Banker To Small Businesses | Anubhav Jain @ Rupifi

There are millions of small SMEs in India that are starved of credit. These businesses are too small to be viable for a bank or NBFC to go out and acquire. This is the unserved market that became the opportunity to build Rupifi. After stints as a founder of an EdTech company and a consumer lending company, Anubhav started Rupifi as a tech-enabled SME lender. Listen on to know more about this young, tech-centric and innovative SME lender on a mission to level the playing field for small businesses in India.

Know about:-

  • Journey from AMEX to becoming a founder
  • Acquisition journey of Qbera
  • Ideation of Rupifi
  • Repayment system
  • Challenges of solving for SMEs

The Serial Unicorn Founder | Sandeep Aggarwal @ ShopClues and Droom

When one talks about the pioneers of building unicorns in India, there would be only one man who has done this not once, but twice. Sandeep Aggarwal has had a fascinating journey- from quitting Wall Street to starting ShopClues to now building Droom that’s soon headed for an IPO. In this episode, the trailblazer walks us through his journey of starting up and starting again. Listen on!

Know about:-

  • Figuring out the white space opportunity of e-commerce
  • Starting ShopClues, one of India’s first e-commerce unicorns
  • The business model of Droom
  • Impact of COVID-19 on the business

Disintermediating Banks | Nikhil Aggarwal @ Grip Invest

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

Read the text version here:-

[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, 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

Building The Ecosystem For EV Success | Shreyas Shibulal @ Micelio

Once every 2-3 decades, we experience an era of technological change that completely transforms how we live. In the 90s it was the connected computing devices, and right now we are going through another such transformation in the space of mobility. Micelio was conceived as the first-of-its-kind catalyst in the electric mobility value curve. Its mission is to power innovation and drive long-term, sustainable change in the clean mobility space.

What you must not miss:-

  • How does Micelio make it happen?
  • Funding journey
  • Passion for clean mobility.

Building The People Mobility Stack | Nikhil Aggarwal @ Chalo

Chalo is on the road to becoming one of the first unicorns in the public transportation space. The startup makes lives easier for millions who use buses for intercity commuting. Nikhil eventually exited Chalo and founded Grip Invest. This is part one of a two-part conversation where he talks about building Chalo.

Know about:-

  • Starting off as a multimodal journey planner for public transportation
  • Moving from real-time discovery to commerce
  • Finding the right incentive structure
  • Introducing smart ticketing devices for conductors

Read the text version here:

Nikhil_Chalo_final cut

[00:00:00] Nikhil: Hi Akshay good to be on this podcast with you. My name is Nikhil Agarwal. I’m currently the founder and CEO of Grip Invest.

[00:00:18] Nandini: The most sustainable way for a country to develop its transportation infrastructure is by encouraging more use of public transport. Car ownership comes with a whole host of issues like traffic jams, pollution, etc, and some of the best places to live in the world actually have more usage of public transport than private vehicles.

[00:00:37] Nandini: And in India, just like every other country, the solution to this problem has been found by startups. In this episode of the Founder Thesis Podcast, your host Akshay Datt is talking with Nikhil Agarwal, who was one of the founders of Chalo. Chalo is on track to become one of the first unicorns in the space of public transportation, and it helps make life easier for millions of people who use buses for intercity commuting.

[00:01:01] Nandini: This is part one of a two-part conversation, and in this conversation, Nikhil talks about his journey of setting up Chalo. Nikhil eventually exited Chalo and founded Grip Invest, which is covered in the next part. 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.

[00:01:30] Nikhil: I went to Delhi University, studied economics honors. This was 2004. I finished my MBA in Delhi at Faculty of Management Studies. FMS. I was a batch of 2009.

[00:01:39] Akshay: Okay. FMS is like really hard to get into because they’re such a small intake, so that’s pretty amazing. How was that FMS experience like? 

[00:01:47] Nikhil: I would say it was very interesting. FMS, you’re right, has a very small batch and hence, unlike most MBA schools where you may not necessarily know who your classmates are, I think in FMS. Just because of the size of the batch, you have a much more deeper connect with your classmates. I joined HSBC as a management training. My first role was as a consumer mortgage banker, so home loans.

