‘To crypto or not to crypto?’ remains a burning topic for the regulators in the country, but for start-ups and investors, it is definitely a hot currency.
Founder Thesis brings you the journey of one such founder, who is riding high on this crypto wave. In this edition, Akshay Datt speaks with Ashish Singhal, Founder and CEO, CoinSwitch Kuber, one of India’s largest cryptocurrency exchanges and the second venture to attain unicorn status in the cryptocurrency sector.
A techie at heart, Ashish tried his hands at different innovations and participated and won various hackathons with his now co-founders Govind and Vimal. The idea of building an aggregator of crypto exchanges came from one such hackathon and it came when the RBI imposed a two-year ban on cryptocurrency. But this did not stop Ashish and he took this product to the global market as a B2B product.
However, to educate and make cryptocurrency accessible to Indian users, CoinSwitch Kuber was started in 2020 and is currently valued at USD 1.9 billion and has over 11 million registered users.
Tune in to this episode to hear Ashish speak about how CoinSwitch Kuber is making cryptocurrency investing as effortless as ordering food online.
What you must not miss!
- What is a crypto aggregator?
- Benefits of participating in hackathons organized by VC firms.
- Building a user-friendly buying experience.
- Future bets.
- Optimise for success, be ready for failure.
What was it like for you to grow up in Meerut?
It was good. As a kid, I never felt security or anything was an issue. We always lived in places. It’s a more populated area, right? And it’s more close-knit. You know everyone everywhere, right? So even if I’m walking down, people know that the doctor’s son was going. Yeah, Dad was a doctor. So everyone knew him well, and it’s a well-connected society and all those, so it’s not as nuclear as it is today. But when I go back now, I feel a little insecure, because I don’t recognize a lot of people and you know, when you go to the streets, the infrastructure hasn’t moved much, but the population has grown significantly. So, everything is lacking in resources, and too much noise, too much crowd. And after Bangalore, it feels a little weird, but security-wise, I’ve never felt anything bad in Meerut.
Who influenced you to try for engineering, you know, I mean, your dad is a doctor. So, the most obvious influence would have been to become a doctor so what made you go towards the engineering side?
So, in 11th when we had to choose maths versus bio, right, so I had both because I loved maths, but I wanted to be like my father, a doctor. So I couldn’t leave maths out of the picture and I kept bio as well. But, you know, when I did an introspection, I realised that this is not what I enjoy, maths is something that I love and my father was very open in the sense that does whatever you want to do, right. Within like, two-three months of struggling with bio plus maths, I left bio. The next subject was computer science. So, I went into computer science with maths from there.
Did you join classes for engineering entrance? You got into NSIT, which is again, like one of the top-notch engineering colleges. So, you prepared a lot for it?
Yes. So there is a sad story and a good story. The good is toward the end, but so in 11th obviously like any other kid, right, I wanted to be in IITs and so on. So I joined coaching as well. In Meerut, there are some amazing, amazing tutors out there. But within the first few months of the 11th class, I met with an accident and I was bedridden for six months. Like wow, I had like 150 stitches.
Like a car ran over?
I was on a scooter and a car hit me from behind. I fell on the right side of the road, there was a scooter coming towards me which hit my stomach. So I would have been almost dead. But the school was in the military area where you know, there was some Major going through that road. He took me up, went to the military hospital, got the bleeding stopped and got the initial bandages done. So I could actually survive because of him. Otherwise, I wouldn’t be here. But you know, after that for six months, I was just bedridden, couldn’t do anything, couldn’t study. And after that, obviously, almost the 11th was over, right? So I had to cover two years of learning to get into any entrance. But as a kid, I never thought about failure. And that is something that I know it was natural at that point in time that okay, this is a hurdle, we have to just cross it right. So I studied day and night, a very crazy schedule, but making sure that I succeed and get into IITs ultimately got some 4000 rank in IIT, but I wanted computer science but obviously couldn’t get it. The next best option was NSIT because like, I got 1000 rank in AIEEE, so NSIT was much easier to get into and then, you know, that’s where my engineering journey started.
Where did you get this kind of work ethic from, like ‘never give up’ and stuff like that?
Coming to the main point, I think it was just growing up and not hardships per se, but I’ve seen my parents struggle, and that’s when…
Your dad was in a job or was he on his own?
A doctor, his own practice. But like, he used to work in a place where there weren’t too many, you know, he was a doctor for I don’t want to say the needy, but he still was in a not so educated or not so moved upon in the society kind of a world, right? So where a lot of people from different villages would come and get treated and all that.
They would not have to pay power?
Yes. And he would never say that let me increase my fee because he knew when I went there, I told him that you charge five bucks to treat a patient, why don’t you charge 10? So he’s that kind of a guy. And, you know, and it’s not that we were poor or anything, it was like a typical middle-class family. Right? So I’ve always seen them struggle for things, and I always wanted to contribute to it.
How was the NSIT experience for you? Like, you know, from Meerut to Delhi?
Yeah. So, obviously, adjusting took some time, but the problem or the, I don’t know how to describe it, whether it’s a problem or a good thing, but 85% of the people were reserved for Delhiites and 15%, is the only seat that outside people can come in, right. So it was a good part as well, that 15% of the people were a very close-knit set of people, right, because they are struggling with the same things. Delhi is more, people speak in proper English, and they’re, you know, much more refined than people coming from different areas. And we were more like normal. I don’t know how to describe that, right? So coming together. And, you know, hostels were only given to this 15% of the people unless you live very far in Delhi. So it was quite a tight-knit of people. Even Govind, my friend from the first day of college, is the co-founder of CoinSwitch, right? So that’s how tight-knit we are, right, since we were 18 years old, we’ve been friends. So, that was actually the good and the bad part that we were not able to fit in, but we found a place for ourselves, because every one of us was struggling with the same problems, and it was easy to connect. And you know, do well in college. So yeah.
Okay. And how did your personality change in those four years?
