Innovation and disruption are the hallmarks of the technology world. Amidst the fintech revolution and the subsequent rise of digital banks in India, going to a bank branch is no longer in vogue.
And with neobanking, this metamorphosis has reached a new level with state-of-the-art technologies and providing customers with easy, quick, and efficient financial services.
The Founder Thesis podcast presents to you a two-part series where Akshay Datt speaks with Kunal Varma, Co-Founder, Freo. He is a serial entrepreneur who started his entrepreneurial journey back in 2008, while pursuing his MBA from the Indian School of Business, Hyderabad.
Kunal, a self-proclaimed dreamer, fondly recalls his earlier days and shares how he always wanted to start his venture. After successfully building two ventures, he collaborated with Bala Parthasarthy and Anuj Kackar and started MoneyTap, which in five years has become an RBI registered NBFC and is now transitioning to credit led neobank, Freo, which is the first of its kind in the country.
Tune in to this episode to hear Kunal speak about how Freo is disrupting the traditional banking system with its innovative digital banking experience.
What you must not miss!
- If you like something in your academics, you’re not going to do it for the rest of your life.
- How interacting with people from different walks of life can help in developing your vision as an entrepreneur.
- The transition from HR and EdTech to FinTech
- The concept of neobanking
- Relation between consumer research and building a product
- Fundraising journey
Skip to 00:01:25
Akshay: So Kunal, what’s home for you? Where did you grow up and in what kind of family?
I was born and brought up in a small town called Jamshedpur. My dad spent his career at the Tata Group and hence Jamshedpur being the hub for the Tata Group back then. All born and brought up over there. So my early years in life were fairly influenced and conditioned by the culture in that part of the country. And I think then, somewhere in my teens, I moved out from there and moved to a larger town, a larger city, and that was my first exposure ever. So that was Delhi. For me, it was a huge difference from coming from a small town to a metropolitan city.
Which school in Delhi did you join and which class were you in?
So I joined the 11th standard in Delhi Public School in RK Puram.
Wow, that’s like such a major change. RK Puram DPS was all like, you know, fairly well to do families, kids come there, and a highly urban kind of a setup.
That’s true. I think, in some ways, it was a cultural melting pot to experience higher education, at least from a school standpoint in RK Puram. So the friends that I made at that stage of my life, are still very close. And we all had something in common. And then we all were in that school, and we were looking at and working hard and making something good out of ourselves. And at least all of us were all, you know, looking at engineering, and that was the dream that we had as cliche as it may sound, but to become successful, getting an engineering degree from one of the top niche engineering schools in the country was the dream back then.
I can see you passed out in ‘97, which is also the year I passed out from DPS RK Puram. We were in school at the same time I guess.
Wow, that is a small world. But having said that, I mean, the funny thing is that the DPS is such a big world, right? It’s like almost 900 students in one class, it’s almost impossible to know other people.
Yeah, I was in commerce. You must have been in science, I guess. So there would have been very little possibility of interaction.
Yeah. I was in Section G with computer science. So yeah, I think probably a bunch of geeks. And all living in our world back then. So yeah, that’s how Delhi was home for some time. And then and then I went to Roorkee for my undergrad. So and you know, eventually passed out with a B Tech with Honors in computer science. So in some ways, I think you know, did my family proud by getting a certificate from IIT. But, I think it was an interesting four years of undergrad living in the Ganges belt of the country, some amazing life experiences, some long-life bonds forged at that time. And then that paved the path for my adult life really, after that.
When you passed out of it, did you like, have an ambition in mind that this is what you want to do, or like, you know, what was it like?
Yeah, I’ve always been like a dreamer since I was a kid. That’s probably part of how I am as a person, I would love to just sit and dream about what I could become. It started when I was probably in middle school. I would be thinking about becoming a football player because I’ve always loved sports. And then I dreamt of actually going into the armed forces because I was always an outdoorsy kid, martial arts, sports, everything. I was shot down by my diligent Indian mother, who decided that no I shall not go. And those were the days when I used to listen to my family. So obviously, as an obedient child, I had no other option but to comply. But yeah, I think at every stage of my life, I had some dreams. And I think it’s important. I feel that it’s important to have a dream and your dreams may change. But going through life, no matter how small you are, and without having a dream at any moment is pretty boring. It’s like living life in monochrome. So I think so for me, when I graduated, to answer your question, my dream was to eventually one day, build a large company and leave a huge footprint of some legacy where I built a huge empire where something has changed. Or, you know, my company is changing people’s lives in a big way. So I had this large blue sky definition in my head which was very vague, but that is how it was.
