Nikhil’s second venture is Grip Invest – it’s making structured debt available to end consumers directly, removing the middlemen from the process like banks and NBFCs. Grip Invest allows consumers to directly lend to corporates and earn a much higher rate of interest than saving via fixed deposits and other such instruments.
Know about:-
- Focusing on fixed-income products
- Go-to-market strategy
- Evolutions in the investment space
- Things done differently the second time
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[00:00:00] This is the second part of the conversation between your host Akshay Dutt and Nikhil Aggarwal. In the first part, Nikhil talked about his journey into entrepreneurship and building up Chalo. In this part, he talks about the journey after exiting from Chalo. Nikhil’s second venture is Grip Invest, and it is making structured debt available to end consumers directly removing the middlemen from the process like banks and NBFCs.
[00:00:34] Grip invest allows consumers to directly lend to corporates and thereby earn a much higher rate of interest as compared to saving via fixed deposits and other such instruments. Listen on and if you like such insightful conversations with disruptive startup founders, then do subscribe to the Founder Thesis podcast on any audio streaming app.
[00:00:52] Akshay: Well then, what made you want to move on? What was the trigger for that?
[00:01:04] Nikhil Aggarwal: My co-founder and I saw some things differently. Tried to make sure or tried to make the effort to be on the same page, but at some point of time. Having the same thought is very critical in early stage companies that we, despite our efforts, we could not get there and hence it made sense to part ways.
[00:01:18] Obviously I was the person having a different point of view and hence, I stepped on the road. Coming out of a very intensive four years, especially as an entrepreneur, I think it’s not easy to say what you’ll immediately jump into. There are multiple thoughts going on in your head, whether it makes sense to go back to a job, should you think of something like a BC role?
[00:01:36] Should you just take some time off? Start again? I think debated a lot of those options. What was fortunate was that almost as soon as I left Chalo, I got an opportunity to join the World Bank. I sent an exit email saying thank you for the association and I heard back from them to offer me an opportunity to work as a consultant with them.
[00:01:56] So that became a very easy transition to say, okay, great, I have something constructive and productive. Something in a sector that I enjoy doing with an organization like World Bank. And within a week I actually joined the World Bank.
[00:02:07] Akshay: In Chalo, you were interfacing with World Bank for some of their initiatives, is it?
[00:02:12] Nikhil Aggarwal: That’s right. Chalo was building public transportation and World Bank, obviously for public transportation is a very critical component. So we used to meet in industry conferences, there used to be common dialogue, and I built a relationship with the team there and they thought that I could add some value to the work that we’re doing.
[00:02:27] So it was a very easy, very fortunate transition into a great organization. It got me to see the same problem of transportation in a very different perspective, in a very different lens. World Bank doesn’t think about the next few months or the next few years. It thinks about the next decade. And at the same time I also started feeling that my entrepreneurial journey was not complete.
[00:02:48] Like when you start a journey, you expect to get somewhere. You expect to do something that I think for me, a lot of those things had not happened. I hadn’t seen that journey through and hence, somewhere, there was always a gap that I wanted to fill. So, over a period of time, it became very obvious that I wanted to go back and take another shot at it, at fulfilling that, that experience for myself.
[00:03:11] Akshay: So what did you decide that next shot was gonna be?
[00:03:14] Nikhil Aggarwal: The funny thing is that there’s, there’d been an idea, which was in my head since 2014, so long before Chalo ever happened, and this was really around making more investment options available for investors like myself, if you think about, if you put yourself in the position of someone who’s around 30 years old in India, earning a good salary, been working for five, seven years, I think there is a immediate realization that the number of options to invest money are limited, right?
[00:03:42] You’re making a decent money, by nature, you are likely to be saving a fairly good amount of it, right? They’re all brought up in that way, or at least my generation is brought up in that way. But the options to invest are really limited to fixed deposits, bank deposits, stock markets, and that’s it. At the same time, you are hearing stories around you of people making a lot more money, looking at diversified investment options.
[00:04:05] A majority of us are also connected globally, have been to school globally or traveled globally and hear about other investment options. And you constantly wonder, why is it not available to me? You hear about family offices and you hear about ultra H&I’s deploying money in structured products and you question, what is it that I did wrong and why can’t my money make the same kind of money?
[00:04:24] And that was the idea that had been in my head. I continued to see that problem exist for my friends, for my family members, and we started Grip with the objective of answering this question, which is how do we create more investment options for the common middle class salaried professional that allows their money to work hard. I said this to someone recently; indians are predominantly making money by salary creation, by salaries. You work harder, you get more salary, you save it, and that’s how you make your savings or your nest. But the fundamental premise of wealth generation is that your money should make money for you.
[00:04:59] You cannot keep working or for a salary to generate that wealth. And I think Grip’s vision is to change that problem, is to see how to make your money work harder than you work for generating wealth.