[00:02:08] Nikhil: This was immediately after the financial crisis 2009, and I think HSBC at that point of time had basically said no more home loan lending. So I was part of a team that actually was helping rebuild that mortgage book. So there were five people in this strategy team and started rebuilding it again. There were also things like how do you create the right perception within the larger bank that this is going well because you need to buy support for anything that new that you’re doing.

[00:02:31] Nikhil: And I did that for about seven months before getting an opportunity to move to an investment banking role with Morgan Stanley. And I think that had its own set of challenges and learnings, but that is how I started my career. 

[00:02:41] Akshay: Okay. Like essentially they gave you an open playing field to set up the home loan business for them.

[00:02:47] Akshay: One more time, which they had discontinued and , what about Morgan Stanley? What were you doing there?

[00:02:51] Nikhil: I was an investment banker looking at a bunch of sectors like Autotech real estate and doing both capital markets and M&A for people who not familiar with investment banking. We help companies either raise money or acquire other companies or sell themselves.

[00:03:04] Nikhil: As part of a transaction and the process of discovery of who the transacting party may be, and the process is what an investment banker does. So what made you move on? I call it the curse of middle management. That’s what I’ve started calling it. People are in the 30 to 40 age bracket and they’ve spent anywhere between six to ten years working in the role.

[00:03:24] Nikhil: They typically start seeing the next three or four years being similar to the last three years at that point of time, you are young, you don’t have that many responsibilities. Health is still good. You may have one kid and you’ve built a good savings base. And that’s when that khujalee starts happening to say, if I want to do something different, this is the thing.

[00:03:41] Nikhil: And I think I went to the same experience where, Entrepreneurship was something I was always excited me. I had started a venture in undergrad. I had started a venture in post-grad, and I just couldn’t find a better time to do this. At the same time, that experience at Morgan Stanley had given me a certain learning, but the next three years were gonna be not the same.

[00:03:58] Nikhil: And that’s when that switch sort of came about. 

[00:04:01] Akshay: So like what exactly did you do then? Tell me that journey. 

[00:04:04] Nikhil: I would say in my fifth or sixth year of Morgan Stanley, we were advising a client company called CarWale, which is one of India’s largest classified companies for cars. Second and used cars.

[00:04:15] Nikhil: And we were advising them on fundraiser, an M&A transaction. Which in that process, I ended up spending a lot of time with the founder, on slides, on meetings, etc, and we started talking about what he’s gonna do post CarWale, and he had incubated a business which is called Chalo, C-H-A-L-O, which is a mobility business, which is almost a unicorn now, I believe.

[00:04:35] Nikhil: I hope that the current fundraiser gets them to that point, but, It’s obviously doing very exciting stuff in a lot of cities, and so I happened to get really excited by it and he offered me a role to join that business as a co-founder. It was a year old when we started speaking, so I moved from Morgan Stanley to join this company as a Chief Operating Officer, and then was part of the organization for four years, helping just build the business.

[00:04:57] Akshay: Tell me about this founder of CarWale who incubated Chalo and what was his thesis behind starting Chalo? 

[00:05:04] Nikhil: In my entire life, the founders that I have found most fascinating are people who basically have two things. One, they have an insight about an industry or consumer behavior that no one else has, and number two, they’re able to act on that insight.

[00:05:19] Nikhil: A lot of us, when you think about even simple things like flipkart or zomato, those are also our problem statements as consumers. But for whatever reason, we did not have the insight that this could be a business opportunity. And even if we did, we did not act on it. This is what differentiates founders. Mohit Dubey, who was the gentleman I’m talking about.

[00:05:37] Nikhil: He had, when he was building CarWale, he had the insight that cars can only be owned by so many people and the more dominant form of transportation is always going to be public transportation. So if you are truly going to impact the lives of hundreds of millions of people in this country, it is not by selling cards, but it is by providing a better public transport or mobility solution, which is the premise of Chalo.

[00:05:57] Nikhil: So his insight came from his own business, and obviously as a one time founder, he was. Also always had the knack of being able to act on it, which is what he did to set up Chalo. 

