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The debt funding masterclass | GetVantage
Have you seen Shark Tank India? Startups pitch to sharks for funding. Here's a surprising statistic: every third deal offered is a debt deal!
Sharks lend money instead of investing in the startup. Some criticize this as "loan sharks," but debt can be a powerful way to grow your startup and build long-term wealth.
GetVantage is a startup dedicated to providing debt funding solutions to other startups. They are bridging a crucial gap in the market where traditional banks often fall short.
Bhavik talks about all things debt funding and how it can fuel a startup’s success!
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Bhavik: Hey everyone, this is Bhavik Vasa here, founder and CEO at GetVantage.
And also the ambition was that digital payments FinTech is what I need. Started meeting as many venture capitalists, as many angel investors. Started pitching my FinTech play that we wanted to build out in India. And do teen options started coming, started materializing. And actually in all of that is when this opportunity arised with Itz Cash, ITZ cash.
So Itz Cash was again the earliest FinTech and digital payments company in India. It had already stepped up, it had already set out taken a one round of investments, but as I met the main founder between Surya and some of the investors, the play was, look, it's something that is also my expertise. I would love to build it together.
So that's where I merged my business plans and my entire digital focus and onboard at Itz Cash as chief growth officer and took that business. Then from 2010, we were what 2- 3 million in revenue, is what the company used to clock to then scaling that business to 40, 45-million-dollar revenue in the next seven to eight year.
So then all the scale expansion made Itz Cash one of the largest payments and digital payments, FinTech in the country, 5 billion dollars in kind of annual volume that we used to start, started blocking. And yeah, scaled that business and learned another thing that, yaar India mai na, you can't build a business on a startup in two three years like you can with the Valley.
India is beast by itself. It takes a decade to build anything in India.
Akshay: So, if I remember correctly Itz Cash was a way to for people who don't have a digital payment instrument, like say a credit card, Itz Cash was like a prepaid instrument. You could put money in your Itz Cash wallet and then use it for online payment.
Bhavik: Absolutely. It was, Itz Cash was the India answer of PayPal to put in the most simplest way. Right. Where you could go to your neighborhood kirana store, give physical cash, but your digital wallet gets loaded. Right. But then it'll also give you assistant commerce service. So if you wanna book your train ticket, your travel tickets, right.
All of those can be also, done on your, yeah money transfer.
Akshay: Okay. With the, like the Kiran owner or the franchisee of its cash can provide all these online transactions.
Bhavik: Yeah. And then we were also I was more instrumental. In fact, we were the first ones to launch what are now very easily seen as these prepaid cards.
So Visa, MasterCard, branded prepaid cards, right? Just like you have a credit and debit card, we have prepaid cards, and we could load money and use it anywhere that these days MasterCard is.
Akshay: And the revenue model would've been a share of the MDR, the merchant discount rate. You were not charging the users anything like they could just, take cash.
Bhavik: It's a traditional FinTech payments comply where every commerce transaction, the merchant gives us a margin to collect the money digitally. That's interchange bolo MDR bolo. Those are the revenue streams. So we been quiet, like I said, quite a solid payments business.
Money transfer was another big use case, you know transferring money in India abroad as well. And after having scaled that business, we were ready for its next journey where in sometime around you know, 2016 happened. So you have to know this, right? This is a superb anecdote for everyone.
You'll also definitely throw in a smile. So do hazaar sola mai jab Modi ji when up and said demonotization,right? That event, while I know it did many things to many people across India, right? What it did to me personally is finally, Akshay in 2016, after demonetization digital payments, FinTech became something that everybody understood, leave aside all professional aspects.
Finally, my friends and family knew what I was doing the last 10 years.
Us ky phly toh Acha ladka US sy aya hai vapas kya karta hai, payments mai startup kar raha hai kuch payments mai hai, paymnet gateway chala raha hoga, Right. So you know like those family or friends, you know, would not really understand. And don't blame them. But it's, so what I tell is it's just finally when Modi ji said digital cash is so important, and is that people understood the domain and the sector I work in. So then as Itz Cash, we took that opportunity that FinTech was now up in centre.
We had established our sensors quite a large layer. So this was a time to accelerate. So we went, we hit the market to either raise our next round capital or we also evaluated and said, should we be the first payments in FinTech company in India to, explore an IP so with these two parts, it was either a series D round, a very large sizeable round where we knew that if we can capitalize on this momentum, the Indian market is, we take this capital to strategically acquire, consolidate the market, acquire a lot of other businesses, and really accelerate ourselves inorganically.
And another way to do the same, to play out the same strategy was, so while we were exploring these two, I think Naveen who was my senior founder and me were pretty instrumentaling and executing on this strategy. And swing at around mid-2017, we got a NASDAQ group called Ebix that was willing not only lead the round, but infuse a lot of capital into the Itz Cash business and then play out that.
That strategy we had of consolidating more players in the market, like go deeper into each vertical segment we were, and we could consolidate and aggressively, inorganically, right? So that's what ended up happening in 2017. That was a 150 million transaction where Itz Cash was merged into the NASDAQ group called Ebix that's where you see a lot of the New Avatar which I rolled out was then, you know, the merger of two players was called Ebix Cash.
That's what, see now Ebix Cash, one of, again, one of the, you know, very few early exits and M&A stories in the startup and the FinTech world in India, right? Like just after that Itz Cash transaction, there was PayU that acquired Citrus, which is another payment gateway. So it was just the first starting off.
