How to Build a Billion-Dollar Startup

[Music] good afternoon everybody I hope you're having a good time at the Abu Dhabi Finance week so the panel today is about building billion doll startups in the fintech space and I'm very happy to moderate the panel with these two gentlemen who have built profitable unicor fintech companies out of India one in the retail lending space and one in the lending space so we have wi from vivriti group and we have Punit from money view I'll quickly introduce both of them but just a brief introduction about me and the firm that I represent so I'm a managing partner at Stride Ventures stride is the largest Venture debt provider to New Age businesses in India and we manage about $500 million in assets we've invested in over 120 companies across the length and breadth of the startup ecosystem in India and very happy to share that just last week we have got the IPA uh in principal approval for a fund out of Abu Dhabi and very committed to this region and excited about the possibilities here so I'll quickly introduce wiin uh wiin is the founder and managing director of Viti group uh they have Viti Capital which is an nbfc regulated by the Central Bank of India the RBI he also runs an asset management company which is essentially fixed income credit fund regulated by sebbi he comes with more than 20 plus years experience in the financial services industry he's an alumnist of the prestigious Indian Institute of Technology and he has done his uh MBA from Indian Institute of Management I also have Punit uh Punit is the founder of money view one of the finest unsecured retail lenders in India he's worked for over a decade at McKenzie Google Capital 1 before founding money View again an Alum from the prestigious Indian Institute of Technology and he has done his MBA from Pur University so very pleased to have the both of you here uh you know and privileged to be a part of the ad FW so quickly you know shifting gears on how to build billion dollar startups in the fintech space um I'll start with you know the fact that India is one of the fastest growing fintech markets globally India has you know something called Indian India stack which is a set of open apis and digital public goods for data identity uh you know and essentially a full digital payments infrastructure which has helped Indian fintech companies skill you know far more rapidly so I'll start with vene on how has you know Adar for identification or you know the universal payment infrastructure like UPI helped you scale your business thanks Aura um I agree that uh Viti as a business model could not have existed had it not been for the technology Innovations of the last decade um in The Last 5 Years for example we have built the ability to read SM balance sheets without talking to theem right today through statements coming in directly from Banks statements coming in directly from tax records statement coming in directly from from pension fund payment uh statements coming in from digital litigation records it's possible to form a complete map of anme without meeting the S and that's what makes it so powerful right in the in the bygone eras of a decade back right A lender like us would potentially depend on intermediary chared accountant firms that know the firm and to ask them how to interpret a balance sheet today we are we can operate completely independently that gives a scale that that gives us risk management it gives us early Waring signals it gives us reach right and therefore the benefit of Indians India's data architecture cannot be overstated I I I would go as far as to say arguably that India today for Lending has possibly the best data St that I have seen across any Emerging Market globally great uh you know keeping that question to you also Punit how has technology and the India stack enabled you to scale your businesses also I think India's stack is already adopted by 15 16 countries globally what can you know UAE as a corridor learn from Indian stack and adopt it to you know do better uh underwriting at scale absolutely kind of echoing some of the things that uh wiene mentioned see uh we are we are kind of a true fintech at heart where we are leveraging technology to the extent possible to create really personalized relevant and very value added products for the consumers and deliver it through a completely digital experience right so uh just to kind of set some context uh we operate in we cover roughly 90% of zip codes or PIN codes that are there in India but we don't have a single employee outside of Bangalore right so it's everything that we do is completely digital uh consumers can apply for a loan or kind of a financial product on the app and in matter of minutes the money in their bank account right all of that could only be enabled through the infrastructure that the government has put in place right and so from kind of really making sure that the consumer who's applying for a product is the customer who he or she says uh they are uh kind of from an identity identity verification using the kyc data that is linked to Adar right to be able to kind of collect a variety of different data variables to underwrite the user uh so we use uh the account aggregator uh kind of an infrastructure which is Again part of the uh uh the kind of India stack which allows us to pull information from any and every Financial account that the user may have that allows us to kind of quickly run them through our credit models uh to finally kind of dispersing the money into the users's bank account again through the imps or the neft infrastructure which is all kind of linked to the overall India stack so I would say kind of the the India stack is a very core enabler for our ability to kind of deliver great experience to the to the users great so essentially India stack is a very powerful digital architecture which has increased interoperability between fintech companies Banks nbfcs and you can and even digital wallets you can transfer money seamlessly paperless consent lless and has given Indian fintech companies an edge to you know build on to that architecture for for further scale moving on you know quick questions to both V and Punit because you know these are very two different sectors and Retail lending I'll possibly start with you pun you have one of the best return on asset uh you know amongst digital consumer lenders in the unsecured space you've been able to control your cohort losses very well reduce the customer acquisition cost really well so was this a part of the DNA from the very start because you know building profitable companies right from the beginning is is very difficult especially when you can easily get distracted by growth at all cost mindset no absolutely see as I mentioned like we we really uh from the very beginning run money view as a true fintech which is a combination of financial services and Technology right so we we Leverage The Technologies to really create delightful user experience with the users to create really relevant and personalized uh products to the consumers but we run money view as a financial services company right and what that means is you want to apply the same rigor that a a traditional bank or or another financial institution kind of applies to to run a run a company uh unit economics has been kind of our core fundamental kind of