invest some money and we wanted them also tied in. So we took a strategic investment, but so SoftBank, we actually back in 2019 and that we started exploring the process and 2020 Q1.
01:02:30
Speaker
So January, February, 2020, we kind of did a mini roadshow, met about six, seven investors, and then March, COVID hit basically. And then, so we kind of stopped all of the engagement, et cetera, and then re-initiated the process, end of 2020, early 2021, and then closed round with softback until I think May, 2021. So we had finally, October to December, November, December, January, 2020 and 2021.
01:02:56
Speaker
Met up with about maybe 10, 11 funds from the exact number. Three of them that we really liked and would like us. So, continued conversations with those three and then eventually, eventually set up a software. How did COVID impact like all the businesses like Zeta, Titan, Linux? All three of them grew way faster than what would have otherwise
Partnership with HDFC Bank
01:03:18
Speaker
happened if COVID wasn't around.
01:03:20
Speaker
Well, there's both an upside and an downside. So we sold the platform to HDFC Bank throughout COVID time. So funny enough, we never had a single in-person meeting with anybody at the bank and met 250 people virtually over the course of six months to actually make that sale happen. And I believe that if there was no COVID,
01:03:41
Speaker
Most of those meetings would have been required to be in-person meeting. Same process that took place in six months may have ended up taking up a year and a half. And we found this universally across the board. Our sales speed increased, banks wanted to. Also because they were seeing the impact of COVID, externally, banks wanted to digitize faster. Digital transformation exercises became much more important. And that's continuing now to see that trend across the globe. So we're seeing a faster adoption.
01:04:03
Speaker
Same with Titan, more people need through websites, email, et cetera. Same with Radix, more people need domain names. We actually had our best year during sort of COVID year because large number of businesses felt the need to go online. So all three businesses saw a lifted natural cost. I think there was a downside impact in terms of efficiency, productivity. You can't build great software where everybody is hot.
01:04:23
Speaker
So I think it takes more effort. Software building is a creative exercise. You need to do whiteboarding. You need to do problem solving. You need to do, create that commentary and the sort of team bonding and spirit and all that stuff. And we miss that. So hopefully now, slowly, which only things will resume to a normalcy, at least we'll have the opportunity to sort of a hybrid model where people perhaps can come together.
01:04:44
Speaker
a week in a month, a couple of days here and there, et cetera, and actually lead people face to face, which I think is important. But overall, it definitely had a positive impact on business.
01:04:54
Speaker
So in your word, SDFC is like light in shining hour. SDFC was stopped by RBI for issuing new cards due to platform related issues. So like you kind of helped make that like digitized and modern, is it? I would say each other. And I think in many ways they have been a huge boost for us in terms of right out of the gate, they've been amazing partners to trust us and trust us the responsibility of what is the largest private sector bank in the country.
01:05:21
Speaker
on a platform that is very new. And so I think in some sense, they've actually contributed really to us and vice versa. And they use a significant number of legacy stacks and we expect to benefit, generate a significant amount of benefit to modern stack providing them. So I think it's kind of a mutual partnership and really amazing one which I see what we can do together. The very progressive bank and
01:05:42
Speaker
but also their thoughts and thinking. They just were centered with platforms that would not support their ambitions and vision. And now, jointly, we can create a partnership that will actually truly leverage their trust and huge trust economy in the amongst the civil industry and audience, et cetera. And so, we'll be able to jointly leverage what they've created as an asset across 27 plus years, the trust, the reach, the scale, along with the most modern platform, we will create the most innovative as digital to experience the upgrades.
01:06:10
Speaker
And what are they starting with? This product, cards I get. So they're starting with payments. And we paid launching credit cards shortly after. All of that will happen this year. And then savings, and others will go live only next year. What is Zeta's current traction like? Like what kind of revenue numbers do you know? Or is it too early, really? So we are doing reasonably well in terms of revenue, but we're not disclosing some numbers per se. We're obviously not profitable or break even. This is a heavy investment space. And in fact, a bulk of our investment
01:06:37
Speaker
So the good part about Zeta is, unlike most other VB SaaS companies who have to burn a lot of capital investment behind building the platform, but also a similar amount of capital investment behind selling the platform, the benefit with Zeta is that we have exactly 300 potential clients in the world, which is top 300 banks, and maybe another three to 400 fifth techs that would be meaningful in size.
01:07:00
Speaker
And so the number of customers is limited. So our CAC is not very high, but a huge amount of investment has gone behind building the platform, a huge, huge amount of investment. And so, and continues to go behind the platform. We have the best, most comprehensive engineering team for both backend and frontend and the kind of technology.
01:07:18
Speaker
platform they've created. Most other companies, country, are not working on as much elementary tech as we are, I guess, in building out this whole venture platform. So that's really where Valka, the investment, is going to go over the next couple of years. The expectation currently is that by the time we get to 2024, that we should be operationally breaking, or close to operationally breaking, even 2025 onwards, we shouldn't require any external capital.
01:07:41
Speaker
And what's your revenue target for $24 or $25? It's in the hundreds of millions of dollars. I mean, the contracts that we've currently signed or are signing themselves would add up to a few hundred million dollars. So currently, your sales data is in the scaling stage? Like, has it crashed? Discovery?