[00:05:10] Akshay: Was this like for active investors, which means that there are multiple decision making steps in it? Or was it for passive investors you invest and forget?
[00:05:19] Nikhil Aggarwal: Actually, I would say a mix of both. In the traditional definition of active investors, it’s like a trading, right? You’re constantly managing it. I think the intention was to do in that definition of it was to make it for passive investors. Once again, coming back to that 30 year old, right? He’s got a busy life.
[00:05:33] He’s probably had a kid, or he’s married about to have a kid and he doesn’t have the time to actively manage money, which is why in India you have $2 trillion lying in fixed deposits. You don’t have time to actively manage your money, so it has to be passive. At the same time, it has to be active in the sense that it has to provide choice to the investor.
[00:05:52] He or she should be able to decide where they want to put their money and be able to get great quality information, seamlessly, and make transactions at ease to conclude that investment. The, one of the other mentalities or thought process that I see happening and I resonate with it, is some discomfort or a belief that money managers are not really adding delta to the returns.
[00:06:13] Akshay: What, just describe this terms, alpha, delta. What are these?
[00:06:16] Nikhil Aggarwal: Sure. If you put your money on the Sensex your money will give you a certain return. A money manager should give you return, more returns than the sensex gives you, right? Let’s just call that Alpha for a minute. The delta between what extra intelligence can add to the way the market is going.
[00:06:29] And just today, morning, there’s a report that in the, for the last 12 months, only less than 50% of managers delivered more returns than the Sensex. So you’ve paid someone money, you’ve trusted this person, he’s not even delivered as much returns as the Sensex has delivered.. And at the same time, the commercial modulus for providing investments reward the manager, give them fees for selecting an investment, not necessarily for what returns they generate for you. So, these are two, I would say somewhere weaknesses of the current wealth management space. And we wanted to be active in the sense that people could choose the investment they made and not necessarily be dependent on the money manager.
[00:07:04] Akshay: And there, there are so many ways to offer investment products. You have a lot of wealth management startups, which have lost in the last two years with a similar approach to make it easier for middle income salary people to make their money work harder. So tell me what exactly you wanted to build.
[00:07:20] Nikhil Aggarwal: Yeah, we wanted to actually be, let’s say the manufacturer or curator of investment options.
[00:07:25] We understand that there are, or, and we knew that there will be many money, there will be many wealth platforms from a distribution perspective. I just, I’m using these names with no disrespect, but just for the example of example, ICICI, private wealth is a distributor of investment products. IIFL is a distributor of investment products and there will be many such distributors who will cater to investors’ requirements.
[00:07:45] But the gap that we saw was that there was no product to distribute. You had the standard stock market, fixed deposit products, but nothing beyond that. And hence, our focus as a business was to create the product in the first place, then distribute it through our platform or through other distribution channels.
[00:08:02] So, we took a step back and said, let’s create the product that is available to a larger segment of the Indian audience.
[00:08:09] Akshay: Okay, and what product is that?
[00:08:10] Nikhil Aggarwal: We are focused on fixed income products, asset backed fixed income products, which basically, means that you get a visible stream of returns on a predefined monthly or quarterly basis, and at each case, your investment has an underlying asset to it that is a collateral or guarantee against that investment.
[00:08:28] We currently offer three such products to our investors. The first is leasing, which is leasing of movable assets like vehicles to companies. Imagine leasing a Maruti car to Uber. That’s the equivalent of what we offer on the platform. The second is inventory finance, which is providing finance against existing inventories, raw materials of finished goods held by a company, and that becomes a short term fixed income product.
[00:08:53] And the final one is preleased commercial real estate. Where you are investing to own a part of a real estate project, which is leased to an MNC client. In all cases, fixed income in all cases, monthly cash flows, in all cases, underlying asset. And in all cases, corporate credit. It’s not a retail credit, it’s not a consumer credit product.
[00:09:13] And with this sort of focus, we started, we made available these three products, the intention is to keep adding more products which offer a similar flavor.
[00:09:23] Akshay: Interesting. Basically, traditionally, this kind of, this is pure B2B financing. There is one financial institution, say a bank or an NBFC, and then there are these corporates which need funds for either an asset or inventory or working capital or whatever, and the funding agreement is between them.
[00:09:41] So this B2B financing you have in a way made it like a C2B financing, where a consumer is financing a business.
[00:09:50] Nikhil Aggarwal: Great way of putting it. Let me ask you two questions. If you think of an NBFC giving finance to a company today, in India, what do you think is the range of interest rate?
[00:09:59] Akshay: 14 to 24, something like that?
[00:10:02] Nikhil Aggarwal: Let’s take 14%. Let’s start at the bottom of 14%, and what is the fixed deposit rate that you earn as a retail investor when you give money to a bank?
[00:10:10] Akshay: 7%, I guess not more than that. Seven would also be when there’s a long tenure. 7% would be like a three years or something like that, huh?