I think I’ve always been a very competitive guy, right? So I always have to be first in class. When I’m first in class, I have to be first overall in all the sections, right? So I’ve always done that till 12. But when I came to college, I realised that’s not going to happen. And I didn’t find the study material to be that innovative, or that engaging at that point. Right. So, I found practical knowledge very well. So it was very empowering. It was doing projects and you know, creating something new, right? And that was the way that I took that in theory, I might score 80-90 and I’m okay with it. But in practicals, I have to score 95. So and because that would give me the power to learn and to actually do something about it. Right. So I think I moved into that in college also, you know, the goal becomes the job, right? And NSIT, obviously, you get some amazing companies, but in the second year, it was about internship, right. So there was only one company that gave internships to second years in college, which was InfoEdge, Naukri.com and there were just two people selected and I was one of them. In the third year, there were two companies Microsoft and Deloitte and I got into Microsoft for an internship. So I had pretty good opportunities within the ecosystem. My friends were amazing, supporting me always.
And Amazon must have been among the top paying companies on campus?
Yes. So we didn’t know what Amazon actually does. But it was a talk of the town that Amazon pays the highest. So you have to get there, right? So everyone fought there, and all three of us. So me, Govind, Brijesh, my best friends and all three ended up in Amazon. Right. So that was like a dream come true for all three of us. So that’s how the journey started from there.
And that’s when you went to Bangalore. Your Bangalore journey started with Amazon? Okay. So like when did that move towards quitting Amazon and becoming an entrepreneur happen? Like, you know, what was the impetus?
Sure. So I wanted to do something of my own from the very start. Since class 11th. That is where I got my first computer. And Google is something that, you know, always enamoured me, right. So, like, how can you make something so simple and so amazing, right, and that is why I came into computer science as well. And that was always there that I wanted to create something of my own. Not that I don’t like working at Amazon, I’m here today because of Amazon, the kind of principles, the kind of, you know, values that they imbued in me, is the reason that I’m here and maybe success or a failure. I do not know at this point. But whatever I am, is because of Amazon. So I think that was a very important journey. But I always wanted to do something bigger. And so that’s where the entrepreneur journey started. First, taking a sabbatical from Amazon, trying out a few things on my own, I couldn’t understand much, because obviously I was not connected, not knowing how startups work. And that’s where I got connected to a few friends who were trying to do a start-up and then join them as a CTO, and, you know, thought that okay, let’s, let’s figure out how this works… Because from the outside, you can never learn what happens inside. I know that you know, leaving Amazon was at a point that, you know, you were growing, you were getting promotions and earning enough. But the idea was that until I take that leap of faith, I will never be able to do it in my own right. So I think to create and as a person, I like creating backups. So I had enough money, I had enough shares, I sold everything. It is a bad call if you retrospectively look at it. But I sold everything making sure that my parents have enough, so no matter what happens in the journey, I have enough money for every possible scenario that can happen from there. So I think that gives me enough comfort to move out and do something of my own.
How does the Amazon restock work? Because you get shares in the US entity and then you sell it and then those dollars are transferred to India?
So you get a Morgan Stanley account, and your shares get deposited there. When they get vested, they’re actually allocated to you. They sell some part of it, pay tax in India, and the rest lies in that account, you sell it, get the remaining amount in INR in India. And if there is a difference in which you got it versus you paid the tax, you pay the difference in the tax. And that’s it. It’s a pretty streamlined process. But it was much easier, right? We just have to place a bid. It’s like selling on Zerodha itself, right. There is a sales bid and money’s in your bank, right? Yeah.
Okay. Like 2015 is when you quit Amazon, and what did you quit for?
So I started with Vasu and Lavanya – Urban Tailor, which was about aggregating. So that was a time where Uber for X was the critical point, right. So we started Uber for tailoring, which basically, wanted to solve custom fit and size problems for a lot of people. A lot of people are okay, buying readymade clothes because they’re faster. But obviously, if given a chance, they would want to go for a custom fit. Right. So that was our problem statement. And we wanted to make custom fit as easily accessible as ready-made. Right. So that was the journey. Short journey but I learned a lot.
Did you raise funds for that?
Yes, yes, we raised from you know, we had an angel round before because Vasu comes from Myntra. A lot of Myntra co-founders invested in us. A lot of Myntra folks invested in us and that was a seed round. Then we raised our pre-series A as well from Unitas fund. But we had a lot of money in the bank as well before we called it quits. So we return that money to the investor.
Why did you call it quits?
So we realised that the problem statement that we started with wasn’t solvable in the current scheme of things that we were trying to solve, right? We were trying to scale it up. But when we started doing like 200 to 300 orders a day. The logistics started to fall apart.
What was the offering like you get a tailor who visits your home and takes a measurement and all that?
Yeah, basically you give a garment, which fits you perfectly. And we replicate that in any material that you want. So, you choose the design on our website. You design your own clothes, give a measurement garment, and we stitch it for you. Right, so but you know, there are a lot of movements, a lot of moving parts in the ecosystem, a lot of clothes to handle, a lot of logistics. Fit is always about feeling right, today, something fits you perfectly, but the new garment, it may be the exact fit, but you might still feel like that, oh, it doesn’t fit that well. Right. So like that problem, we couldn’t solve it entirely and the quality for the tailoring units that we had, right, we didn’t have tailors in house, we were aggregating a lot of tailors in Bangalore, the quality keeps on shifting, because the people at their place with good, you know, keep on quitting, and you know, they would get new folks. So there was never a quality control that we could build through software that we always thought of building. Right. So we wanted to be a software-driven thing. But it became a lot of manual processes. And ultimately, we decided that’s not scalable at what we thought it could be. And that’s where we decided to leave.
Plus, I don’t think single fits would make a customer happy. Typically, it would be multiple fits.
So there was a lot of back and forth alterations, and also the cost was just ballooning up, right. And you’re not able to compete with obviously the local tailor, who just gets it done right in front of you.