[00:06:07] Akshay: So this is a pretty broad problem statement to improve public transport. What exactly was Chalo’s focus area? What were they working on?

[00:06:14] Nikhil: We started off actually as a multi-modal journey planner for public transportation. 

[00:06:18] Akshay: Just break this term down, multi-modal journey plan. What is, 

[00:06:21] Nikhil: if you think about your journey using public transport, not a private car or a private bike, you will typically take auto rickshaw from your house to the railway station, then you will take a train and then you will use another form, either a bus or another auto rickshaw for the last mile, right?

[00:06:37] Nikhil: So the first mile and the last mile in the trunk are going to be three different modes of transportation, very typical. It could also include walking. This is multimodal, right? So different modes of transportation to complete the same trip. Chalo basically built an algorithm to allow people to plan multi-modal journey.

[00:06:51] Nikhil: Using different forms of public transportation in a most time effective or cost effective. And what we realized is that the biggest part of the journey is going to be buses, especially in a country like India. In fact, even in London today, which is one of the most developed public transport networks, trips on buses, far outsize the number of trip on metros. So buses by themselves are very dominant and will be a major form of transportation. The experience on these buses is very poor in India. 

[00:07:15] Akshay: So you’re talking about like local transport or like within cities? 

[00:07:19] Nikhil: Local transport. So if you’re listening in from Bangalore, it’s BMTC. If it’s Delhi, it’s DTC, in Bombay, it’s BEST, absolute local transport.

[00:07:26] Nikhil: And if we have to focus all of our limited energy and time, it should be on solving buses and making that experience better. It’ll have the most significant impact to travel. So Chalo’s proposition within public transport came down to how do we make a bus journey an intra city bus journey better? 

[00:07:41] Akshay: And and how did they fix that?

[00:07:42] Akshay: The most 

[00:07:43] Nikhil: important problem within that, I’m saying this point again and again because ultimately you can only start to solve one problem at a time. Yeah, you can solve more problems over a period of time but, at the beginning of a startup, you solve one problem and you want to make sure you go after the largest problem to solve first. 

[00:07:58] Akshay: You need a wedge to establish yourself. 

[00:08:00] Nikhil: Absolutely. You need a hook, right? To go after it. So the biggest problem within buses was meri bus kab aayegi. That was the question. Okay, when will my bus arrive? If you think about the ola and uber experience of the world, you know exactly when your cabs going to come.

[00:08:13] Nikhil: Why couldn’t you know when your bus is going to come? And that’s how we started Chalo’s journey in public transport. By trying to solve that question. The way we did it is to install GPS devices and buses and then provide a mobile solution, mobile app to users where they could search for buses and know when it’ll arrive at a bus stop. At a particular bus stop. 

[00:08:31] Akshay: Did this include commerce, like ticketing you can buy your ticket, pay for it, and all that? Or was it just tracking? 

[00:08:38] Nikhil: So again, down to focus, right? So the first problem to solve was, Arrival timing. The second problem that we then start to solve was commerce, because if ticketing when you’re on a bus is not that big a challenge, there is a conductor who will provide you a ticket and hence you can purchase it.

[00:08:52] Nikhil: It is a problem still, and we realized it. We realized the magnitude and the, I would say the dimension of the problem over a period of time. When we got into commerce, we realized that because tickets are entirely paper based, cash base. There are two things that happen. Number one, there’s a lot of pilferage in the system.

[00:09:07] Nikhil: Cash get leaked out. And number two, what in traditional economics is called menu cost. You can’t keep changing the menu. It’s a cost to change the menu. If you have fair changes, if you want to add a new dish, it changes, right? 

[00:09:18] Akshay: Because those are printed receipts of tickets, so you have to print those stubs once again.

[00:09:23] Nikhil: If we could make that experience digital, where you could use a smart card or mobile, we would suddenly be able to address both these problems. So it was not a convenience problem, it was, there was a economic problem associated with offering better services through more variations of tickets. And second is better connection of tickets.

[00:09:40] Nikhil: So Chalo built a mobile app and a smart card. For example, in Hong Kong there’s an octopus card, and in London they have an oyster card. Similarly, in India, we launched the Chalo card, which is a smart card solution for people to use for ticketing.. And on top of it, we could actually start building different ticketing products.