01:07:58
Speaker
I wouldn't say that, yeah, in enterprise software, it takes longer. So I would say that way past the planning stage will probably towards the end of discovery and bully scaling in some markets for some products. But I would say to get well within the scaling stage is probably another year and a half.
01:08:13
Speaker
I would love to understand from you how to do organization building. You have built multiple organizations and each of which has scaled significantly to market leadership positions. And this is not obviously a one man, like the current doesn't go to one man, it goes to the team that you built for each of those organizations. So tell me how you do that. Like what are some learnings over there that you can share?
01:08:39
Speaker
Sure. I mean, in fact, I would say a small fraction of the credit goes to one man. I think the larger chunk is most. There's a lot of smart people out there who can come up with brilliant ideas, but I think if I can take credit for one thing, it's actually focusing a lot on talent acquisition.
Recruitment and Leadership Hiring
01:08:53
Speaker
I spend a lot of time in recruitment, hiring leadership, hiring light talent. I'm very pedantic about it, et cetera. And so that's probably one area where I see I can take potential credit for.
01:09:03
Speaker
Do you have a playbook for hiring best talent? There are some themes. Hiring about the meat of the organization. Hiring sort of people who you believe will add knowledge. So in the interview process or being excited about the fact that you acknowledge the organization, et cetera. Leaving the interview with like this feeling that that's going to be an edited process to the average score of the organization as opposed to sort of reducing the average score and some all the other.
01:09:24
Speaker
I tend to dive, I fundamentally believe in asking a lot of case study oriented, problem solving oriented questions. So my interviews, I don't believe in like, oh, describe what you've done in the past. I care much less than about that. I care much more about this. I'm giving you a brand new problem that you've not encountered before. Or that might be the adjacency space, but you've not encountered that problem before. I really want to think about, you know, I really want to sort of focus on how you think about that new problem.
01:09:51
Speaker
First principles, thinking, defining the fundamentals, figuring out how you solve that problem, et cetera. That's really where a lot of focus is spent when I'm interviewing candidates.
01:10:01
Speaker
So as a manager, are you like the big picture guy who looks at the vision and looks at trends and figures out what is the direction to go in or are you like more into the details and what kind of a manager are you? So in the planning and discovery phase, I do both. And I'm actually a bit of a micromanager there when it comes to planning and discovery, depending on who I'm working with. A lot of people, folks who work with you for a long period of time, there's much lesser need of micromanaging in that class.
01:10:27
Speaker
Otherwise, during planning and discovery phase, I dive into the weeds. For scaling phase, I'm almost the opposite, which is I will take a very hands-off approach and only focus on contributing to a quick picture strategy, not even necessarily actively deciding the
Personal Investment Style
01:10:43
Speaker
strengths of myself.
01:10:43
Speaker
I was looking at your Wikipedia profile which says that you are amongst the 100 richest Indians. So I'm sure you'd be getting a lot of people pitching ideas to you for funding and also what is your way in which you evaluate when people pitch ideas to you for funding and stuff like that.
01:11:00
Speaker
So truth be told, I am not an investor. I have never loved passively investing. I have loved actively building businesses. I would say more than 80% of my personal investments are all into companies of my own. So I put in 25 million good ad eggs, put in 40 million in a receipt, put in a chunk of cash into title, and I would gladly put my own money into businesses that I'm actively involved because I love building my own hands.
01:11:21
Speaker
I have made some investments. I'm an investor and a mentor in an academy through Karam Munjan who's one of the most outstanding entrepreneurs again that I know of and it's a space I'm very passionate about. Education is generally a space that I'm very passionate about. Of late I've invested in a handful of companies but nothing close to what most other entrepreneurs out there have done. Overall, I've probably got less than 10 investments, maybe less than seven investments across the board.
01:11:47
Speaker
I don't actually, I'm not necessarily at the receiving end of many lectures. Most of my time is spent on building the companies that I am. I'm currently operating.
Evaluating Business Ideas
01:11:54
Speaker
But what makes you bullish about an idea? It'll go back to kind of, and this all comes from hindsight bias, because I've been pretty stupid in some of my business plans in the past, and so learn some mistakes. And so it's kind of a template. I think anybody who has fundamental clarity about the persona, the problem, the product, and by front of tower, solving that problem, serving a next better way. A rough idea of go to market and rough idea of revenue.
01:12:17
Speaker
And the business proposition has a moat. Those are the fundamentals. On top of that, you add market opportunity and size and scale. So it's too tiny. Very interesting. If somebody has reasonable fundamental clarity or at least a hypothesis based on fundamental clarity, depending on the stage you invested, if you're investing in a growth stage company, you're past the discovery stage. You have to already be in scale. So it's a proven idea.
01:12:40
Speaker
If you're investing, pre-discovery, then if they have fundamental clarity, passion, I also believe in hands-on and depth as being sort of model criteria and that's my style of working. So I do refer entrepreneurs who have great depth and not just breadth and are not sort of jack of all trades, but rather master of many trades, let's put it that way. So yeah, those are the areas that I would say are areas that would be in the comfort, non-compromisables.
01:13:05
Speaker
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