Not much value add happening. Okay, good, then what did you do?
So then I, then once we shut down the company at will, obviously, it was very hard. And then I moved on to Livspace, founded by Anuj and Ramakant, who tried to solve the custom home design problem for the masses, right? And a lot of my friends, Govind, worked there. One of my mentors from Amazon was part of their team as well. So, it felt like a good set of people to work with, to learn from and I went there. Ramakant, who was the CTO at that time, was amazing. He’s still the co-founder, and he’s the CEO. But he’s still an investor in our company at CoinSwitch. But he’s an amazing guy. Right. So I learned a lot from him from others there. But always that point was there, you know, creating something on my own. So I, you know, what I was doing crypto trading way before, I was very excited about crypto, ever since 2013. I read the white paper. And with Livspace I got enough time to explore new things, new areas, we built something for three of us and you know, made it public.
What did you build?
So the problem in crypto is that, especially in 2017, when the concept was really new and cryptos are traded entities, right? So the price of crypto depends on the demand and supply on any given platform. So price varies across exchanges, right? Even stocks vary between NSE and BSE. But the price equates very quickly because they’re just two exchanges out there. But in crypto, there were 10s of exchanges. User experience was so complicated for every one of them. And you know, the price was varying. So we wanted to build something like a Make My Trip to help the user discover the best price and also convert right on our plan. And that’s how the CoinSwitch story originated. Right?
Like a crypto exchange aggregator. Yeah, that’s how Ixigo got started.
Exactly, exactly. Right. So within a month, we were doing million dollars GMV a day, although we were still employed at Livspace.
What does this mean? You were just directing people ahead, right?
So they won’t get redirected to the exchange. So we built a very custom experience like you go to Make My Trip, right? You don’t go to the Indigo website to book a flight, Make My Trip integrates and gives you a consistent experience on booking a flight. And that’s what we did.
Did you have an API like integration?
Yes. Yes. The experience for the user becomes consistent. He knows how to use CoinSwitch. He doesn’t need to know how different exchanges work. So that kind of gave us a view into the crypto industry. And we actually built it for ourselves, right? Because we were trading we were not getting the best price. We thought of building it for ourselves and then made it public and realised the potential of it.
And were you monetizing this when you entered?
Yes. So these exchanges, to bring volume to them, they pay you affiliate fee, right? And we were earning our money. So before the user, it’s a win-win situation for both of us, right that user how they Make My Trip or the Ixigos of the world works.
When was this? When did you do this experiment?
So we started in June 2017, when the company went live with our website. And you know, started trading in crypto. Within a month, like we started a million dollars GMV a day, then, you know, we got into Y Combinator, we applied to Y Combinator and got into the interview round. And that’s where we decided to quit Livspace as well, you know, to form it as a formal company, we couldn’t make it into YC. But within the next 10 days, we got into Sequoia. So after leaving our job, we left I think, in the second week of December, by the fourth week of December, we had a term sheet signed and everything from Sequoia.
How much did you raise from Sequoia? So that would have been like a seed round?
Yeah, so that was about 1.2 to 1.5 million. A lot of angel investors got in, Sequoia got in and, you know, helped us do the initial validations of our ideas and make sure that we had enough money to build something concrete.
So what did Sequoia see in you? Like, was it the space they were bullish about? Was it you guys, what was it?
So I think it was the team. And, you know, obviously, the space was booming. There were not a lot of entrepreneurs in crypto at that point in time. And I’m biassed here. But we were one of the best teams out there. Technically smart, shown our abilities and a lot of hackathons, right? So we have won every single hackathon in India, including the Sequoia hack, which is Asia’s largest hack. So Sequoia knew us that if something interesting or something innovative needs to be done, then these are the guys that they can take a bet on, right?
What happens in a hackathon? Like you’re given a problem statement for which you have to build software? What is it?
They kind of give you a track. Sometimes it’s very open, do whatever you want to do, build something amazing, right? So you have 36 hours or 24 hours, stay up all night, build something amazing, showcase it to the judges, and if they like it, they rank you on that, right. So initially, we were losing a lot of hackathons. Because we are always trying to build the best product, right? We realised that hackathons are not about products, they are about ideas, right? So if you want to build a, say, a base on Mars, as a hackathon project, you don’t build a base on Mars, you build a rocket to show to the judges that I can reach Mars and build it. Right. So that was the trick that then we started using and started winning hackathons. So we would sell an idea of a set, you know, setting up a base on Mars. And we tell them that, oh, obviously, we can’t reach Mars in 36 hours. This is what the major critical problem is that the spaceship does not exist, which can take you to Mars, like building is relatively easy. Would have its problems, but it’s relatively easy. But we have built a spaceship for you, who could help us settle on Mars. Right. So that was the kind of moment for us to understand what hackathons are about. And after that, we never lost a hackathon.
Okay, so in Jan 2018, you now are funded by Sequoia. What kind of daily GMV were you doing at that time?
At one point, we were doing almost a billion dollars a month in GMV. Even at one point, Microsoft was using our services to convert, you know, to accept cryptocurrencies for their Xbox payments. So we built a very amazing set of APIs, which help you convert crypto at a fixed price, no matter how the market is moving. If you book an order with us, the price is fixed.
How do you achieve that?
So we built algorithms, which basically trade on the market on the aggregated liquidity market. And based on a lot of different factors, those algorithms determine what could be the price in the next five minutes, right? Or what the direction of the prices and putting a volatility fee on top of it, ensuring that no matter what happens, you don’t lose the money. That’s not true, we do lose money in a lot of trades as well. But on aggregate, you always do better in the market. Right? So building those algorithms actually helped us build CoinSwitch Kuber as well. But that was the start of the journey, right? How do you build, so it’s similar to how Goldman Sachs do block order trading right. As a consumer, they always quote you a single price for say a million shares, then they go back, talk to exchanges and figure out how do I get a million shares at a better price, which I give to the user and earn money from that. So users get an amazing rate, but as a company, you make money as well.