[00:09:56] Nikhil: We launched a weekend pass, a weekday pass, three times a week pass, return journey pass. So we solved the menu problem and we solved the cash collection problem. So that is how Chalo then moved from purely journey discovery, to realtime information, to commerce. And I think the last leg of the journey today at least, is using all of that data to actually help plan bus operations better. If you know where users are searching from what they’re searching for and you know where buses are and where they’re going, you can start suggesting what may be a better way to design public transport systems? Should the bus leave at 9 or 9:05? Should it travel on A to B route or A to B to C route?

[00:10:33] Nikhil: And that starts then impacting occupancy better right experience. So that’s the journey that we saw at Chalo. 

[00:10:38] Akshay: Yeah. So I live in Japan and we have this Suica pass here, which is the same thing. You can use it across. Bus, Metro, Rail, Shinkansen and everything. Tell me the journey of like actually building it. So first that multimodal journey planner would’ve needed a lot of data, right?

[00:10:55] Akshay: and Google Maps probably took a decade to build a multi-modal journey planner. How did Chalo build it? 

[00:11:01] Nikhil: I would say that, that was actually, when I look back, the easier part of the business to build, because we were inherently using Google Map locations to then put together the map or the trip for the person and then using data from public records of a transport agency or a train schedule to create it. Okay. 

[00:11:20] Akshay: Like DTC would have a published schedule. 

[00:11:23] Nikhil: Correct. However, we realize that and why the trip planner was not a successful product is that information was not real, it was not real time. And hence the accuracy of what we were telling people was fairly poor.

[00:11:34] Nikhil: We were not fulfilling the promise of our product and hence the learning to move to real time information as against to move to schedule information, with all its credits to Google Maps. But if you use Google Maps today for public transportation, there will be bus stops that don’t exist anymore because ultimately no one is collecting the data by going and physically verifying.

[00:11:50] Nikhil: It’s all based on the algorithm and hence while we were able to create it as a pure tech solution. It never served its true purpose and hence the need to move to real time.

[00:11:58] Akshay: Because I think these public transport agencies anyway, don’t publish stop-by-stop timing. They just publish the start time, like the bus starts at this time.

[00:12:07] Akshay: Then rest depends on traffic. 

[00:12:09] Nikhil: That’s correct. They publish a start time and of frequency they don’t file. 

[00:12:12] Akshay: Okay. Okay. The GPS tracker part of it, how did you, I’m guessing the challenge there would’ve been who will pay for it? I’m assuming that it was a service that you were selling to the transport agencies.

[00:12:24] Akshay: Like how did you actually. Get that off the ground. 

[00:12:26] Nikhil: Sure. There are actually some very interesting problems, which we never anticipated there. The first one was convincing government bus operators to actually put the GPS in the bus, forget the cost of it, but actually how do you convince them to do this?

[00:12:39] Nikhil: Because governments run on tenders and you know, there was a protocol towards doing things. The way we did it as a pilot was we went to bus conductors and we installed a tracking app on their phone and paid them money to activate the tracking app when they were on the bus. So we found sort of a private market solution to a public market problem, and when the data started working, we were able to convince governments to say, okay, fine.

[00:13:00] Nikhil: Here’s data for why you should allow us to put a GPS. 

[00:13:02] Akshay: What data were you able to show them? Riidership increased or what? 

[00:13:05] Nikhil: Ridership increase was difficult to measure, but we had number of, 

[00:13:08] Akshay: yeah, you didn’t have the pre, 

[00:13:09] Nikhil: we had number of people using the app and saying over here’s data to say that this is how your network is moving.

[00:13:14] Nikhil: You can even see problems like three buses back to back, and here’s the number of people who are now logging in to see this data. So clearly we are solving a pain point and then we got permission to put GPS, I think getting someone to pay for it was almost impossible because you also needed to go through a tender system, etc, to do it.