One journey, one cycle, right? One decade, one over of the startup and the FinTech industry. I continued, with the business for a year, year and a half. Being one of the younger, senior team members. It was also good and create experience for me now to play out that strategy, right? So sitting in at and, being a part of not only running all these consolidated businesses, the Ebix Cash umbrella, but also driving some of the acquisitions, the M&A that was going in about 10, 12 acquisitions in that year, year and a half. So now,
Akshay: And what was the goal of these acquisitions? You wanted to do like a Paytm kind of a super app, like where you can book flights also and you can pay your bills also, and
Bhavik: Correct. So we were already in a lot of the services. The idea is to go deeper, right? So in booking flights, we as Itz Cash used to always book flights, but via.com, which was another, you know, the third largest travel booking, acquired via.com, right?
So now you know, you're basically buying into a lot of that volume and aggressively laying that out. We wanted to get into newer spaces of money transfer, both domestic and international. We were getting into money exchange, so Centrum ka money exchange business. So now whenever you travel into India or out, you'll see at all the airports keep cash money exchange.
Right? It is flow. That was the game plan.
Akshay: So, you know, while you were at Itz Cash, you must have seen companies like Paytm, Phonepay raising lots and lots of money and very like hyper scaling with all the cashbacks and discounts and all of that. Like, you guys didn't feel, that you would lose the race.
Bhavik: So every business or every technology has, and I've learned this the little patient way, right? What is known as incumbent today and a challenger today, the challenger becomes encumbered very soon, right? So through that journey, yes, did learn a lot of things about how it requires also patience and the right business fundamentals to grow.
one of the things and this is my global experience that always played out that payments is, payments of financial services has to be a very disciplined business. You can't buy your way by burning to scale. And, if you ask me this question three, four years ago, you would not write my answer, but now look back and the same names you mentioned.
If the business model is not solved, I can't throw money and acquire customers in, because your customer acquisition costs cannot be larger than what you'll ever make in the lifetime. Discipline in fundamentals in financial services are very important. It's not like e-commerce business. See, what happens is the way e-commerce, scale you can't spin every startup the same way the business model, the basic fundamentals have to be even when the Paytms or the Phonepays or some of the other players who were now the challengers.
See, we were the challengers to the banks initially. You had newer players with newer technology, and yes, I think the mobile really disseminated a lot of the various layers of friction areas that friction points that were Akshay to answer your question. Two things happen. A we never refocused from our core that build a strong sturdy business.
That could fund managers. And so Itz Cash at its exist. We were already profitable in a world or in a way of payments to being profitable as a business, you always get value. On the flip side, I actually was at the front end of all growth and marketing. See, the only difference was how much you spend on marketing, how much would you spend on customer acquisition?
Right. If you could burn a little more there, and at that time you'd remember there used to be these models, Times of India group used to run brand capital and all to woh bi do teen term sheets ly ky aya mai, you know I was very clear ki chalo vo kar ly ty hai let's take money like that, but could never take it to my board of directors, honestly, because giving away equity for a barter deal where there is just add space in return, not real money.
Right. So A, I saw that debt, those models had some flaw. Banks had a challenge of understanding our business to give us debt while we were high growth, high revenue generating businesses, but banks could never underwrite. So bank debt was always, bank would ask us for collateral. Yaar ek business chala rahy ho mery pass thodi koi factor ya zameen hai that I will give you collateral So, so it's literally those pains as an operator founder that I realized that as India is going to have more and more Itz cashes of the future, more and more digital first businessing that are asset light, all they need money is this booster capital, this growth capital from time to time, this short-term debt.
And if we can do that with a complete new flavor of tech and data and performance of that business. Right? So the birth of GetVantage really came from them serious phone personal founders. Operators challenge ki yaar Season time p thoda zyaada marketing p spend karna hai. We spent capital compete with the competitor, right? I needed to increase some customer acquisition.
Where do I get short term quick access to capital for that?
Akshay: Okay. So like when did you formally like start working on GetVantage you know, tell me that zero to one journey of GetVantage.
Bhavik: So before GetVantage was the exit of Itz Cash where after spending a year, year and a half I say this, that all founders are on, operators are on a treadmill.
Finally you know, I was happy. The group allowed me to step out on the 1st of August through all my professional duties. So 1st of August 2018 1st of August, I stepped out on 4th of August, I had my first born in my hand. It was well timed.
So, no, it was well timed. I knew that I wanted to be extremely hands-on with my first child. That was a perfect way to step out, take a sabbatical. So the next six, eight months to a year actually was only being a hands-on dad. You know, I say this, I've built startups you know, this is the most important creation I had to be hands-on, right?
So life gave me that opportunity. I think I look back and say timing wise, everything fit out where I was able to literally be hands on with my baby girl. She's now four years old. So everything I look at my life, pre her birth and then post hers, right? So the entire journey through a Bombay boy through Silicon Valley, back to India building Itz Cash was, and then.
Literally post Eva is this journey where after taking six, eight months with her is when we started and slowly end of 2019 is when we started putting together the first core team for GetVantage and started building on complete stealth mode, started building out the tech and the platform first, FinTech hai tech bana na hai first make sure we get the basic railroads of our tech and platform.
So 2019 end is when we started work on the tech.
Akshay: So like was there a like, did you have some comparable models that you had seen in US for example, of companies doing this that you thought, yes, we can, like that's the playbook that we can build in India? Like what was the playbook that you had in mind that you wanted to build
Bhavik: So very, when brainstorming had to happen, right?