Your product version one, which you launched with was essentially like a global, it was called CoinSwitch only?
Okay. And this was like a global product, like, what percentage was outside India and what percentage was in?
Everything was outside India because of the RBI ban.
Okay. And then from being B2C then eventually you started building API integration products, which businesses like Microsoft Xbox and others to build up more business-related services.
Yes. And that’s how we grew. So we have always been a profitable company, we never relied on investor money, although, you know, had amazing investors, but we always wanted to be self-sufficient. And that’s where we grew. At one point in time through this business, we were earning almost $10 million in profits a year. So, and then came 2020 When you know, the RBI band got reverted. And what we always dreamt to build in India, to deliver for India, that kind of opportunity opened up and that’s where CoinSwitch Kuber was conceptualised and launched in India.
Okay. So CoinSwitch is like a global brand and product and CoinSwitch Kuber is a crypto exchange.
Yes. So CoinSwitch Kuber now is the only product today for the company and that is the main focus of the company. So because of the opportunities in India, we decided to shut down our global operations, or put them on hold for the time being, and focus all our energies on CoinSwitch Kuber itself.
But when you have great customers like Microsoft using your product, then why would you want to shut that down? And also because it was profitable?
So it’s counterintuitive, a lot of our investors also were not in agreement, but they trusted us enough that they said, Okay, do whatever you want, we trust you, right. We always believe that the opportunity in India is so large, that our focus cannot be diverted. Right. So we want it to be a single focus company. And that’s where we took this call.
CoinSwitch Kuber is now like an exchange of its own, you’re no longer doing that aggregation?
We still do aggregation. So for a user, we are the front end, unlike Ixigo or Make My Trip, they don’t get options to choose from and things like that. They are interfacing with us, but in the backend, they still aggregate because aggregation gives us the best liquidity on the planet, right? So with the best liquidity, we can give the best price to our users.
Okay. So, essentially, for crypto, the volatility is so high that if you’re able to do a good job at executing, that is how you make money? Okay. Essentially, if you’re able to hedge against volatility, that is the core service or value add?
It’s a little hedge. And it’s also because we work with a lot of exchanges, right, and we bring volume, a lot of our exchanges that we work with, we are the biggest clients of theirs. So they treat us preferentially as well, they don’t charge us the fee that they would charge a normal user. They would give us maker fees and things like that. So through all those business relationships plus algorithms on top of it can give us the earning that we need to survive and thrive in this business.
How is it different from say WazirX?
They are an exchange, so that’s a typical exchange where people go to trade with each other, right? But we aggregate similar to WazirX. There are hundreds, not hundreds, 10s of exchanges out there. So we aggregate all of them together. So as the next would have their own liquidity, but every exchange would have their own liquidity and aggregating every one of them would give us the highest liquidity possible. Whoever has the highest liquidity can execute the order in the best way possible. To give you an example, if one exchanges selling one Bitcoin at 50 bucks, a second bitcoin is at 60 bucks, the other exchanges selling one bitcoin is 55. And second, is 65, then I can get at an average price of 52.52 on bitcoins, right, while on a single exchange, either one of them cannot offer that.
Okay. Got it. Okay. And this is a global thing like you can work with any exchange across the world. There are no borders, as far as crypto is concerned?
A Bitcoin is a Bitcoin anywhere in the world.
Yes. And that’s the nature of the business itself. Those cryptocurrencies are global in nature, their prices are not only locally dependent, but it’s globally dependent based on the liquidity across the market. So that’s where we excel as well. So we aggregate all local players in India plus all global players outside.
Okay. And do you get customers from outside India?
Now we have stopped our global operations. And we only focus on India
In the sense that anyone who wants to use it will first need to do some sort of KYC and prove that he’s an Indian citizen. With an Aadhaar or something?
So he has to link a PAN and verify his PAN to a government DB check. You know, upload Aadhaar passport or voter ID to prove his identity and give his address, then, you know, provide a selfie or a video for liveliness check of that user. And then also link your bank account. So you can only deposit and withdraw to the bank account that belongs to you to make sure that the money coming in and going out all belongs to you. And there are no legal issues around the money movement within crypto, which is the biggest concern of the government. So we make sure that we are the most regulated exchange in India, self-regulated at this point, but hoping that the regulations we follow become the norm in the crypto industry in India itself.
I’m not an expert in crypto, but my understanding is that the weak link in the chain is the wallet where people can lose money. Can you help me understand how this works? How does the wallet work? Why is it a weak link?
Sure. So, think of it this way, right. So, when you keep money in the bank, the bank is responsible for the security of that fund. You can also take out cash, put it in a locker that belongs to your house, have, you know, multiple locks in it, and secure the key now in a safe place. So now you are responsible for that money, right? Not the bank. So, crypto exchanges are like that itself, right. So as an exchange, we are like a bank, we are responsible for the cryptocurrencies that we hold on behalf of you. So if say anything goes wrong at a crypto exchange, or not just the exchange loses its money, it loses money which it kept from the user, which it tries to secure on behalf of the user. But as a wallet, now, you can take it out and put it in a wallet, which is owned by you. Now, you are in charge of that security, now you have the key, which you need to secure now, right. So earlier, it was in the hands of the exchange. It obviously has great cybersecurity, a process in place, making sure it’s secure and protected. But you can also take charge of that process. And make sure that you are the owner of that crypto and you are the one who is responsible for the security of that cryptocurrencies. So there are pros and cons in both approaches. For some people, one works better. For others, the other works better.
Help me understand is the difference between when you are responsible for your wallet versus when the exchange is responsible? Exchange is responsible means you probably put your username and password on the website, and then you access your wallet and do the transaction. How is it different when you become responsible?
So when you become responsible, you get a passphrase, which is unique in the world for you, which you can write on paper but if somebody clicks a photo of that paper, he can replicate your vault and steal your money. As an exchange, we are now a single point of failure because a lot of hackers can simply attack us to take our users’ funds, right? So there are pros and cons and both, as securing yourself, you have to take all those precautions, you have to make sure that your key is not lost, your key is secured.