[00:13:30] Nikhil: So we actually gave it for free. We used to install GPS for free in buses because the data was just so valuable that it didn’t make a difference, and GPS is a commodity in that sense, so it’s not a very expensive proposition. Then the other problem we used to have was that conductors started using the data to decide how to run buses, because if your bus is too close to the next bus, then you’re going to lose passengers, and if the next bus is right behind you, then they would just wait at bus stops and board more passengers, right? And increase collections. So the data side getting used for those purposes. So that became a, that became a different problem to solve. But yeah, these were some of the things that we had as an experience in doing it. How did you solve this problem?

[00:14:09] Nikhil: It was actually come down to incentive structures. Okay. So if you incentivize a conductor to run as per schedule and say there’s gonna be an incentive for you to meet the schedule. Rather than worry about collection, it then starts making sense. So one of my favorite learnings from MBAs school is about incentive structures.

[00:14:24] Nikhil: We all work on incentives, different kind of incentives, not necessarily money. And creating a successful business is about finding the right incentive structure for everyone in that ecosystem. I think, and that’s what we were maybe able to do, at least partially at Chalo in this problem. You were able to convince the authorities that your conductor’s performance parameters or KPIs should be timeliness and you can track timeliness through Chalo’s product, which made it easy for them to really do performance evaluation of every bus.

[00:14:51] Nikhil: And at the same time, we were able to give this data. To the transport agency for them also to track their buses. They had no idea where their buses were during the day. They were relying on the, just the kilometer count in the bus, but they had no other idea. And when we started providing them that information, we started solving their problem, which then started giving us more permission to do more GPSs and more experiments with how the buses worked.

[00:15:12] Akshay: Okay, so this GPS was essentially like a top of the final cost. It was your cost to acquire users. If you are able to give users that arrival information, then they will download the app. So it is just a cost of downloads basically. 

[00:15:26] Nikhil: Absolutely. I think Chalo never spent anything on marketing. 

[00:15:29] Akshay: You would not need to, if you have something this powerful, then the word of power.

[00:15:32] Nikhil: Yeah. Lots of very interesting things we did on the marketing side, which I give credit to. We have a co-founder called Dhruv Chopra, and we used to put stickers inside buses. Okay. About the Chalo app. Because all of your customers are in the bus, so why go outside the bus? We started realizing that there are places in cities where there is no bus stop.

[00:15:47] Nikhil: We basically incurred the cost of creating a bus stop there, but then branding in Chalo. We started building city maps and branding them Chalo. So we realized that given the, it’s an infrastructure, we are building an infrastructure, we can think of marketing very differently and create awareness about the graph.

[00:16:01] Akshay: And how did the commerce kickstart, like the ticketing, was it about replacing paper tickets altogether, or did authorities say, okay, people can either buy a ticket or they can show the conductor the ticket on their phone, or like what were the modalities of getting it off the ground? 

[00:16:15] Nikhil: You can’t eliminate paper tickets because ultimately that, you have to make the assumption that everyone is happy to do this and in a society like India, that’s not possible. So it was an additional mode of payment that was available to people, and that’s something that we started providing. 

[00:16:27] Akshay: But so as in once you board the bus, you go in front of the conductor and you tap something on your app and the conductor gets a notification that you’ve paid.

[00:16:36] Akshay: Is that something like that? 

[00:16:37] Nikhil: So basically, very much like how all of us use our Paytm today. Okay. Where on the merchant’s post machine, there’s a QR code and you scan the QR code. Same way, we used to generate a QR code on the customer’s mobile and the conductor’s ticketing machine could scan that and validate that the payments that happened on the card very simply, the way we do a tap today, if your spend is less than 5,000, rupees RD allows you to tap your credit card on a post machine. Same way, we built a card solution, which you could just tap on the conductor’s ticketing machine to pay for the payments. 

[00:17:07] Nikhil: One of the things I’m proud of is that we were the first to introduce very high tech ticketing devices for conductors. Today if you go to a merchant shop in India, the machine that a merchant uses for payments, car payments is the same device that is inside the bus in the conductor’s hands. So same pos machine, same handheld pos machine is what the conductor uses. This is effectively an Android device and hence you can program the share out of it.