[00:10:19] Nikhil Aggarwal: Yeah, 7% is like everyone would be jumping and getting 7%.
[00:10:22] So it’s in the 4 to 5% zone, which means that there is a thousand basis points between 4 to 14% delta, between what money you put in the bank, which then ultimately goes to an NBFC, which ultimately gets loaned out. And what Grip is doing is saying, I’m giving you the option to make that full thousand basis points.
[00:10:39] You know, it’s not as risk free as bank FD is, there is an element of risk here, but you have a thousand basis points more to make, against which you can measure the risk of what you’re investing in. The same company that is taking money from NBFC is also coming and taking money or making a, it’s available on Grip’s platform.
[00:10:56] Your choice. And, could you think about allocating a portion of your portfolio to this thousand basis point additional opportunity? So it’s a disintermediation of B2B financing exactly as you put it, but the upsides are very different.
[00:11:08] Akshay: So, traditionally you put in money at 4-5% and then the bank further lends it out and they earn something on it and some is their risk to cover risk.
[00:11:18] So risk plus profit, that is, and that additional 10% which the bank is getting and they give it out at 14%. So, here you’re just removing that middle layer of a bank or a financial institution and allowing that to happen directly for consumers who are comfortable with taking on that additional risk with the expectation of a higher return.
[00:11:38] Nikhil Aggarwal: Absolutely. And, technology is all about disintermediation. Amazon did it for the cost of books that you can purchase, right? It’s become significantly cheaper. Make My Trip may have done it for the cost of travel that you can do. We are doing it for the cost of returns or the kind of returns that you can get by just disintermediating.
[00:11:53] Akshay: And what is your take in this?
[00:11:55] Nikhil Aggarwal: So, we take 3% of the investment value. So, if you have invested a hundred rupees with us, we will make 3% and to align ourselves to the investors, we don’t take it upfront. We actually take it over the period of the transaction. So you, we make money when you make money on that transaction.
[00:12:10] Akshay: So if somebody’s putting in a hundred rupees, then when that fixed income is paid out, every time from that fixed income you take your cut. Is that how it happens?
[00:12:19] Nikhil Aggarwal: That’s correct.
[00:12:20] Akshay: Okay. So, what is the customers’ journey like?
[00:12:23] Nikhil Aggarwal: It’s quite straightforward. So, we have log into Gripinvest.in, where you do a simple OTP based registration. And, once you are in, you can see the various investment options that I talked about. For each option, you get a description about the company, what’s the underlying asset, what’s the returns, what’s the risk, and if you like, what you can go ahead and move towards completing our KYC, document, signing and payments.
[00:12:44] All of it is completely online, right? There’s no single offline process. It’s a payment via payment gateway account. KYC is e-KYC, and document signing is E-signing. So, you can complete your entire journey within the grip domain and execute the transaction. We then have a portfolio page that allows you to track what your investments are, where you have received returns, what’s the next step, and then, every month you get your money credited in your bank account. That’s the journey.
[00:13:09] Akshay: If someone just wants their, an investment to grow instead of getting income?
[00:13:13] Nikhil Aggarwal: Yeah, we of, we introduced a auto reinvest option, which allows people to set certain rules for reinvesting their monthly flows and that allows them to compound their money.
[00:13:22] It’s all about compounding, right? Especially when you’re getting monthly income. So, we built a very easy tool for people to reinvest at a click. Once again, giving them the choice to set the auto-invest. The principles for auto reinvestment, and that’s something that we launched on our platform about a quarter back.
[00:13:36] Akshay: Why do you use a payment gateway? Won’t you lose out that one or 2% payment gateway fees in that? Which is pretty substantial, right?
[00:13:43] Nikhil Aggarwal: We actually don’t, because thanks to our payment gateway partner, they have understood our business model and we do not get charged the same commissions or the same spreads that get charged normally for e-commerce transactions. Our commercials are significantly lower.
[00:13:57] Akshay: How did you manage to do that? That’s a pretty big achievement.
[00:14:01] Nikhil Aggarwal: I think you sit down across a table with good people and people who want to do business and they understand what you’re trying to do, right? We obviously, there’s a lot of money that gets invested on a daily basis, which is still profitable for the payment gateway platform and the transaction sizes are much larger, right? They’re not 20 rupee transactions, they’re typically a lakh rupee transactions. So, it still makes money for the payment gateway, but it just fits the right business model.
[00:14:23] Akshay: How do you curate and how do you control risk for investor, the investment options, what is your process of onboarding investment options, curating them, doing some sort of risk assessment, because end of the day, if something goes bad, you will lose customers, right? Like, there’ll be social media backlash and stuff like that.
[00:14:41] Nikhil Aggarwal: Absolutely. Selection assessment is probably one of the biggest things that we do at Grip, and I would divide that into two parts.