That key will only work on CoinSwitch Kuber?
What I was saying was that CoinSwitch is a wallet, which is a custodian wallet, which is one part that is like a bank. And the other part is where you buy a safe and put it in your house. So when I talk about the wallet, it has that wallet, which is safe, which is outside of the CoinSwitch ecosystem. So you have created a new wallet.
But how do you access it? You know, I have never used crypto. So I’m actually asking questions that sound very beginner level.
Create an account on CoinSwitch Kuber first of all. So if you never use crypto, right, so how crypto works is you can go to an exchange and buy and sell crypto. And now the security is with the exchange because the money is lying with the exchange itself, you can decide to take it out. Taking it out means transferring it into a new wallet, which you created. You only know the key to that wallet, it could be a hardware wallet like a ledger treasure, or it could be a software wallet like Exodus Jacks, right. So these are separate software which you run on your laptop, Nobody else is running on behalf of you. Right. So now you run the software, it will give you a password, which you have to write it down or secure it in a perfect way right, and then transfer money from CoinSwitch to this wallet and keep this you know under your security. But if you lose the password, if somebody steals your password, then it is gone. Secondly, on CoinSwitch they can only steal your password and pin. They have to steal multiple things from you to be able to access your account. But even if they do it for a single user, only that user’s account gets hacked. Not all the users of CoinSwitch. For that to happen CoinSwitch needs to get hacked. And as a company, we would take much larger precautions on securing your funds, engaging cybersecurity firms from best in class and around the world, making sure that your funds are protected the best way possible.
What’s your level of confidence that you will not get hacked?
My level of confidence is above 90%. But this level of confidence can never be 100 because you don’t know what you don’t know. Right? And that’s why you employ the people whose job is to figure out what is wrong with the system. So we employ one of the firms I cannot name but it is formed by, you know, the ex CSO of Facebook. Right? So, you know, at a lot of national security levels, he has worked in helping governments secure their systems. And now he helps us in building our cybersecurity engines, right? So it’s a continuous process where there isn’t a set of steps that you do these five steps and you’re done. It’s a continuously evolving process. It’s a cat and mouse game, right? Hackers are trying to always evolve their techniques, and you as a company are always trying to be ahead of them, right, making sure that your funds or users’ funds are secure. Right? So it’s always a continuous process. It is just that some exchanges work harder at this, some do not. And you’re rightly said 56% of exchanges have shut down, big exchanges have shut down in the last 10 years because of these hacks, right. So this is one of the biggest threats to a cryptocurrency exchange and making sure that you are always ahead is a constant battle that we fight.
So can you help me understand use cases like what is the use case of Bitcoin? What is it for Etherium and some other interesting use cases according to you?
Sure. So Bitcoin was created as a replacement for a currency right? So how you transact your internet banking, moving money from one place to another, Bitcoin was an easier store of value to be able to transfer similar to gold. The way gold used to be bartered back in the days. So Ethereum is more like an AWS which allows you to post decentralised applications onto its platform and run decentralised applications. Any application can solve any sort of problem. But where do you run it? You run it on the Ethereum blockchain, you write your code on the Ethereum blockchain, which makes sure that any code that is run is running in a decentralised fashion, there is no central entity controlling the functions. I’ll give you an example to make it easier. So let’s say you’re running Uber, right? What Uber does is connect a driver to a rider. That’s all it does, right. But Uber is a central entity. Tomorrow, it can say, Oh, I will charge 25% to the user and 25% to the driver, and nobody can do anything about it. What a decentralised system means is that I created an algorithm to match a driver and a rider. Now, no matter who the rider is, no matter who the driver is, they always follow a certain set of rules to get connected, right? So I cannot change the logic at any given point. So think of surge pricing, when you think of it right. So say, you know, something bad happens, say you are in Indiranagar a lot of clubs, you know, close at 11. And there would be a lot of demand there, right? So the price goes up, but nobody knows how the price is going up. Who is determining these prices, is Uber charging just for the sake of it or is it actually the demand and supply ratio that they’re maintaining? Now, you put that out in a set of rules, which are public for anyone to see and validate. And once that is public, now, anyone driver and rider that comes on that platform, it becomes clear to them why they are getting charged so much, or why they are getting paid so less, right. And now the set of rules are hosted globally, validated globally. And this demand and supply now can work across without worrying about that, a single entity can tomorrow change anything in this and it will fail? Right? So this is a decentralised system where, you know, it’s a written set of rules, which are not dictated by a central entity.
What are some real-world applications of this? Like Uber was a hypothetical example you gave me but anything else?
Loan. A lot of companies are working on solving this use case, right? How do you get a loan? How do you get a microloan at an interest rate which is driven by the market? Not by your history or on subjective terms? Not on bureaucratic terms? Right. So there are other insurances. Another example right? So when you take insurance, your insurance claims go through that bureaucratic champ, right? So wherever in the world, you can think of standardising a process and eliminating the element of humans from it. Humans are still required to build and you know, process these. What I’m trying to say is that removing the human element is removing the biases of a human and that cryptocurrencies or blockchain can help you solve that use case, right?
These are also called smart contracts, right?
These are called smart contracts. So when you write a code, you put it in as a contract. So that’s a contract that you and I are signing if we are engaging on that contract, right. So that is how it works. So there are hundreds of use cases where it can be solved.
Okay, and how does Ethereum host these smart contracts? How does that happen?
So I’m not smart enough to be able to explain this entire process, but think of it this way, right? So think of how a validation happens, right? So when this code is getting deployed across geographies. So there are a set of people who’d say that, oh, I will host your code, and anything that happens on your code, I will charge you a fee for it, right? Or you can pay a fee to me, and make this transaction happen. And if that transaction happens successfully, I will get that fee from you. Right? So it’s to create an incentive mechanism on the blockchain, which helps the other side who is helping you run this code decentrally. And it gives an incentive to the user to pay a fee to the miner who ultimately helps you bring that transaction onto the blockchain, complete a process and then earn money through that.