[00:17:31] Nikhil: You have an camera to scan QR cords, you have an NFT, you have a swipe. Even RuPay cards or a Visa MasterCard can be accepted by the system. So it’s wifi connected Bluetooth enabled. It’s as high-tech as it gets, and that’s the machine that Chalo for the first time introduced in India for buses and then built the solution on top of it.

[00:17:49] Akshay: So your parts to roll out ticketing would’ve been to first get the authority to equip conductors with this ticketing machine, right? Without that, none of the next steps would’ve been possible. 

[00:18:01] Nikhil: That’s true. 

[00:18:01] Akshay: Okay. And the relationships with the transport agencies was already built because you were giving them at no cost data about location and like the telemetrics of the vehicle was going to them at no cost.

[00:18:13] Akshay: So that built the relationship, which could be then leveraged to get them to adopt ticketing device. 

[00:18:18] Nikhil: Yeah, it all started from there. That simple GPS device. 

[00:18:21] Akshay: Amazing. Okay. And this was again like a paid solution or what was the like monetization for this? The ticketing. 

[00:18:28] Nikhil: So the machine all was free of cost. Okay. We always give it free of cost because it’s so much easier and it’s, it is like building a road. You can put that toll later, but you build the road for free and you can find other ways to monetize it. So the machine was given for free and we used to basically, we initially used to charge on people who bought mobile tickets or smart cards, and we used to not charge anyone who used the paper ticket continue using the paper ticket.

[00:18:55] Nikhil: So only people who transitioned were what we used to monetize on. Chalo has now moved to a different model where we started seeing that as a combination of the data and the ticketing. There was an increase in ridership, also a reduction in pilferg. And what we started seeing. Or started seeing an opportunity for us to take a revenue share off the total earnings of the bus because we were playing a role in increasing those, and hence, the model is now about revenue share rather than simply about providing this as a service.

[00:19:22] Akshay: Got it. Got it. So it’s now Chalo is a tech partner for transport agencies, basically. 

[00:19:28] Nikhil: It’s everything from a tech partner to getting involved in bus operations. So everything, I like to think of it as the largest private bus service in the country, which is using technology, but without owning any buses.

[00:19:38] Akshay: Amazing. Okay. Okay. And the smart card, when was that launched? Like at the same time, only when you launched the ticketing device for conductors, or what was the evolution? 

[00:19:48] Nikhil: The ticketing machine came first. We launched a ticketing machine for a very different purpose. The funny thing is that, there are two things about a bus.

[00:19:54] Nikhil: There’s a bus number, and there’s a route on which the bus operates. Like you said, green line. But green line doesn’t mean that the same bus comes on the green line. It could be any bus, which means even if we have a GPS on board, we have no way of telling whether it’s going to operate on the green line or some other route.

[00:20:08] Nikhil: Alright. But the ticketing system knows. Because that’s the only way to issue tickets. So the reason we put the ticketing machine in the bus, was to find out the route number. And that married with the GPS data, gave us the ability to predict ETA. Once we started putting the machine and seeing the data, we realized that, okay, there’s another opportunity here to bid commerce on, and that’s when we introduced the smart card and mobile ticketing.

[00:20:30] Nikhil: So that’s the full evolution of the tech. 

[00:20:32] Akshay: Amazing. 

[00:20:33] Akshay: The foresight to have this process, this way of thinking that let me get the data first and I will monetize later. That is simply visionary, I would say, to have that kind of foresight. Amazing. Okay. So essentially I would say like Chalo is like a data company then at its core, like everything that built Chalo to where it is today was in pursuit of better quality data.

[00:20:56] Akshay: That’s how it got built to where it is today. And what kind of, so once the monetization started, then what kind of numbers did it do? Like what is the revenue numbers like? Are you at liberty to share some, something about the growth in numbers? 

[00:21:09] Nikhil: The last number that I saw in the public domain was about 180 million dollars of ticket sales in a year on various parts of Chalo system.

[00:21:15] Nikhil: So that was a total gross value of transaction that Chalo was enabling, and that’s something that Mohit has recently spoken about. So I’m just quoting him. 

[00:21:23] Nandini: We hope you enjoyed listening to part one of this two part episode. Just search for founder thesis on any audio streaming app for part two of this amazing conversation.

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