Like, where did you join from campus? Did you get placed through campus?
Yeah. So it was very interesting because the year I graduated was 2001, in engineering, and just in 2000, you know, the entire Y2K happened, the whole episode under the dot com bubble had burst globally, the dot com crash. And that was an interesting time because I had got a job offer on campus on day one, from Nortel Networks. That’s when you’re in the fourth semester of engineering. And then just before graduating and passing out of IIT, we got a letter from Nortel Networks saying we are shutting down our India operations. So yeah, I think just like after celebrating your last final semester, as an engineer, and I’m pretty much coasting through life, for those six months, suddenly there was a wake-up call that hey, I don’t have a job. Because the offer letter was rescinded. It happened across the board for a whole bunch of people companies are shutting down their operations left, right and centre. So I was one of the folks on the receiving end, as well. So it was a wake-up call, I suddenly realized that nothing is going to be served on a platter. So I need to immediately pull up my socks and get into hard work. So eventually, I ended up joining a startup right out of campus itself. I got placed in another New Jersey-based startup, but they had the R&D operations in Delhi itself. And so, it was pretty nerdy with a job back then coding device drivers, all that kind of stuff, and then I was pretty excited. A computer science geek myself, so I was pretty excited, I joined that company. And that was just six months because, within six months, I figured out that I’m getting rather bored at the job. And you know, it was not exciting for me, I was not solving problems which would push my thinking. So I switched gears and I had a chance for some reason, it was serendipitous, and I ended up joining Texas Instruments in India out of their R&D unit in Bangalore. And that’s where I spent the next seven years working with Texas Instruments, a lot of exposure, travelling to their units in the US, France, Japan, working with people globally. And some amazing life experiences as well along the way. But yeah, I think seven years at Texas Instruments and that is the only corporate job that I’ve ever had in my life. So that’s the only one time I’ve prepared for an interview myself or given an interview. So yeah, so pretty good fond memories, but that was it in terms of where I started,
What made you stay with them so long? I’m trying to understand what was it about whether it was the role or the culture?
I think it was a combination of a few things. One is that I think back then, I was not exposed to concepts of work-life balance, what is work stress? What is personal life? I think these concepts were pretty foreign to me at that time. The culture was one of very high commitment ethics, hard work, high sense of ownership. One of my initial bosses at Texas Instruments was a phenomenal gentleman. And I learned so much. I mean, there was a time when I used to think that he’s quite the taskmaster. But I loved working in that environment. So the combination of those things, and honestly, it was a huge discovery process for me. And surprisingly, in my engineering, I was a computer science major. And I did not pay much attention to my hardware and electronics courses in IIT. Well, that’s putting it mildly, and the not so sugar-coated version is that I sucked at those courses. And the professors made it a point to call it out loud in the class. So, all my friends and I were very clear that you know, if there’s one thing that you should not be doing in life, is going into electronics and hardware. And that is exactly what I ended up doing, which is going into Texas Instruments, which is all about hardware design. But I realized that as much as I was uninterested in the theory of it, I loved the actual work. And I did pretty well, I think the amount of learning we had from the contribution that we made. And particularly the people, I think that’s what made me stick around. So the challenge of doing things which had not been done before building out products, which were the first of its kind back then, you know, our department teams used to file patents a lot. So that experience along with the managers, and the seniors that I’ve worked with, I think that’s what made me stick around. And like I said, I was not one of those people who had the spirit of giving up easily. So there were tough days. I used to have a small pillow and a toothbrush in my cubicle. And there were days where we used to just not go home, I used to go home after 48 hours. So but what is phenomenal is that and something like that doesn’t happen unless you are passionate about something, right? Because then there are so many options available. So you can just get up and quit one day and say it’s not for me. But I think the culture and the people are what allowed me to stick around. And I don’t know, time just flew and you know, I just looked back and said, “Hey it’s been like, almost seven years,” but it was phenomenal. I mean, you know, the experience of working across global teams and projects.