What next to do, right. It was not that one fine day we woke up and sent GetVantage we go through the whole whiteboarding session. Put 10 different ideas, spaces that you go into. One thing was clear that I understand the FinTech domain and I'm an operator. It also came about some opportunities to try and become an investor, right?
VC funds, once a founder is taken an exit, you know, VC funds of the investor rule is also something that comes very tempting. But I think I had the operator in me. One thing was clear ki well, let's build something new and interesting for the next decade. And when we started putting out a lot of different opportunities and kind of vo jo hum karty hai na
in any entrance exam when it's multiple-choice question, right? You don't know the answer or you first you eliminate, the ones you are confident are not the answer, right? So it's a process. By elimination that you come and the platform idea, right? In one word, what is GetVantage? GetVantage is how can we use tech and data to do alternative forms of funding and finance?
That's the one-word mission, or one word thesis or foundation of GetVantage saying that businesses are gonna need all forms of capital as they group and can we have a very strong tech intervention and a platform, right? So the idea of course won. It won a lot more also from, like I mentioned, my personal journey, my co-founder who's another FinTech CTO veteran CTO called Amit you know, of course he was the first one who came alongside into this journey with me.
Once we zeroed in on saying, Let's make this play where businesses need money for growth, for marketing, for inventory, right? Today they have only access to venture capital, so they keep diluting themselves. But what they have is these are businesses that are also online and digital. So they know in real time, what is my sales over the last 10 months or daily basis?
What is my payment gateway revenue? That infrastructure is in place, right? And can we use this data to evaluate these business better? So once we got our thesis right, we did look at, plays around the world. Are there some global comparables, Clair is doing something similar? To our surprise there were few versions and Avatars of it.
In Europe, there used to be a player called store fund. I clearly remember they used to do Amazon Seller Finance, right? So they would fund all these sellers in UK and Europe. They were selling. I'm like, okay, that model is there for all e-commerce.
Akshay: That, that was more like, uh, bill discounting, right?
Bhavik: That's more like inventory financing or you are basically funding a marketplace seller. Then there were certain players around the world that were trying this little different version of venture debt, right? So instead of venture capital, there's also the version of venture debt. And venture debt was evolving in this early stage of digital businesses. In India also, there were two, three venture debt players or there are two three venture debt players venture debt funds.
But ye funds bi kya hai na Akshay these are not pure venture debt. They're still hybrid. So they will give business debt, but takes some warrants and convertibles alongside
Akshay: And a warrant is basically like a Right to convert to equities.
Bhavik: Exactly, exactly. So in future, right, so it's not very clean debt.
So I've been interested in returning the money and getting equity participation in the future, so it's not pure venture debt.
Akshay: Which means that the process of raising venture debt would be as strenuous as raising VC money because the venture debt fund would also do that same amount of due diligence, et cetera.
Bhavik: And funnily enough, venture debt in India was only playing out where jaha p VC ny 10 million ka check likha hai vaha p venture debt would jump in immediately we just following.
It was not based performance. If VC funded business as a venture debt I go and fund that business cause I know my money is at least secured because there is equity money,
Akshay: Typically VCs would actually prefer some venture debt to come in. So that value of their equity is stronger.
Bhavik: Correct. So you get, and every business, I believe all are all the big corporates in the world have taught us, right.
Whether they're listed company also right, is you need all forms of capital you need. To raise equity money, you go raise, public moneys. You need to raise money for long-term debt, short-term debt businesses need all forms of capital. The only thing is, as there are more new age businesses, new economy businesses evolving, unlike the traditional manufacturing and physical setup businesses, these new eight businesses are only venture capital or angel investments as one way of funding.
They also need all forms of capital. And these are the businesses that actually you and me are consuming. So while there were, certain models of venture debt, tech driven venture debt, revenue-based funding taking off in other parts of the world 2009, 10 when 2019, early 20, we still not many names sizable name players, but that's, we actually launched made our first announcement.
We came out of stealth mode. February of 2020, that's when the first time the media wrote about what Bhavik is doing next, and how we were looking at plays, positioning ourselves as new avenues for business today, capital of funding. But as soon as we came live in February, 2020, March 20 happened. We all know how the world went upside and down.
Akshay: What did you build? You must have built a tech stack, right? Because you said the way to give money to a new age digital business is to use digital data for underwriting. Like you have access to a lot of data about the payment gateway. Transactions and so on and so forth.
So what did you build as a way to do your underwriting? you must have built that by the time you lost, right?
Bhavik: Yeah, absolutely. So the first effort went in building this the tech stack and the platform, dekho kuch naya kar rahy ho toh you have to build the platform ground. There were a lot of shortcuts, ready platforms for lending that could be modified and built on top of, but that was not the IP or the direction.
So that's where the first two, three months post brainstorming, literally. And I give more credit to my co-founder, Amit for doing that, where he fought with me for two months saying, we are building this completely in-house and controlling the entire stack. I don't wanna use any third-party modules and build on top of it.
Because, what we are creating is as value is on data that flows through our system and don't want that thing to ever go to any other platform. Right. So yes, you are right. We built and, you know, our strongest trend is even before we touched any external capital, we bootstrapped, completely funded it ourselves and put together a platform that is a completely API driven platform.