[00:14:47] One is, what we do in-house. And second is what we do via partnerships and maybe a third element is how we are building certain credit mitigation structures at our end to further protect the investor. So it’s not a marketplace where you can just list whatever you want. Every deal is vetted by our internal team and based on certain minimum criteria that we have, as well as a detailed diligence on the financials of the company; typically what any creditor would look at, like last three year financials, GST payments on time, litigation, track record, cash availability, profitability, quality of promoters, availability of existing investors, quality of underlying assets, right? Everything is done at our end, typically for hundred companies that come through our system, only 20 get listed on the platform, so 80% get rejected. So, that’s part one. Part two is that some of the assets that we are adding are actually in partnership with companies who are a hundred percent focused on identifying those assets. Like for example, real estate. We do not source the real estate opportunity ourselves.
[00:15:44] We work with the company who’s only focus is investing in real estate, which means that they are 24 by 7 looking at real estate opportunities, they understand how to underwrite those opportunities, they do the work, they offer majority of it to their investors, and we take only part of a small portion of it, which means that our investors benefit from a double research done on the same opportunity. So that’s part two.
[00:16:08] Akshay: This would be like a startup or like a PE firm. I mean, there are these startups like I think Myre Capital.
[00:16:13] Nikhil Aggarwal: So, currently it is other startups. For example, in the real estate product we work with a company called Startup Capital, which is one of largest offers of such products in India.
[00:16:22] And the third thing is how we think about other credit mitigants. All our transactions have a security deposit; 10% security deposit. We take PDCs, e-Nash, escrow agreement, charge on revenue against the company. And what we have recently started doing is to also work to give a FLDG. It’s a, think of it as a insurance option, a credit default insurance option, right?
[00:16:44] And we have started buying FLDGs against our portfolio that mitigate against the ten first 10% of loss. So there are various things that we are doing, that we are hoping will protect the investor in any credit business. And I, I always say this, it is naive to believe that there will not be a default. It’s totally naive, it will happen.
[00:17:02] What you must do is to do everything possible, as many buffers possible, to make sure that you can protect the capital of investors. Typically, in our transactions, you get 50-60% of your capital back in the first 12 months, and along with the other mitigants we have, we believe that in case there are some default happens over 18 months, we’re in a fairly good position to recover capital for investors.
[00:17:22] Akshay: So this FLTG or first loss default guarantee. This is, you’re working with an insurance for this? Uh, or, or how are you providing this?
[00:17:30] Nikhil Aggarwal: We are working with two different parties. One is an insurer and the other is a financial institution.
[00:17:34] And I think it’s still at a, we’ve executed a pilot for now. If this works well, we will definitely look to scale it up both, whether from a, whether, which party it is and how it is structured, we’ll need to figure out.
[00:17:44] Akshay: So, tell me about your go-to market, and obviously you have two different go-to markets. One is the investor side and the other is the supply side or the companies at one fund.
[00:17:53] So tell me about each of these, and when did you start the go-to market? Like when did you launch?
[00:17:58] Nikhil Aggarwal: Sure. So we launched in June, 2020, which is about almost two years back. And I think at that point of time, our bigger struggle was to find investors to try and invest money in these options. It was easier to create investible opportunities because you need only a few opportunities and you are educating a market to say this product exists.
[00:18:19] Our go to market for customers has since always been about A, it’s important to diversify, B, higher returns than what are available on other fixed income opportunities. Three, you have the ability to start small. Four, passive income, non-volatile against in market volatility is a great way to, is great in addition to have in your portfolio, right?
[00:18:41] So, these are the four premises or go-to-market that we have on the user side. On the company side, our premise basically is to be able to offer them a non-equity dilutive instrument, which allows them to pay us or to return money as they make revenue. It also offers a non, it allows ’em to remain asset light as a company and scale faster.
[00:19:03] So, these are the, these are the GTMs on the company side. Over the last two years, the GTM on the company side has become more important for us to do because we have been able to build a fairly large base of investors who are now educated, have tried it out, have told their friends, and hence there is a little bit of momentum built up on the user side.
[00:19:22] Akshay: But yeah. How did you get those early users? Was it like performance marketing or what was it like?
[00:19:28] Nikhil Aggarwal: It was actually largely word of mouth that happened for the first hundred users. I think what is what we got very lucky with is timing, and I think timing is a very important factor in the success of any startup. When, if you look back at June, 2020, it was the month that the lockdown was lifted, but people were still working from home.
[00:19:45] Stock markets had almost completely bottomed out at 30,000, Sensex was at 30,000. At the same time, fixed deposit rates had also come down significantly. So, here was a user sitting at home actually having more savings than before. Not sure where the stock market was going and not finding it exciting to invest in FDs and, for those users, we became a very interesting investment option. They also had the benefit of more time to do more research, find out new things, and I just, I think we got incredibly lucky with that cycle in the market, which allowed people to start investing on our platform and build through word of mouth. I think the biggest change that is happening in investment today, the retail investor is getting much more powerful as an investment class and is constantly looking to direct invest, whether across asset classes, I’m not a stock.