So then why did you move out? Like, what was the trigger to do an MBA?
Yeah, it was one of those things where, as I said, I always part of me has been a lot about dreaming about like, what should I be doing in the future? What would my path look like? Like, why am I doing this? I always keep questioning, you know, I keep having these existential thoughts about myself and my life, every once in a while. I’m not sure it’s a great thing to do, but that is who I am. So I always knew that I had this vision of starting something of my own and doing something and I mean, I do not come from a family where everybody is in entrepreneurship, right. So on my father’s side of the family, there were no entrepreneurs, no family businesses, and on my mother’s side of the family, almost everybody was in business. But the one thing which is common across both sides of the family is like a lot of lawyers in the family. So I honestly thought that I would eventually grow up to become a lawyer, if not anything else, and I just go into the family profession. So but I think what happened is that along the way, I realized that look, I’m doing well in technology. But there are a couple of things that were coming out to me as a pattern. One, I was somehow missing the big picture somewhere, in terms of what is the impact that I’m making through my daily slogging of 18 hours a day, seven days a week. So I’m sitting there, I’m working at like 3 am on a Sunday in the office coding my way away on hardware design, and I’m thinking like, “Hey, you know, I’m doing this work. And I know that it’s going to make an impact, maybe second or third-order down the line, but I’m not sure if it’s going to move the needle for one actual human being’s life.” So I had started thinking a lot about how I need to kind of find my path, I need to figure out how I can start something of my own and realize my dream. And the sooner I do that, the better it is, because you know, let’s just make mistakes, while you’re young, you know, and so that you still have time to correct those mistakes and have the energy to find your new path. So I think a lot of this introspection and looking at what I was doing, and the impact that it was making really pushed me, to the extent that I realized that look, I just cannot continue to do this. And obviously, money and finances were not the motivators at all, because I think financially I was doing pretty well at TI. So if I had continued on a corporate growth path, I would be very comfortable in that sense in life, more than what I would have imagined. But I knew that now’s the time. So that whole push of not seeing the impact that my work was created, daily. And knowing that, look, I had this vision, and it looks like after seven to eight years of working, I still have that vision. So that probably that itch has not been scratched. Or that dream has not been fulfilled. So I said, you know, let’s just jump and make the jump and do it. But I needed a conduit, right? Being in R&D, being a very geeky person and having a very narrow worldview in technology does not prepare you for life entirely. And unfortunately, we all grew up. I mean, I grew up in a culture where I was not prepared for the challenges of life, you know, how do you think about money? What do you think about financial planning? What do you think about the future? What do you think about risk-taking? The conduit for me was to take a year or maybe two years off and find a middle ground. That seemed like a business school because that would allow me to get some exposure to people who are completely from different walks of life. And that’s what made me take the jump against just an amazing amount of opposition that I got from a lot of people. But yeah, that is the start of all the opposition I started facing for the next couple of years in life.
What made you want to create an impact? Was it inspired by the Tata philosophy, considering your dad worked there?
So I mean, at some level, how you look at things around you daily do impact you. Growing up, I was a lot in awe of JRD Tata, as a legendary person. And in some of the other, I would say, iconic figures at the Tata Group. But I think it is that plus a combination of reading a lot about what other people had done for themselves. Those the times when we were looking at others,
Who were the people who inspired you?