So to your question Akshay what is this? Right? So APIs are nothing, but we had recreate pipes into all other digital platforms out there. So think of yourself. You are a small business, a small brand. Today you will use two or three payment gateways. In India you would use razorpay, cashfree pay you if you're aware of some of these names.
for digital payments, if you are a small store, you would launch on Shopify. So you'll use Shopify as your store launched. You might be selling on Amazon or Flipkart in the marketplace, you might be using a logistic. All of these are digital stacks. We did the plumbing of building pipes into all the payment gateways into Google and Facebook so that when a business comes and applies through just a few clicks, we are able to connect all these platforms.
So now I can see data from source. I'm not dependent on an Excel sheet or an MIS that the business submits to me once he applies with me through his payment gateways. I know his last 12 months what his daily revenues are. What his monthly revenues are? What is the seasonality of the business? Live data, unfiltered data from source is what the mode in this whole business is, right?
So these, building these basic pipes and this piping infrastructure, these complete API stacks, that's the value of the GetVantage platform. So we have a completely homegrown stack from a origination system, e management system, collections, great engine. This is the entire platform that we picked out. And even before we did a first deal, first transaction it was all done on the platform, right?
Because that was the ultimate you know, eccentricity or absurdity invented to go out with, right? Which was saying that, you know, we have the venture capital in the private equity world over the last 40 years around the world, investing in all companies and investing in tech, right? But the funds themselves have not won any tech.
It's still giving you Excel sheets. It's still a partner taking a call on your business based on gut, so on pitch meetings, IC meetings, right? There's too much room of IC involved. If the funding industry is funding businesses for tech and scale, the funding industry needs to attack, answer to it.
So, that's that ambitious. Outing. We started with saying we build that. So yes, that was built.
Akshay: So your product was basically where somebody could come in, fill out a KYC form to apply for a loan, and then, you would ask them to connect their payment gateway and, marketplaces and Shopify, et cetera, so that you can look at their revenue trends and bases those revenue trends.
Would you also ask them for bank statements and stuff like that?
Bhavik: We take everything. All the basic things for any venture debt or debt facility are a cost, right? So bank statements, IT returns. But now with the putties triangulation of this data live by the system, right? We may connect your IT returns and your GST as a business.
So now I know what you're filing as revenue. You,
Akshay: Is there a way to make you connect with GST portal?
Bhavik: Yes. Like absolutely. Absolutely. So you connect GST So you take bank statements and you connect your payment gateways, and you connect Google, Facebook, these four, five data coins. See what this is doing,
Akshay: Google, Facebook is to see where the money's been spent, right? Right.
Bhavik: I'm the only one, even today, if Facebook or Google knows how much money you spend with them on advertising, they know what deep throughs are, but they necessary don't know what revenue turnaround.
Akshay: You're able to not just, see revenue growth, but you're also able to see efficiency, like how efficiently that revenue is being grown
Bhavik: like the ROS is right. Now, so imagine right. Four years ago. FinTech lending has also seen an Avatar five, six years in India. But all these avenues were not available. See our ability to get data from payment gateway ability to pull GST, GST only happened two years ago in this country. Timing that we were on right. That has given us a huge inflection point.
And I believe an idea only as good as the timing in hits, right? So only in the month of 20, early 2020 GST was live. Could take GST data to cross verify it with their payment gateway data cross verify it with actual how much cash is coming, what is the cash flow of credits into the bank account and believe me, all businesses have this thing, all three are different.
The numbers don't ever match up. They didn't level what I file for GST is not actually what I get as revenue in my bank accounts or cash in my bank accounts my payment gateway will. So, but the idea is to know to have direct clear visibility so you can take an exposure basis. This live data and due diligence and the due diligence isn't stop on data.
We are able to look crime checks on these promoters and founders, we are able to do civil scores on these promoters. We are able to, we are able to pull if there is any company's history of pForce or legal laws, the lawsuits against them report we are adhering on. Even our partners of friends and venture capital funds are saying your due diligence is like a legal due diligence that was being done by the humans.
Right? Months and months here in 7 days my engineer is able to connect in data from live sources and pull all and give one report, which is untampered, unhuman biased and system driven.
Akshay: How do you do the credit scoring? Like, you know, you must have some way of scoring a business. What is the way that you think about that?
Like, I just, because I don't know how credit scoring happens, you know, so for an outsider, just help me understand, like, do you see that revenue should be greater than expenses, revenue should be growing a tax percentage? Like, what is the way business scoring happens?
Bhavik: Yeah, yeah. So very basic high-level structure I'll share with you, which is that every business or every financing player has a credit policy, right?
and what we call at GetVantage is that every business that applies with us, gets us up, gets the, gets a trust score. We call it a trust score because we don't think that any business needs to be rejected ever. It's just probably not the right time right now. Right. and the trust score defines how much exposure.
That can be taken in terms of quantum right now, what is this trust score? This trust score is a byproduct of qualitative and quantitative aspects. 70 to 75 percentage of it is all quantitative to by numbers in real data, we look only for 20%, 25%, which is qualitative data, which is also important to understand a business, right?
The quantitative is like your IP said, broken into four parts. What are the company's financials? What is its revenue patterns? We believe that businesses today are so dynamic gone are day when I can view a business’s last two years, balance sheet, or IT returns to judge the health of the business.
Every quarter is changing, right? So we look at those parameters like revenue trends, spending trends. What's the efficiency? So the engine is based,
Akshay: so just also tell me the correlations, like what revenue trend will correlate with higher trust score?
Bhavik: So fundamentally ripe a business will have total revenue coming from all this channels, but digital revenues, which means that anything that is coming through payment gateways and how much of their business is coming digitally through payment gateways is a higher trust score.