[00:20:32] I think it’s a huge transformation that’s happening across the world and will change the course of wealth management.
[00:20:37] Akshay: Angel investing, that whole trend that is again, retail investor directly investing into startups.
[00:20:43] Nikhil Aggarwal: It is shocking the amount of wealth that is held in Indian hands, and I say this in a good way, but I think it is, it takes you by surprise and which means that there is this latent potential of capital that is looking for investment options.
[00:20:58] It has just not been provided and not been provided in the right way. And it’s a huge opportunity for anyone building a wealth management platform today in India.
[00:21:06] Akshay: And did you need some regulatory clearances to launch this? Is this covered by any such clearances?
[00:21:13] Nikhil Aggarwal: Yes and no. So I would say that we are in an area where the way the products are designed don’t come under the SEBI framework today.
[00:21:20] Okay, because effectively we are asking people to purchase physical assets, right? And hence, in that sense, they stay outside the purview of what happens. And I, I’m not really happy about that. I think for any product to be truly scalable, it needs to lie in the regulatory framework. Hopefully you and I will speak in a couple of months down the line and we would’ve executed a new instrument to execute our product, which is within the SEBI framework. It’s a securitization structure, like a pass through certificate that we are doing for our leasing transactions. And that will be a rated, listed and SEBI regulated product for, and for the first time will be done for the first time in the Indian markets.
[00:21:57] So, we are very excited about it, but it would be a game changer for us. Let’s say that you enter into a lease transaction. Let’s say I, we enter into 10 lease transactions.
[00:22:05] Akshay: Currently, it’s a purchase, like you are connecting, let’s say 10 people who will collectively buy an ambulance for stand plus, for example.
[00:22:13] Nikhil Aggarwal: That’s correct, yeah.
[00:22:15] Akshay: Uh, and so it’s a combined purchase which is happening, so it’s not really like an investment product in that traditional sense. And Stand plus agrees to pay back an EMI on that ambulance for 18 months or 24 months or something like that.
[00:22:31] Nikhil Aggarwal: Absolutely. So, now what we’re doing is that a company, a single entity, will sign a lease agreement with Stand Plus, right?
[00:22:38] It’ll also sign it with three, four other companies for different assets. And, this creates a stream of receivables; monthly income. That stream will be securitized or converted into a financial instrument via a SEBI mandated or SEBI regulated process and issued to investors as a financial paper that they can hold in the materialized form.
[00:23:01] This entire structure is called a pass through certificate or a PTC certificate, and it basically securitizes all those cash flows from the lease income into the hands of the investor. And this is a structure.
[00:23:11] Akshay: So, this becomes like debentures or a bond, uh, in a way?
[00:23:15] Nikhil Aggarwal: Like a bond, right? All of these, simpler, they’re all in a way, PTCs.
[00:23:20] Akshay: And like a debt instrument, basically.
[00:23:22] Nikhil Aggarwal: Like a debt instrument. And that’s what we are doing for lease transactions. It’ll be the first ever done in India.
[00:23:27] Akshay: Is there a difference between lease and EMI?
[00:23:30] Nikhil Aggarwal: Yes.
[00:23:30] Akshay: When you’re leasing a vehicle versus when you’re like financing it and getting EMIs back, what, what is the difference?
[00:23:37] Nikhil Aggarwal: The difference actually lies in how you treat on the PnL and balance sheet. And I’ll try to make it not complicated. Lease is treated as an expense item and it lies on your PnL statement above your EBITA line.
[00:23:50] Akshay: So lease is like a subscription cost, basically?
[00:23:52] Nikhil Aggarwal: Subscription cost or it is like rent, right? EMI actually consists of two parts. Interest and principle, the interest part lies on your PnL, but the principle lies in your balance sheet. And hence, this treats, changes the treatment in the hands of the lender and the borrower.
[00:24:08] Akshay: But you are leasing an ambulance to Stand plus, which means that Stand plus will pay the subscription in perpetuity. Or will it reach a stage where it will then own the asset? Like in an EMI there is a ending date, right? What happens here?
[00:24:22] Nikhil Aggarwal: There is an ending date. You sign lease agreements for specific periods of time. And then after that point of time, there are various options of what can happen. Either Stand Plus can ask to purchase the asset. Either it can be sold to someone else, or Stand Plus could also ask to extend the lease of the same asset to say, I’m going to opt to, I’d like to extend it for another two years.
[00:24:42] So there are various options available at the end of the lease and that also obviously is an upside to the transaction.
[00:24:48] Akshay: By the time the lease ends, you would have already gotten the return, the desired rate of return on it. And what is the role of technology in this? One would be, of course, like a way for investors to do their KYC login, see like a marketplace, that would be one of your technology products, right? Like a web application where people can see the listings and like an e-commerce kind of an application where they can check out and pay and all of that. What else is there?