So essentially, you pay in Ethereum. And the miner is the one who is validating the infrastructure. Okay.
Infrastructure, as well as validation. So say if I’m paying you five bucks, right? And somebody needs to validate whether Ashish has five bucks. And has it reached Akshay, right, so somebody needs to validate? So if there are 100 people on the blockchain, then 51 of them have to say that, Oh, this transaction is valid, right? And doing that work, we have to pay them something and that payment either comes from the blockchain itself, or comes as a fee, or both. On Bitcoin blockchain, it comes as both. So whenever a transaction gets added to the ecosystem to the blockchain, a blockchain itself gives a reward to the miner who helped do this task and also get the fee which Ashish agreed to pay while he was transferring five bucks to Akshay.
So maybe not your personal opinion, but the ones which are getting accepted, like interesting use cases, cryptocurrencies?
So, Uniswap is one example where they built an exchange, a decentralised exchange, with a very unique market-making model for an exchange to happen, there has to be a buyer and a seller, right. Now, a decentralised exchange where user experience used to be a bigger problem, a lot of sellers didn’t come, a lot of buyers didn’t come. So they always had a problem with liquidity on their platform. So now they did something amazing, building a mathematical model, on determining price based on liquidity pools that they were creating, right, again, not going much in-depth there.
In a way, it’s like bringing insights to writing, like if there is…
Yes, making a mathematical model on how the price to be determined of any asset. And if the price is too high compared to the market, it gives people an incentive to sell their assets at a higher cost, which then equates the price back to normal. If it goes too low, it gives the people an opportunity to buy and when they buy the price again, goes up. So they created a mathematical model to equate the price at any given time, and eliminate the dependencies from buyers and sellers aggregating together. So that is one amazing use case and how they have solved it and the AMMs are, as a mathematical problem, have never been solved at the scale which the cryptocurrency industry is trying to solve, right? So second is compound, right?
Uniswap is doing this whole thing on what commodities?
Cryptocurrency itself. So Uniswap is a decentralised exchange where you can exchange one currency to another. So they’re trying to create without the need for actual order books, they’re trying to now create a model where the price of crypto can be determined or exchanged from crypto to another, right?
And Uniswap is an exchange also and a coin also?
Yeah, so the coin comes from their innovation. So basically, whatever volume that they drive through that ecosystem, they link it to their token. So the more people find their use case worthy, the more the price variation happens in their currency picture. So similarly, there are many like Compound.
What is Compound? I find this very, very fascinating because I’m not from this world. So I am getting to learn a lot. I mean, if you have the patience, I would love to hear.
There are many and I’m not the expert in all of them, but I’ll explain Compound to you. Compound is exactly doing what we talked about lending and borrowing, right, the use case and how to bring equality into the system. The interest rates are dependent on the demand and supply rather than you knowing who you are and how I treat you. So there are a set of rules, which you can now determine and see where you can get the best benefit out, right. And those rules are applied equally to everyone. So it enables, you know, microlending even staking. If somebody is lending some money, then somebody must be borrowing some money. So a borrower pays that amount in interest, a lender gets that amount, so you get opportunities on both. And as a retail user, I can invest there for people to borrow. And it ensures that you will always get your money back through the ecosystem that they are creating. And a lender can lend anything to the platform, earn interest, a borrower can borrow at a certain interest rate, which is now mathematically determined, rather than…
How does it ensure that you get your money back?
Basically, you give your house as collateral to a bank, and it says, Oh, your house is at, say, $100,000, you can borrow $50,000? If your house value falls below 50,000, then I’ll sell your house to recover my money. Right? So like, these are the basic maths that they apply to the assets that people borrow and lend on the platform.
So basically, collateralized lending is something where you don’t need humans, obviously, because the collateral asset is there. There’s no need for a human being. So that can be total, like, automated through an algorithm.
Okay. And what are NFTs? Like, you know, that’s like the flavour of the season, do you think it’s here to stay or it’s just the flavour of the season?
So NFT in general is a very amazing concept, which is a Non-Fungible Token, it’s like, you know, we used to collect cricket cards right. So, which would be limited in number but exchanged with each other based on Sachin Tendulkar’s card and things like that. So, these are Non Fungible Tokens, which are basically one thing that is different from the other. So, if you have a 100 rupee note, which will be exactly the same as I have 100 bucks as well, right, the two notes are interchangeable, these NFTs are basically non-interchangeable assets, right? So think of it as like if you’re buying a house, that could be an NFT ultimately which is trapped on blockchain ownership can be moved from one person to another, and it is linked to a physical asset. So as a concept, it has an amazing value. I personally disagree with what is happening in the industry at this point in time, which is, which is more in terms of…
It is currently used for digital assets like an image or a tweet. Is NFT working on that greater fool theory, like you buy a tweet thinking that there will be a greater fool theory, who will buy it from me at a higher price?
I wouldn’t say that, I wouldn’t go that far. I think people are smart, they understand what they’re getting into. They understand the limitations as well. And they are working to improve upon, right, so they are the initial adopters. They’re not just acting as a greater fool. But I feel that you should understand that risk before you get into it. And that’s where I’m seeing that as a retail user, sometimes it becomes glamorous to think of these things, as you know, something amazing happening without looking under the hood, what actually is happening. I’m not saying that these are wrong or right. But I’m just saying that people have to do their research before they get into NFTs right? And NFTs would evolve and NFTs could change the way things work right? When you say I love the concept of linking offline to the online ecosystem, right? So even your insurance, your property buying, your car buying or anything that you’re buying, right as a serial number, which is getting tracked now it is on the blockchain. If you’re selling it to someone, you pass that NFT to that guy, right? So you’re actually passing and now you can show the proof of ownership digitally of any physical asset that you own, it could apply…
It’s fractional ownership.