Right? Because, this is also the same way how a business is being verified today a brand then sells more from its website. IT margins are better. He's getting his money prepaid, so he gets his money the next day when he sells the through marketplace, he gets money after 60 days, 75 days, his inventory is stuck he has to give margin to the marketplace.
Right. So what we are trying to say is that as much data of revenue, as much trends in predictability, we are able to gauge through digital sources has a far higher weightage, right? On the traditions. Then of course we check on the next very important parameter of the financials, which is the operating margin positive, right?
So without going into too much jagron for the audience, it's really saying that we are not saying every business has to be profitable. Some businesses high growth, they're meant to continue to keep growing first instead of right worrying about profit. But as long as the unit economics of these businesses are in place, which means is there, are they operating margin positive for every.
You know, $3 of revenue is the spend, only $1. So is there a margin? What we don't want is the business at operating margin level or a gross margin level is burning more than its revenue. Thoroughly spending what its Revenue is right? That's a million.
Akshay: What is the difference between operating margin and inhibitor
Bhavik: After your expenses, right? Your right.
Akshay: Like say your tech team, if you have a tech team
Bhavik: Operating margin is basically contribution margin CM1 CM lot of you listeners the finance guys, the founders they will easily get it. That is what's your total sales, minus your direct expenses for those sales. So there is channel sales, all of that at least unit economic vise. So CM1 is basically your total sales minus your total expense direct expenses. CM2 is after that, you minus direct marketing also. So we properly believe that a business at least has to be CM1 positive unit economics positive. Then it should take growth cap because then every time you're putting in $1 more, there is at least $2 or $3 of revenue add but it be $1 and there is 50 or 0.5 of revenue coming, then it's only going to earn itself faster.
So in a nutshell, all those quantitative aspects right from its financials is margins, filings, timely filings and compliances, right? All of this comes in the quantitative part. 75% score. Like I mentioned, the remaining 25% is four.
Qualitative aspects of the business, which is what is the industry that they are operating in? How is the sector performing? We also check the promoters in the founder’s backgrounds and scores, right? Because it's also a great way to know if there are any wilful defaulters or history of batter or defaults at anywhere in the management team.
And all of this effort is actually just the first time around. So now this is where it gets interesting. Every business that applies and connects with us the first time, it takes that much more effort to connect all these accounts and, you know, the connecting of the platforms. I must mention that tech is so slow that it's as simple as if you were going and registering on Facebook as a new account, Facebook will tell you, right?
Use your Google or your Gmail account to login, we just give consent. That's the simple overall mechanism we use in our entire application process. When you are an applicant, apply, connect your payment gateways, connect your Google Facebook account. It's all just a quick, quick connect and passing. And the beauty is once you've done round one of funding with us and you've done this full effort, which is a seven 10-day effort, cause you get to know your business, there are some of those qualitative checks also.
But once all of this is done, now the first round of funding is what we call only handshake round. Because now I have everything connected with you and the same data points that I have evaluated during underwriting Akshay continue as the same data points through the tenure of the repayment.
Right? And is data driven. Is this live monitoring. I'm not also waiting for the business to give me data to three months, one year down the line as an MIS, this is how business perform. If there's something going off, I get to know immediately.
Akshay: So tell me then what happened when COVID hit, you know, you told me that you launched your tech stack in February and then like, you know, then came March 22, March, 2020.
Bhavik: So as soon as we came live again another silver bullet that we dodged you know, we're about to start to making our first funding and disbursements and Covid hit I think the first few months, like all of us, nobody knew ahead of what, where this is going, right? But what happened interestingly is very quickly as the world started opening up, the first thing that started opening up as e-commerce.
So come end of July, June, early July, it was only e-commerce businesses that came up. So here is, I call this the second infliction point of my life. No, actually the third one, if you've taken the choreography well, right, or the third infliction point. Because what's interesting is suddenly now every business is considered or has to be online and digital.
It's not a good to have anymore. It's a must have to, as consumers, we all started buying everything online, right? So our pieces that GetVantage will back as many and more digital business, not only product, even service, right? So whether you buy cosmetics, apparels, whether you are buying your essentials like milk or bread, or whether you are buying services like media or your subscription driven in business, right?
We said that all businesses are, small businesses in India are going to go that much more digital. And I think that Covid times only has accelerated that by, you know, 5x 6x the minimum. So we came out completely action back. So here is GetVantage setup built as a covid baby, a business that has come up in the Covid times.
And we also find ourselves in the midst of a space or an industry that has accelerated in this time, D2C direct to consumer e-commerce has accelerated, B2B SaaS has accelerated, right? more and more emerging brands of India are coming to the, for it we are buying more local products than international products.
So yeah, I mean, look, as a founder, I could not have been happier through all the hardships. Look, it's tough building a business by itself and building it in the covid times. It's even worse. But at least you know, we find ourselves at the right place at the right time. That the next decade, I truly believe.
No, I mean, gone are days we are not buying only Nike and Reebok Shield. We're buying local brands in shoes. We are buying local brands in our food. We are buying local brands in cosmetics. So I think this decade ahead is going to be about small. India has always been a small business economy, right?
And, this kind of circles my journey, right? I come from a family of small business. India has always been a small business economy. The only thing is that now this decade is going to be emerging small businesses of India that are going to be that much more digital and that much more brand, local brand by themselves.
This is going to fuel the consumption story of India. And hence this is going to be the highest growth centres any. Any centre that the fastest growing is going to need that much in all forms of capital. So that's where we find ourselves, you know, just well positioned.
Akshay: How did you disperse funds?