[00:25:16] Nikhil Aggarwal: Sure. I think this, the current application in my view is actually the simpler part of it and not the exciting technology stuff that we are building now, but break it up into, into two parts.
[00:25:27] One is about investor experience. See, making an investment for the, making an investment once is like making an e-commerce transaction. But once you buy a packet of chips, you eat it, you’re done with it. But an investment is something that you live with for a fairly long period of time. So the platform must also offer you a great experience in terms of how you manage and exit the investment.
[00:25:50] What if you are at the need of money? And need to liquidate your investment. How can the platform enable that for you? What if you require a loan for a short term against your investment? How can the platform enable it for you? Can you create certain product variants? Can you create a SIP variant? Can you create a mutual fund variant?
[00:26:06] Now, these are all things that are in the realm of reality for stocks. Because there is a framework for it, but in the case of alternative fixed income assets, it does not exist. And one of the key things that we are doing from a technology perspective is to build product features that enable this experience for you.
[00:26:23] We have a simple motto in the product team, which is to make alternative investing as easy as buying a stock, and our focus is to do that. The second part is I would say, from a wealth management experience, how do you make the user journey and the discoverability easier? How do you customize experience and personalize experience for people so that it is easier for them to receive information and make a decision?
[00:26:46] And there’s a little bit of an, I would say, AI, ML aspect to that in terms of understanding what a user wants and then giving it to them. Amazon recently did an incredibly exciting experiment where they built AI and ML for retailers to help them, help people discover what they really want to buy in a store.
[00:27:04] And I, very fortunate that a friend of mine was the product manager on that, and I recently saw him post about it. But imagine going to Netflix today, you’re incredibly confused about what to watch, right? How do you bring technology to play a role into making that decision making easier for people? So, that’s the second part.
[00:27:19] And finally, third part is using technology to make smarter decisions about the companies we are leasing to or working with. How do you access that data? How do you monitor their performance? How do you look out for social science, employee engagement, science that can help you determine how a company is doing?
[00:27:35] So those are three areas that we are working on from a technology point of view.
[00:27:38] Akshay: Coming to the first, the product, uh, extensions. So a mutual fund would then be like a basket, like say mobility could be a theme in which you would have ambulances for stand plus and let’s say cars for some, uh, electric vehicle mobility startup.
[00:27:53] And like you would have a basket of a such options, uh, for a investor, that’s what we would mean by a mutual fund, right?
[00:28:00] Nikhil Aggarwal: And also, basket of products. So, leasing plus inventory, financing plus real estate, can we combine that into a basket and give you a flavor of all three at the same time?
[00:28:09] Akshay: And for due diligence of companies you are investing in, so, what all do you do there? Do you, there is that account aggregator framework, which has come in right? Which allows you to like, real time read the bank account of people you’re lending to, are you making use of stuff like that?
[00:28:24] Nikhil Aggarwal: Yeah, we’re making use of a lot of tools like that which are available already in the market and give you access to information.
[00:28:29] I think that’s incredibly helpful. We’re trying to see if we can look for maybe one or two additional tools. And Akshay, in my opinion, a lot of companies have talked about this. I think it’s great talk, but maybe not very easy to implement or the end result is not useful. So I, I don’t know where that journey will lead us, but when I look at companies as, as simple as Glassdoor reviews, what’s the attrition rate in the company?
[00:28:50] I know things like this can be softer signals of what’s happening in an organization and just try to marry the financial data with some of this to marginally increase the quality of decision making you’re doing.
[00:29:04] Akshay: Coming back to that go-to market, so one is you are doing like a direct customer signup where you are using social media and there is a word of mouth referral, which is happening for you.
[00:29:14] Are you also looking at some kind of partnerships, collaborations like, say, being present inside the bank’s app, say on the ICICI app, I have Grip invest as an option, and those could be big unlocks in terms of increasing your investor base.
[00:29:29] Nikhil Aggarwal: Absolutely. And we are already working with several partners who are distributing our product, if you can say that, and making it available to their customers.
[00:29:37] And I think that this is very important, especially early in our journey. Because, anything new requires a little bit more education and handholding and to the extent that there are people who are already working in that space that can do that for us, I think it is great for our business as it’s a core part of our strategy and we are looking to expand on that, those kind of partnerships.
[00:29:55] Akshay: So these are like offline distribution partners or like apps?
[00:29:59] Nikhil Aggarwal: Predominantly apps. Some offline distribution. So there’s a company called Cube Wealth in India. Another called dezerv, D-E-Z-E-R-V. Which are digital wealth management platforms, right? Again, complete overlap of our user-based persona.
[00:30:12] They are managing their money and we are making Grip available as an investment option on these platforms. There are also offline partners, but I see a lot of more scalability coming from digital partners.
[00:30:23] Akshay: Would you also look at the way mutual funds distribute, where they have a distributor who gets a commission on selling it like the offline channel is, is that in the pipeline for you?