Yeah, exactly. So it has amazing, amazing use cases, I’m just saying that it’s probably not at the stage, and how it is coming out to be, especially in the last six to 12 months.
But so far, nobody is using NFT for physical assets. As you said, the property would be a great use case for NFT. But nobody’s doing that so far.
Again, linking offline to online. I’m sure that hundreds of companies are working on this. I do not have this much knowledge to know about it. I think you know, Anderson Horowitz has invested in a couple of NFT companies that are doing an amazing job in bringing NFTs to the masses and solving some amazing use cases. Which probably I am not smart enough to understand at this point.
Okay, cool. Okay. After that first funding from Sequoia subsequently what was your funding journey like?
Sure. So, I think I didn’t tell you about the CoinSwitch Kuber journey. So, why did we start in India right? So, in 2020, once the RBI bank got reverted, when we looked into the market, we realised that a lot of exchanges were already there in India. But if you go to an exchange, you look at their experience, complicated graphs, order books, buy and sell, and it creates a hindrance for a retail user to go. First of all, crypto is so complex now, you put that experience on top of it, they will never go and buy crypto, right. People are used to the experience of Swiggy you know, Add to Cart, checkout food is at your home or Uber and Ola. With just a click of a button, you get the cab that you are looking for, right. So, that is where, you know, we realise that the kind of problems we solved in 2017 can help us build a platform that will be very unique. It has never been done not just in India but around the world as well. Helping customers buy and sell crypto where price remains fixed. With a click of a button now they can buy and sell any crypto that they want to as simple as ordering food online. Right?
But why is the price remaining fixed unique? Isn’t that the case with WazirX or somewhere else? Like if I see a price and actually buy I don’t get it at that price?
It’s an order book, right? So say you’re buying 10 Bitcoin and you’re buying one lakh but the top bid is only 0.1 Bitcoin at one lakh. So you have to wait in the market for 9.9 Bitcoin to be bought, which may happen, may not happen, the price may fall down, but we ensure a price guarantee. So when you see something on us, you buy it instantly and instantly it reflects in your wallet, no questions asked. Right. So that is what online shopping is. If I give you an experience where you’re buying a phone of 10,000 bucks, add it to the cart and it becomes 11,000. You will be a little, you know, taken aback and whether I want to go ahead or not. Right. So that’s where we build that experience for our users. Giving them the best price. And you know, fixed price conversion with a click of a button. Our experience was one of the simplest in the world at the time that we launched, and we launched in June 2020. And it just blew up. Today, after 14 months, we are set around at nine and a half million users, one of the fastest FinTech companies to ever reach that mark, funded by the likes of Tiger, Ribbit, Paradigm, which is Coinbase co-founders fund, and Sequoia and, you know, growing the company bigger and bigger every single day. Right. And today the largest crypto platform in India, right. So, that journey has been really, really remarkable. From the funding standpoint, you know, obviously, Sequoia was our initial backer. But we realise that within the three months of CoinSwitch Kuber launch, we had initial success and product-market fit that we felt that we reached. That’s where we reached out to Ribbit who is one of the best investors in the world. And, you know, have funded almost every FinTech company in India and outside be it Coinbase, Robin Hood, you know, so these are the kind of market investors that they are. And we wanted them as one of our investors, obviously, that was a tall task at that point. But we realised that telling them what the problem that we are solving, how we looked at the market, and how they have taken risks on crypto before they were the Series A investors of Coinbase itself. So we reached out to them, and, you know, they loved our team and what we were doing. And we got Paradigm also, who is again, you know, learned a lot from them, who come from Coinbase co-founders themselves, and putting it together makes the best possible Series A for us.
When did Series A happen?
Series A happened in December, December of last year.
And Tiger was also part of the series?
Tiger happened in February. And it happened in a very interesting time when a week before you know, the government announced that they might be considering a ban on crypto. Within that week, Tiger came to us and said that no matter what happens, we believe in you, we believe in your team. We love what you’re doing in this market and no matter what happens, we want to fund you. Right? So that’s how Series B happened with Tiger.
Okay, so Series B was not something you planned? But yes, it was inbound. Yes. And Tiger is not typically for being very, very fast and aggressive. Like what was that whole experience like?
It was one of the craziest experiences within like, the 22 hours. It was a signed, done deal. It was the fastest turnaround time that I particularly have ever seen.
Wow, okay. And what was the raise in December and the Series with Tiger, how much did you raise?
So we raised 15, about 15 million in Series A and Series B, we raised about $25 million.
And what valuation was in Series B?
Little above half a billion dollars.
Amazing. Okay. So what is your monthly volume now, like GMV?
It touches somewhere around a billion, billion and a half months.
Wow, and how much was it at the beginning of this year? Like Jan 2021?
I think we started obviously, very small, I think $100,000 or something per day. So that would be I think $3 million a month.
Wow, this was Jan 2021 or 2020?
Oh, I’m talking about June 2020. So about a year or so back.
Okay, wow, from 3 million to a billion and a half. Amazing. Okay. So what next, where do you want to spend the money that you’ve raised? What are your future bets?
So we are obviously, you know, investing a lot in branding and creating education around crypto, we want to make sure that people understand what crypto is, right? So it’s not about when the first thing that comes to your mind when you think about crypto, we want to have that very clearly defined or have a very, not a positive spin but more of right messaging to the user. Right? So making sure that they don’t think about illegal things, they don’t think about the ban when they think about crypto, they actually understand crypto, and then make a choice for themselves, whether it is good for them, they want to be on the sidelines, or they want to keep away from it.
How much time does a crypto transaction take to compete like I believe Bitcoin is supposed to be very slow in the time it takes to complete the transaction?