Where did you get the money from? Like were you taking, like did you have NBFC partnerships? Or were you co-lending or?
Bhavik: We have our NBFCs, we have Sister NBFCs. We work with the largest institutions. Akshay the aim is to make a platform play. So what Amazon did to e-commerce world and what Uber and Ola did to the mobility world.
Right. You are a platform bring one demand with far more convenient than a tech intervention play. When you bring demand, when the consumers in. On the other hand, you stitch up with various sources of supply. You don't own any of the sides of,
Akshay: got it. So, you are not lending from your own books. This is a marketplace. Basically yours is matching seekers of,
Bhavik: unlike traditional marketplaces In 19 used to do what? Take a files from three players sorry, take a files from a borrower and expose it to three banks at the backend and see bank accept this is slightly different.
So I call that as like the, version one here. This is Uber. Because what I'm doing is I have a complete filtration process. I decide whether we are funding this business, what price, what underwriting, what. The only thing is I have further stitched up. Tons of large institutions, wholesale lenders, NBFCs of debt funds they basically opened up a large pool of supply for me.
They don't want to pay individual debts, they're too small for them to do individual debt, but the lending or the funding is from their balance sheet. I am the one who is the fees for the brand borrower. It's complete experience, which is GetVantage. When you get a parcel on Amazon at home, right? For you everything was Amazon.
It's just that on the invoice you see a different seller name. See,
Akshay: so like a lender would typically not go on a case-to-case basis, but they would give you like a allocate a sum of money like say $1 million from a certain NBFC and that $1 million you will deploy at and you will take the call on which companies to deploy to what rate of interest and so on.
But, and the backend, but you would have some
Bhavik: criterias with the lenders. There are, some institutions like large ticket sizes, some like smaller. So we have figured of this. The, it's exactly when you want to book taxi, right? You say from E to B. The Uber has pre-qualified the drivers in the area.
Which one bids does he, do you want the small car, the medium car or the big car? But then he lets, after all of that early filtration also he shows the, you as a customer, our trip and drivers. Whichever picture.
Akshay: Yeah. Yeah. Okay. Same thing here. So what is your monetization in this? Like, uh, let's say somebody gets a loan at say 18% or 20%, something like that.
I'm guessing the range would be 18 to 24, right?
Bhavik: Same as Uber and Ola, right? Or Uber. Sorry. Amazon and Uber. See, your biggest takeaway is what we are building is. Nothing but for the first time a financing platform. Truly the way e-commerce or e-mobility is happening, this is finance that's happening.
Amazon and Uber take a 20% take rate or whatever the revenue that comes through their system. So like I said, different funding, different commercials, et cetera, doesn't matter. Whoever is my lending partner doesn't matter. I, my monetization is just the way Amazon or Uber make a platform fee. 20 to 30%. I make that 20 to 30% of all the revenue that I'm able to generate through my platform.
3 million use cost charging as a flat fee. Whether I have charges as a interest, whatever, doesn't matter. That's all different. Structuring the revenues we make from the capital deploying. 30%, 20 to 30% is mine. The remaining goes as cost of capital.
Akshay: Okay, got it. Got it. So, therefore this is not really a very a capital-intensive business.
You don't need to raise a lot of money because money is part of your marketplace. Money is the
Bhavik: correct, so this is, so I will, add to your statement this is a business or the way we want to look at finances operationally and this what tech should do and the way we built a platform should do that as we scale, the operating expense does not scale.
Two, can we build in operating expense efficiencies? We're not building a traditional lending business where branches and those bsc's running around trying to take ideas can build it up a more opex light way. Second is, yes. So we don't need a lot of equity money or equity capital cause we are not deploying from our balance sheet.
But we are in the we are in the business already. So Akshay what we need is we need tons of right powder I call the raw material of my business is actually cap. So I don't need raise it on my balance sheet, but I need keep raising a lot of deadlines and debt pools and debt vehicles so that we can deploy from them.
We clearly believe this is an opportunity to deploy half a billion dollars in the next few years into the Indian ecosystem, right? The requirement for just debt alone in young businesses or early SMEs in India is north of 10 billion, is a private sector play, right? I'm saying even if I'm able to crack 3% or 5% of it, I'm a half a billion dollar.
I need to raise access to half a million. That's my raw material.
And hence the extensive amount of backing that we have from not only equity investors but large as I mentioned. Yeah. Japan. Sony you know, these are Japanese guys and are,
Akshay: so, like Sony is a equity investor or they have given you deadline
Bhavik: Equity investor bring in debt as well. Right. Because all these corporate funds or corporate groups name the financial institution in Japan needs to park in debt for some better returns.
This is the vehicle and it’s the structure. Some of them are equity investors, but they've taken the equity bite because they know that there is a play of how much we can deploy as debt in these cases. Right.
Akshay: Tell me something you've raised more than 40 million dollars so far, right? You've raised like I believe in 2020 October, you raised 5 million dollars which was like your seed round.
And then just this year only you raised another 36 million dollars. Why did you, I mean, why did you want to dilute and raise so much money? Because your the money you need to lend out?
Bhavik: No, say if you read right. We do what we tell people and founders to do. I tell every founder out there, raise all forms of capital right in your journey and raise hybrid forms of capital.
So all the capital we've raised today is also hybrid. It's a mix between equity and debt. Of course, we've taken some debt in our books so we can pilot some programs, et cetera. But this is a mix of debt and equity. You are, thank you. You're very right. If you like what we've said in our business, I absolutely don't tend to dilute more.