So I think the one thing obviously, was not growing up in an environment and looking at Tata. The second thing was I started to hear a lot about how some of the big, large scale entrepreneurs globally are making a difference, right. So these are the days when I just started hearing about what Hewlett Packard was doing globally, in terms of building the business out, I just started hearing about what Nike was doing, Phil Knight was doing. I just started hearing a lot about what the Birla group in India was doing. And of course, I wouldn’t miss the whole news about how Dhirubhai Ambani was shaping the future of the Ambani group or what he had done. So I think some of these figures made us take a step back and think that if that’s the scale of what people can do with the 24 hours of their time, and if I have a vision, then why not at least have the determination to figure it out. So I think those are the days and that along with my thing that I have to create an impact. I have to create something big. But I wouldn’t say there was anyone major person which was completely life-transforming as far as an impact is concerned, which forced me to jump in that direction. But it was more about getting more exposure or seeing more things around me and probably just being a person who is more, I would say internally driven, in terms of who I want to be and what I want to do. And I think a combination of these is what just made me take the plunge
Okay. Did you get more clarity in that one year at ISB? In terms of what you want to do?
I got clarity because I started my journey as an entrepreneur while I was a student in business school. And, yeah, so I think that for me was another seminal year in my life. And particularly because of a couple of reasons. One is that again, I was in ISB doing my MBA, Indian School of Business in Hyderabad, in the year 2008. And that is the year the financial crisis happened, the entire Lehman Brothers, the entire market collapse happened. So well, we were all in business school, and I had started interacting with a lot of people who came from different walks of life, chartered accountants, engineers, or doctors, people from other commercial domains. And today, I think some of my closest friends are the people that I spent time with within the business school. But that opened up my eyes, it just gave me so many different dimensions and mental models to look at things. And on how to frame a problem, how do I evaluate what choices lie ahead of me, I think all of this was heavily influenced by mostly my friends, I would say. So the biggest influence for me at business school was, was my friends, the peer group. And I’m so thankful for the peer group that I had access to and that gave me some of my closest friends who I can today, you know, who are like family to me. So I think that was my biggest lesson.
I think that’s the thing about online learning, you lose out on the peer group.
Yeah, absolutely. And I think the joke is that my friends and family tell me that, you know, I should never go back to any more education. Because of the two years during which I graduated, the markets crashed both the years 2001 and 2008. So I’ve been forbidden to go back for any further higher education, not that I’m yearning to mature. But yeah, that happened. And honestly, the time at the school helped me forge some ideas around how I should look at my life in the next few years? Should I take the plunge of becoming an entrepreneur, and whatnot? So I think that year and the influence of peer groups and friends is what changed my life in a big way.
What was the business you started while on campus? And tell me about that, like, like that launch journey from idea coming to your mind to taking it off?
Sure. I mean, now that I look back, and if I narrate it to you, it’s so funny in my head, because it was all driven by passion. And the unconditional support of my friends, and not so much driven by how I operate today having gone through the journey. But yeah, I think back then so I started my first venture, which was mostly focused on providing marketing and branding services to other institutions. Marketing was my major in the MBA. I did not pay any attention to courses and streams like finance. And there is another inside joke, and I’ll probably tell you later.
You can tell me now.
Yeah, I think when I look back, I compare with what I did in my education in my life, and it’s 180 degrees opposite, right. So in my undergraduate, I detested electronics and hardware and I loved computer science. And I spent my job or my career at TI completely doing electronics and hardware, which was the exact opposite of what I liked. In my MBA, I slept through most of my finance classes. And today, I’m running Freo, which is in the world of finance and FinTech. And I’m loving it. I realized that then I’m just thinking, like, why did I not do this earlier? I love this business. So I think that’s the joke. I mean, everybody’s like, you know, we know that if you like something in your studies and academics, you’re not going to do it for the rest of your life. So, I think somehow it just worked out like that for me. But yeah, so that was my first venture in terms of providing marketing and branding services to corporates. So, for example, ISB used to have its annual alumni meet, so I decided to become the entire branding partner for all their branding.
So, ISB was your first client?
Yes, they were. But I had to bid for the project because it was not easy. Just because I was a student, they were not willing to just give it away. So I had to kind of outbid some other people and get my foot through the door. But obviously, they were very encouraging, ISB as a school, and that was my first client. And then from there on, I think I grew my client base to other institutions and corporates and companies. Companies like Cisco, Johnson and Johnson.
What was the service offering?