[00:30:33] Nikhil Aggarwal: No, I’m a little, to be honest, I’m a little nervous about it. You see, power, the benefit of digital distribution is that you can completely control the information that is distributed, okay? And I think in a new product category, ensuring no misselling because of wrong information is very important.
[00:30:50] Akshay: Okay.
[00:30:50] Nikhil Aggarwal: And hence, I think it’s important for us to remain as far as possible, digital.
[00:30:54] Also, you know, I go back to when we decide, GTM, go back to what’s the number of people we want to target? What is the persona of people who will be the adopters for the next two or three years? And the answer to all of that is they’re all online and they all prefer to transact online. And hence, it does not make sense for us to build that. 50 years later, when alternatives are no longer alternatives and become main stream; Sure, I think that, I think that is a case to be made.
[00:31:21] Akshay: Okay, okay. So, currently with these apps who are distributing, you would share that 3%, some part of it you would share with them for the customer acquisition commission in a way?
[00:31:32] Nikhil Aggarwal: That’s correct.
[00:31:32] Akshay: Tell me, what kind of numbers have you been seeing? Well, what is like the, what are the numbers you track? Like assets under management, say Mutual fund has that AUM number, which they track. Well, what is it for you?
[00:31:43] Nikhil Aggarwal: We, so we track investments, new investments made in a month and total investments made for our lifetime.
[00:31:50] Akshay: Which would be AUM, that total investment.
[00:31:53] Nikhil Aggarwal: Would be gross AUM not net AUM because we are also constantly returning money to investors.
[00:31:58] We also track repeat rate of investor. Okay? Because see, we know that it’s people will come and make a first investment, but. It’s truly when you make the second investment that you like what we are offering, because referral is very important to us. You also track referral rate. How many of our users are referred someone else on the platform.
[00:32:17] So these are the some of the key metrics that we, and we track average investment per user, average times the investor invested on our platform.
[00:32:23] Akshay: Can you share some, like what is your gross and what is the monthly edition?
[00:32:28] Nikhil Aggarwal: We’re very proud to be fairly transparent as an organization and all the numbers I’m sharing with you are actually available on our website as well, and we, they’re updated on a real time basis.
[00:32:36] So our gross AUM is about 250 crores. Our current monthly new investment is 30 crores, so 30 crores of new investments happening every month. And average investor has three investments on Grip. 40% people make their second investment within 30 days, and 36% of our users have referred someone else.
[00:32:55] Akshay: How do you track reference? Is there a reward for referring? Like you refer a friend and you..?
[00:32:59] Nikhil Aggarwal: There’s a reward for offering. There’s a reward for referring, so that’s how we track it.
[00:33:03] Akshay: What is that reward?
[00:33:04] Nikhil Aggarwal: It’s 2000 rupees on the first investment.
[00:33:06] Akshay: That they make? Like your, the person you bring in?
[00:33:09] Nikhil Aggarwal: He makes a first investment and then that’s 2000 rupees.
[00:33:12] Akshay: Amazing. I’m guessing like the scheme would’ve been a big customer acquisition channel for you. Like, what’s the split in your customer acquisition? How much comes from referral, how much from performance marketing, how much from, like, organic?
[00:33:24] Nikhil Aggarwal: 45% comes through reference. Another 25-30% comes from organic.
[00:33:29] So 75% comes in organic and referral and 25% comes through performance marketing and digital wealth platforms or other wealth partners that we have.
[00:33:36] Akshay: What’s the size that you see grip invest getting in the next couple of years? Do you have a target in mind?
[00:33:43] Nikhil Aggarwal: Our target for March ’24 is to hit half a billion dollars in total investments enabled.
[00:33:47] So, we are currently at about 40 million dollars, our aim is to get to 500 million dollars in total investments enabled in the next two years.
[00:33:56] Akshay: Okay, okay. Like a 8X in two years. Wow, amazing. Okay. And you’re saying that the monthly AUM number is like growing fast to really hit that 8X?
[00:34:05] Nikhil Aggarwal: Yeah, and also if you see that there have been platforms, obviously the platforms older than us in other markets, what tends to happen is in fixed income products, you keep getting money back to the investor. And the next check is always larger. So you start your investment with a hundred rupees, you get money back, your next investment is gonna be 130 rupees, right? So your ability to, uh, get higher volume share of the user keeps increasing. Which makes this business more profitable because you are able to scale your business on existing investors.
[00:34:35] And if you have a, a user who’s invested twice or thrice with you, he’s highly likely to tell someone else about it. And because that experience of telling someone is so personal plus, educational, right? There’s a conversation that happens about it. The person is also very highly likely to invest, and hence that becomes a great growth engine.
[00:34:55] And a lot of platforms, not just our side, it’s not special to us. When they hit a certain point, they see a very natural growth happening on the investment side because of this behavior.
[00:35:04] Akshay: So what is your, uh, average ticket size right now? Like an investor? How much does he invest on average?