And also, I'll tell you the second reason, Akshay is we are in business of financings. I need to be well established. So when I'm well capitalized, also from perception when I open up lot of large banks, financial institutions, they need to see how well capitalized GetVantage is, right? The sub amount on that are expenses.
If you ask me a lot of capital in going into building the right tech, besides, besides tech investments or platform investments and employee costs, we don't have any other costs. So we are not burning money, but we will keep raising money because any institution that's in the game of financing, right? The more well capitalized I am, the more access I'm able to get partners and I'm able to also then cost of capital.
Akshay: Okay. So tell me about collections. Who's responsible for collections?
Bhavik: Oh, we are, like I said, when you don't like something on Amazon or Uber, you complain to Amazon and Uber. So the same way, the entire user journey is also GetVantages Yes, we are absolutely responsible for ensuring collections also be done.
That's why with all our lending partners, we are technology service provider, which is doing not only the sourcing underwriting, but even collection. And that collections Akshay is, thank you for asking the question, because that's bloody holy grail of any financing business.
Akshay: Yeah. Yeah. It is easier to give money than to take it back
Bhavik: No, it's actually difficult to get the capital back. And I believe is our strongest differentiation, which is using the same technology we spoke about for underwriting, for data analyst. Right? We use the same API based tech stack for high frequency and automated collection. So we plug premium gateways, we plug into the payment gateway.
This is why it's called revenue-based financing, right? As your revenue sum, you pay me a percentage of your revenues as repayment, and your revenue comes from what Payment gateways daily, right? Or it might come from a marketplace or if you are in SaaS business it comes from one to contract clients, enterprise clients, even before the money hits your bank account.
Can I take a split? 5% is my revenue share. I take five from the payment gateway 95 will come to you as a merchant. Five comes to me as a retainer, right? I have an escrow mechanism, a virtual escrow account. So when you're getting moneys from your marketplace, it's all in you as a merchant's name. It's just that these escrow and these split payment mechanisms allow us to take our revenue share.
5%. It's like just like in India when you were here, right? There used to be a concept of TDS. We've used the same play called collections, deducted at source. So if you're getting high frequency. High frequency and automated. I'm not waiting once a month for the borrower to do a transfer.
Then you're chasing the borrower.
Akshay: Yeah, yeah, yeah. That is expensive to do. No. Then you need a connections team. You need a call centre to call and remind people and follow up and all that.
Bhavik: So towards the end of the whole conversation is actually what the biggest secrets also to GetVantage model. And the platform we built is automated in high frequency collections that businesses are digital, their revenues are digital.
I underwrite them digitally, and hence I collect also digital.
Akshay: So essentially, I understand payment gateway, how that would be done for the other kind of revenues. Then you create a, like a virtual account and that account is what the seller is giving to his customers. So when customers pay the seller from that virtual account, 5% going to you and 95 to the,
Bhavik: it's a current account is you sitting in front it a current account with GetVantage and the lender to have rights to take X amount out of it
Akshay: Is this from Cash tree this virtual escrow
Bhavik: all built in house. We, you know, we have this in-house joke that the amount of modules we, there are, we've built four startups, if not more within our own thing because platform, the API, the tech we've built that collection as escrow that we've built is actually four startups. We could spin them all off as different product and propositions, but no, the intent rider is, look.
GetVantage. And now that you've understood the payment gateway play, you've understood what we are doing. The signing off aspiration is GetVantage wants to not only be India's, but the world capital gate. We know what a payment gateway does, connect a merchant with the consumer to make payment happen. Here
what I'm connecting this institution with a brand to get it forms of capital, right? Today we do one form of debt capital. There are so many different structures of debt financing. There are so many different structures of quasi equity or hybrid capital where equity and debt can be. The play is in this all be run through a platform and a capital gateway.
So supplier on the one side and on the other side.
Akshay: Amazing. So, what is the repayment agreement with the borrow? That he will continue to pay 5% until the principal plus interest is paid off.
Bhavik: Yeah. It's as simple as that. Where the principal is quantum that they get as a capital advance, one, and now the business we pay is the percentage of
Akshay: Okay. So with like a flat amount, fixed amount for interest, it's not calculated on the amount of time it takes them to repay. So therefore it is very important for you to get that calculation right off your estimation, your prediction. You need to make a prediction that this guy will like this percentage will pay me back in six months.
Because if that's six months become eight months, then you, like earn less money on that.
Bhavik: Absolutely. And that's again, the credit decision engine that I was weekly highlighting. But the beauty is that's where this is also a portfolio effect. So the reason we wanted to make sure that you have to be able to bring something that is new something that is simple, right?
People ask me, what are you all doing? Are you all disrupting something in the space? I said, well, we actually are simplifying venture finance because as a brand put myself as a founder. All of this came from my own questions as a founder promoter. Today, when I can borrow a hundred rupees and I know 5% is my flat fee, I know my cost on that hundred rupees is 5 rupees.
My debt is. Now I can pay hundred five back and I'm happy to pay back as my cash flow comes in right as my money is coming in. I'm okay if you're taking a small trickle effect, right? It is actually more challenging for founders and I have face this myself, where once a month you pay an EMI loan, and that's the time end of the month.
You have to arrange money for rent, for your EMI. Business doesn't work like that you don't have a waterfall or a windfall of money on 29th or 30th of every month small five, 5,000 rupees every day from my revenue start unit does. It doesn't pinch me anywhere, and I know what my cost of capital is. It's fixed, it's not.