No, so the service offering was that these institutions were looking at creating a whole full-fledged branding program for future joiners or employees, and creating a complete branding team in terms of how should they make sure that their brand and their culture translates into products or merchandise that their employees and their partners and clients would consume. For example, things like a branding message around some event, things like products like merchandising, like, it could be branded souvenirs, t-shirts, it could be any major marketing collateral or just the strategy around how should they translate their culture and thinking into a branding strategy for their employees and partners on the ground. And then eventually make sure that that gets translated into some actual product, which is either worn by people or used by people on a day to day basis. So in short, if there was a scope for some new design of souvenirs and t-shirts and other products to be created, I would be advising them on how to go about it. And then I expanded my offering from not just providing the services, but I said, I will also actually get the product for you. And then I tied up with the manufacturer, I said, why not just increase my value chain penetration over there. So I did that. And I tied up with manufacturers at the back end, these are wholesale manufacturers of different types of merchandise, and I would source the product, I would create the whole strategy, source the product and provide the end finished product. And I would make my margins on the value that I was providing. So that was my initial journey. So obviously, in the first two or three months itself, I started generating cash flows, because of the services business, and I had a very minimal capital requirement from my side. So I started making money very quickly. I realized that you know, the amount of money that I was making, when I was working at Texas Instruments, I had already started making that kind of money in about five-six months of becoming an entrepreneur for myself. So immediately, I thought that look, this is okay from a money standpoint, but as far as the problem that I’m solving on a day to day basis, I’m not sure if I’m going to love solving the same problem two-three years down the line. So, after having done this for about a couple of years, and having made whatever money I could make, I then moved on to doing something else, which was, again, as a kind of a lateral transition. And in all of these companies, my clients used to keep asking me that, you know, while you’ve done this branding, and merchandising and marketing strategy for things, but we also need to engage our employees. And then there are training programs, a whole bunch of activities. So do you know somebody who can help us engage our employees and offer a training program for a whole bunch of things? And that is what allowed me to transition and realize that that was probably a much larger problem, which was all-around training and skill development and skill assessments. And that’s what allowed me to take all the cash that I’d made over there and morph myself into a skills assessment and skill development company. And that was my second major switch.
This was something like Mettl, like an online thing?
Yeah, it was like Mettl in some ways. And incidentally, you mentioned Mettl. Ketan, the founder, was my classmate at IIT. Different streams, Ketan was in metallurgical, I was in computer science but friends from IIT days. But they were doing something which was more technologically savvy then and my initial focus started on a more human-driven initially and then I think that evolved and pivoted into I would say a larger platform and a product play eventually. But my first step was a slightly more services-oriented model. And I think it was also driven by my desire to always keep making money. So I kind of had made a promise to myself that as much as possible, I will always try to be an entrepreneur who does not lose money. And I think till date, I can see that like, at least I have not lost money. But my starting point in services back then was driven by that focus that I should make money. And then eventually, it kind of evolved into a much larger technology-driven platform play, I got a co-founder on board. As I changed my whole idea and thought process, we worked together to create something big. And then that’s what led me to the next leg of my journey.
What were the kinds of engagements you were getting?
Yeah, mostly it was about training and skill development for most of the professional staff, which was mid-manager and manager level staff. So this would be about different areas of professional development, initially started by a huge demand for areas of training and assessment around organizational behaviour, organizational development, I would say negotiation, conflict management, those are the areas that I used to get a lot of queries for. And that then kept growing and I kept adding areas to it. And I expanded the repertoire of services that were being offered, I built a network of other professional individuals who could deliver the same outcome under my brand and create a revenue-sharing model, because I had to figure out how to scale this. I have only so many hours in their day, so even if I learned how to deliver it by myself, that wouldn’t be the smartest thing to do as an entrepreneur. So then I built a network of people who could create high-quality content and deliver it. And I also started doing a lot of it myself, because I enjoyed it. And that then evolved into my next product play which we call SkillWiz.
We have now come to the end of part 1 of our conversation with Kunal Varma, Co-Founder, Freo. In part 2 of this conversation, we find out how Freo plans to make a strong mark of its own within the Neobanking category and what the future looks like for them. Click here to listen.