So crypto buying and selling is not actually a blockchain operation. So it happens instantly within milliseconds, right? So when you click a buy button, you have that right? How you order food once you pay and click done. That is how your order is done. Right? So that is how crypto buying and selling works on CoinSwitch Kuber. When you go to the blockchain, when you’re actually transferring, say, I’m transferring Bitcoin to you, that is where blockchain operation is happening, where the value is getting transferred, a bitcoin is getting transferred to you, and then the miners need to approve it. On average, every block takes about 10 minutes to get confirmation. And it takes at least six confirmations where people say that now it can never be reverted. So it would take from 10 minutes to 60 minutes to get your transaction approved on the blockchain.
How are these different? Like, how is it that I as a retailer get instantly but the Bitcoin on?
So you are not transferring on the blockchain. So when you’re buying and selling, it’s getting an exchange, so it’s getting exchanged between one user to another. So it’s not actually reflecting on the blockchain itself? Right. So it’s a database entry, how do you do a UPI transaction, a bank doesn’t actually hire a person, give him the money, who runs goes to the bank, so it’s not happening, right? It’s digital. It’s money getting deducted from your bank and getting reflected on the merchant side instantly, right? That is how a blockchain transaction works.
This is in a way, like interexchange, like one exchange and other exchangers between themselves
Between themselves or within the exchange, since you have both parties on there, you’re just linking them, rather than creating a blockchain transaction for that to happen.
Okay, but if you take it out to an external wallet, that would then probably happen on the block. Yes. Okay. Let me pose this question to you. What was the failure you had in the last 3 months?
I think one of the biggest failures is not building my team fast enough. Not anticipating the growth in this journey and being able to build a lot because the work increases, right, and people get burned out. The idea is, how do we anticipate that and start hiring those people because the process takes time and the kinds of requirements we have, like, it takes time to fill those positions and start looking for those people much earlier than where they’re absolutely needed. It is the crucial, crucial point that I particularly learned in the last four months of our journey and hopefully, I will try to learn from it and do better as we go.
Like, hire in advance before you actually need those people?
When you are doing something, it just feels like let me just do this work and then I will look at how to solve it. But that is not the time to actually go and solve it. When you are actually doing that work, go and figure out what do I need to do, who do I need, who can do this better than I am doing and who can actually help me the next time this situation arises. So I think taking a step back no matter how busy you are or how much at the centre of the storm you are, taking a step back and looking to see how to solve this better next time, who do I need? And start that process from that time onwards rather than waiting for that storm to be over and then start looking for that person.
Right, okay. Are you a remote company now or do you work from the office?
So we are all remote. So I think CoinSwitch Kuber conceptualised within this remote environment that day we decided to do CoinSwitch Kuber, the next day lockdown came and we all so far, you know, the team has done an amazing job. Obviously, communication becomes an issue sometimes, but we are figuring ways to solve that day in day out. And we will hopefully be in the main remote country till April next year, and we’ll reevaluate the situation, whether it’s time for us to come back to the office.
But would you like to be a remote company or an office-based company in the long term?
We are growing, right. So what happens is, a lot of people can learn from each other much faster if they are working together. Because when you’re working together, you’re not just an individual contributor, you’re learning from your outside, your peers and trying to grow, right. So what I feel is this, this environment is very good for individual contributors. But their growth is suffering. They’re not learning from outside enough, right. And as a growing organisation, where the kind of processes are changing too frequently, it would be much easier when everyone is together and aligning together towards the same goal. And trying to achieve that together, right? learning from our mistakes. Everyone doesn’t have to make the same mistake, we can just learn from each other. I think that is what is missing today.
Got it. Okay. And what is your headcount split like this 250 people, most of them would be tech I assume?
Support is one of them because it’s the customer first. So our support team is quite big. Product, tech, marketing is about 100-120 people and the rest 120 people are Support.
Like you’ve not automated support, like chatbots and stuff like that?
Crypto is a different market there, you know a lot of people because it’s about money, right? And it’s not like a food ordering where you can, you know, when something happens to you say you deposited money, there might be a problem at the bank at a PG or in our system where the money didn’t reflect back. Right? So dealing with a bot at that point in time becomes frustrating, right? So we want to give the best experience to our users, making sure that they feel that there is somebody on the other side, who cares as much as you know they can in solving and helping them out through this problem.
How many hours a day do you work?
I do not count the number of hours.
Like, you know, like what you did for your preparation for engineering.
I don’t think I work that hard. So I’m always constantly thinking about the problems and trying to solve them. I think my role now is not how many hours I spend on my laptop actually doing the work. But it’s more about how I enable people to solve the problem that they are facing right and try to constantly be in a problem-solving mode. Right? So the day I wake up, and till the time I go to sleep, I am always thinking whether that is work or not work, I do not know. But that is the habit that has been built up.
Cool. So any advice for aspiring founders, you know, like any last word you’d like to leave the listeners with?
I think a lot of people, including me, think about failure when they are in uncharted territory. And I think one hack that I found to go over that is thinking what? Even if you fail? What is the worst thing that will happen? And once you rationalise that fear into what would actually happen, rather than being afraid of it. It’s what gives you the confidence to go beyond? Right? A lot of these times our fears are only just in our heads, right, and actually logically thinking through on what if even the worst-case scenario happens? What are the repercussions? How do I come out of it? And how do I create a plan to move forward in spite of the failure? Not that you’re optimising for failure, but you’re rationalising it that even if you fail, it’s not the end of the world, you still have a path to go forward, I think that particularly has helped me and my team to overcome fear, right? We are a very innovative and fast-moving company. I know every company says that. But like we take a lot of risks, right? And making sure that people are not just, you know, overburdened or paralyzed by this fear of doing new things, and they go beyond that. So you know, logically rationalising what are the next steps? What are the fallbacks? What do you do if you fail? What do you learn from it, and optimise for success, but being ready for failure is, is what I leave with.
That’s a nice mantra to optimise for success, be ready for failure. Nice mantra.
I think a lot of people that I’ve seen are sometimes that they get stuck in the failure mode, right, and just a fear of failure itself. And this helps me particularly go beyond that point.
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