So no fixed tenure, no fixed interest rate. Is what makes this truly a very, very simple and founder-friendly model.
Akshay: Yeah. Yeah. It is extremely founder-friendly. I agree with you that, and like you said, the portfolio effect, there would be some borrowers who would pay back before time because they are earning more than you anticipated and somehow would.
So, therefore, net you would still have.
Bhavik: It's also important to go under the sector, right? We're going after sectors that are high growth. So we are packing the mere thesis these are high growth companies that are gonna continue to be at a growth.
Akshay: Which sectors are you backing?
Bhavik: Growth can be different, right? Growth can be either 80%, hundred percent, or even 20, 30%. But the idea is that these are high growth business and we are fuelling this capital is going towards growth. I'm not giving you money for rent and payroll, right? I'm giving you more money for digital law. So we've been equal to back businesses across 18 sectors and categories.
Which includes eight to nine different D2C sectors, right? So home care, furnishings, apparel, personal care, right? These are all your,
Akshay: basically the consumption story. You're betting on the consumption story of it.
Bhavik: Absolutely. On the other side, we are back betting a lot of B2B SaaS businesses, subscription businesses today, milk, eggs, and bread also coming to everybody's house in India as a subscription for Right. We've been able to back businesses that are ed tech or e-learning platforms. Today, every examination, exam prep course in India is also being done digitally. Right. So no, I think you are absolutely right. We are going after sectors that are fuelling the end consumer consumption story that I've, my definition of direct to consumer.
I call every business direct. Because wherever today I'm engaging with you, my consumer directly, I'm engaging to you, I'm marketing to you, I'm reaching you directly, and I receiving revenues from it directly is direct to consumer whether it's a product.
Akshay: So, tell me something you said that 2020 was really the best time to start this business, you know, in terms of a timing, and that is born out by the fact that I think there you would have maybe 10 to 20 other competitors who are also doing revenue-based financing.
And I've interviewed four, five of them already. So what is it that is your secret sauce? You, are like, you know, there have been a lot of players who have come up in this space.
Bhavik: Well, I'd be very happy if they were 10 to 20. I think they are 10 to 20. But yes, there have been a few that have entered, which is also flattering Akshay because it's always good to be the first player.
And then if your models clicked, you see more, enter right. I think India is believe you me, I've been a FinTech founder in a long time. I think India is a large opportunity, yet none of us have been scratched the surface. And whenever you're doing something new, I actually find it a blessing in disguise that you have at least two, three others because then time and effort, you know, 2020, there was zero eight competitors because even one pool that you might have interviewed or not, they all actually started as a venture debt play for F&B and restaurants.
Then they pivoted and they saw what we were doing was better. The other was a corporate credit card mai 2020, in fact, while is the best time to start, the toughest thing was spreading awareness because you're doing tech driven, you're doing revenue based funding, just explaining to people something new you are doing.
Akshay: Yeah, the education of the market is being done by all players. So,
Bhavik: so now there is, awareness is being built, there's understanding of the space. And like I said, you know what what's the mode between a Flipkart, Amazon, Shop clues or Snap deal? Like what you need all four to kind of scale up.
But I'll tell you, our mode is one that I like to really say, and this is not, I never dock. We are better than a competitor or better than a founder for this and that, I think our strengths are on two things, very strong. A, I personally believe that businesses picked out of a problem, or
there's a genuine mission. I have pivoted or copied a model and entered to doing this with, as I share with you through my journey. My own struggles as a founder operator, I realized yaar ye zaroorat hai, right? So I think we say this at GetVantage, we don't have a mission. We have a passion. Our passion is to back a thousand, 10,000, a hundred thousand founders in small businesses that are out there help them capital support intelligence.
That passion gets driven by us personally. That's where very interestingly in comparison to all other players doing this and why my competition is not only RBF players I to say bank is my competitor. Today. I'm competing honestly because they want to do this sector also. They take three months. So the difference is we are founders operators building a founder funding model.
Unlike any of my partners or any other competitors or associate talkers out there, right? Amit, myself, my entire senior team. We are all ex-founders and operators. We don't come from a venture capital or investment banking background, right? So when a founder speaks to us, when a founder connects with us interconnect, we aren't just saying capital.
Isliye I don't call myself x, y, z capital. I'm saying GetVantage is giving the unfair advantage to every other founder out there, right? And I don't think anybody can take that away which is very qualitative in nature. And that quantitatively, I think our approach has always been, it's not about race to AUM, in this space
Akshay: AUM means assets under management, which means how much you disperse, how much you disperse,
Bhavik: Right. Akshay, like I mentioned you in the early days, it's not about how much money we disperse. Like you said, paisa batna is the easiest, right? What we are going after, the three things. A, we are the only ones who went live only once the platform and tech was ready. You put my, if you come to my office, my team sits in .
The, these team, the finance team, are all around it, right? Platform and tech has to drive this place. This is not one more, there'll be a larger venture that fund that will raise a lot more and deploy a lot more. In fact, a lot of them are investors. You know, us GetVantage. Because what we're doing is can we drive to build it efficiency?
So the team, 40, 45% of my team, even as we are growing every month, we actually, the base we are growing is we hiring one new team member every day. That's the pace at which we right now doubling every quarter in town, right? But even then, 40, 45% of my team will always tech and DevOps. Because we are FinTech guys approaching this from a FinTech lens, not from a fund manager or a investment banking lens.
So I think being founders and two being very tech and FinTech focused founders will continue to drive and be our trends that we will continue to play.
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