[00:35:10] Nikhil Aggarwal: On an average within 12 months, an investor puts five lakh on the platform.
[00:35:13] Akshay: So you really have an SECA kind of an audience on the platform?
[00:35:17] Nikhil Aggarwal: And that’s how the journey will always begin, right? Every financial product from stock markets to insurance began with SECA. It’s the way to happen and there will be a trickle down effect. It’s the same thing that’s happening in our space as well, and I think that’s just the way to go.
[00:35:31] Akshay: Would you need to do stuff like say, celebrity endorsement and TV ads and all to really hit that half a billion dollars number, to really be more like Marcy?
[00:35:43] Nikhil Aggarwal: That’s a good question. I don’t know whether the answer is whether we need a celebrity endorsement. Do we need to get ourselves out in front of a larger number of people? Sure. There are obviously new and more innovative ways to do that depending on who the persona of the user is. There is the Elon Musk and Steve Jobs style, which is where you make the CEO of the company iconic, right? And you want to just be part of their stories and you have a celebrity-led something, or you just have a product- led thing.
[00:36:08] I think we are still in a phase where we are experimenting with what works as the best way of educating investors about the product.
[00:36:16] Akshay: Are, are you on Cred yet? Like Cred is also like a platform right? Where a lot of products get distributed?
[00:36:22] Nikhil Aggarwal: No, we’re not on Cred yet.
[00:36:23] Akshay: But that would be on the road map?
[00:36:25] Nikhil Aggarwal: Definitely. I think we would love to be on Cred at the right point. I think they, they have recently started their journey on investment products with the P2P offering. As they expand, I hope that we are able to have a conversation with them and introduce Grip on Cred.
[00:36:37] Akshay: This is your second startup now, so what did you do differently this time around?
[00:36:42] Nikhil Aggarwal: I would like to say that I didn’t make the same mistakes again. I think that’s the only thing, made some new mistakes.
[00:36:45] Akshay: The solo founder, no?
[00:36:47] Nikhil Aggarwal: No, I have two co-founders. One learning has definitely been the need for co-founders. I think it’s very hard to be a solo founder, so I, I would highly recommend that people have co-founders.
[00:36:57] There are a couple of things I think we have done differently, just coming out of learnings, right and no wrongs. Number one, we focused very heavily on defining certain common attributes about the company, like culture, vision, mission, style of working on day one of the company, and, in an work from home environment, those things have really been what have kept us together. We didn’t have anything else to keep a team, which was hired online to keep together, and I think it’s been a big differentiator for us. Number two, we have made very senior hires. Very early in our life as a company. Most people do it later and the reasons are money, et cetera, et cetera.
[00:37:35] But we believe that if we hired senior professionals today, we can grow faster and also grow in a more sustainable manner because we put the right frameworks into place. And I think that has worked very well for us. We probably have a, a team that most people would have maybe three or four years in that journey, we have tried to do that earlier, including a head of HR, a head of finance, brought into the company. I think that’s number two. Number three, is much more focus. Focus. See, we are on a, we constantly on a treadmill as a loss making company as all startups typically know. And, which means that you only have so much time to prove a business model till you require a cash infusion, till you require to achieve certain scale and numbers. The treadmill’s not stopping, right? You still have the same fixed cost in your business.
[00:38:16] Akshay: Did you, uh, raise funds? Like what has been the way to fund it so far?
[00:38:20] Nikhil Aggarwal: Yeah, we’ve raised funds. We’ve raised two rounds of capital, totally about 33 crore rupees of capital, equity capital for the business.
[00:38:28] Fortunate to get backed by some of the same investors that backed me in Chalo, and it’s great to have them believe I can, maybe I can take another shot at it. But yeah, we’ve had some great investors who’ve added a lot of strategic value to our business and helped us grow.
[00:38:41] Akshay: Is this a business which would need a lot of funding, because you’re growing pretty organically? You, you would not really need like large funding rounds, right? And 3% is a pretty healthy number as what you’re running .
[00:38:54] Nikhil Aggarwal: I think there are two questions that will decide that answer. Number one is, what is the cost of acquisition of the user, given it’s a new category, and financial investments generally is a fairly competitive field to exist in, and I think that is one, one key question to be answered.
[00:39:09] Number two is, how fast do you want to grow and what do you want your business model to be? If you want to be a single asset focused company, which is growing at an organic pace, you can become profitable very quickly, but if your objective is to be a curated platform for alternative investments offering great product experience, there’s going to be a lot more investment that you do in tech and product that you would require to do.
[00:39:33] Akshay: And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to the show? I’d love to hear your feedback about it. Do you have your own startup ideas? I’d love to hear them. Do you have questions for any of the guests that you heard about in this show? I’d love to get your questions and pass them on to the guests.
[00:39:51] Write to me at [email protected]. That’s AD at T-H-E-P-O-D-I-U-M.in.