belief from day one uh actually from the first loan that we have given out the focus had been to kind of be unit economics positive uh so whether it comes to kind of creating the products correctly to kind of pricing them correctly uh acquiring the users in a more efficient manner uh to even things around building a business which is very Capital light right so we actually turned profitable with this $30 million of of funding it's so so kind of to to to come back to that this rigor of running a fintech as a financial services company has been kind of our core part of the DNA from early days and that's what is kind of helping us deliver the the high roas and Roes for for our investors great uh we need similar question to you you know uh lending is U extremely underpan iterated they contribute about 40% to the GDP in India but only 11% of the bond market I think Viti is unanimous to propelling performing Credit in India and opening it to different investor types and uh I see the same Trend in UAE I think there's significant under penetration when it comes to credit what I your learnings you know since you've already bridged the Gap to a large extent and your contribution is very relevant there what are the key learnings that you'd like to share with the audience here on you know with possible entrepreneurs who are building something similar in this region I think um something we told ourselves um you know 7 years back when we started was um stay profitable and never have more than single digit NPA cases that we go after right and that's been our uh that's been our story in the last 7 out years and that's helped us stay up the water stay profitable even when we were boat strapped company for 18 months and thereafter and frankly U the market is so rewarding that it has not resulted in a sacrificing growth right uh in 6 years today Viti is roughly $1.2 billion of assets U I think U I think it's been a great story because fundamentally we were ing a market that is massively underpenetrated and therefore we had a lot of if I may use the word Rich pickings within a very large Market that was crying for term funding right our learnings have been that um uh go where the market uh today is not there fundamentally uh and keep a very tight eye on risk-based pricing right uh for example India SM weighted average term default rates are 3% but term term margins over risk-free is 8% so if we spray and pray we can make five and we not spraying and praying yeah right yeah so uh so that our learning has been that when when there is a market Gap so fundamentally wide there has to be a very clear reason and hence someone like us can exist sure I'll just like to add you know so stride is in the startup lending space and the asset loss ratios are less than 1 one and a half% so I think India has that DNA that we've used alternate data sources to make sure that we are doing a good job at credit underwriting at scale and if the unit economics as both of them have uh you know focused on in their businesses we can really run profitable companies at scale next question to um you Punit uh you know uh fintech is of course a highly regulated sector there could be decisions which become retrospective in nature it's also a very Dynamic space uh you have to be you know hand in glove with The Regulators be on the right side of the things how do you create U you know a company right from the start to navigate from these different uh compliance uh you know issues that can crop up in future see uh if I kind of just think about from a regulator standpoint right what they're trying to do is they want to make sure that there are enough guard rails for for the industry to kind of continue to grow in a very resilient manner right uh and and there are two aspects broadly that The Regulators are focused on one is making sure that you are doing right by the customer right and then second is to make sure that there is no systemic risk that you are creating right so things are kind of the process are well well defined you're kind of managing your Capital well you're managing your risk well and so on so forth now if you actually take these two key uh uh kind of themes uh that's something that we have focused very deeply from early days right uh even being a digital lender uh our our Play Store rating is 4.7 right our NPS is 60 so uh whether regulations or not we want to actually do right by the customer we want to create great products we want to create them with respect and so on so forth so that's one part of the regulation that came the second part of the regulation is around uh kind of risk management and so and so forth now those are two things that I believe any financial services company should be doing right so that's again kind of going back to our DNA about kind of we have been building this as a financial services company so uh when The Regulators over the last 18 months there have been several different guidelines that have come out uh I'm I'm very happy to kind of say that not even for a day we had to actually slow down or pause our business right because we had been anyways focusing on that and to us actually it's great that these kind kind of uh guidelines are coming because that's going to make the overall uh ecosystem more and more robust sure sure I see just one minute I somehow feel that there wasn't 20 minutes but one my last question to you uh vinit and I'll just summarize post that Ked Avenue or U actually is the largest uh debt syndication platform in the country today in India and it is a quite a tough task to digitize all the work workflow streams in wholesale lending so what was the vision behind it the vision behind it was that U one the market needed that kind of a platform to bring thousands of smmes into the formal world uh it was not practical to assume that a bank could open a branch in every pin code every Bank could go to Every pin code that's not practical there had to be an inbound and an attractive value proposition to bring the The Seekers of capital to engage and login and create their accounts right the second is that providers of capital in India unfortunately are not large enough or numerous enough and as a result it was necessary for us to very deeply integrate with these providers of capital and that's been one of the uh value proposition of cred Avenue to significantly deeply integrate and provide create a dense Network through which uh a bank can switch across multiple products and meet multiple needs ofes I think these have been probably the two biggest WIS that the platform has had which is why we are today roughly at $6 billion of annual throughput that's that's really very impressive in the interest of time you know quickly summarizing what we've discussed I think uh uh building a profitable unicorn fintech company is massive and couple of key takeaways is obviously to focus on your cohort losses your customer acquisition cost access to high quality customers and I think you can use different alternative data sources to refine that underwriting and definitely use technology to build that up at scale and I would say the second very very important thing is always have processes and risk mitigation in place so that with the everchanging Regulatory Compliance landscape you're always in the right side of the things thank you so much everyone for you know hearing us