Bhat's Notes

Keerthi Kumar Jain, known as KK, is very good at articulating the message to his audience. While many were celebrating December holiday season, he was busy raising funds in Delhi with investors. It is probably a record by itself that a startup founder raised 25 crores in 25 days that includes time for due diligence. KK is a product of IIM-K and ISB.

I am a Marvadi. I am the youngest with two elder sisters. I was a pampered child at home. I was in my 7th grade when my dad lost all that he built. That is when I started telling myself, “I believe everything is possible. Only I can do it. If I can’t, no one can.”

I had 17 national records and a Guinness record. I got awards and accolades at ICICI including the Guinness record for selling insurance worth 9 crores in a single day spread across 501 retail insurance policies and then I moved on to Yes Bank. I took that risk call of switching to an upcoming bank in its early days of 2005 as I know I have this entrepreneurial zeal and I want to learn how large organisations are built from scratch. I served at Yes bank for three years. There at Yes bank, I introduced a concept called reverse banking.

Forward Banking is about acquiring customers via asset products and cross selling liability products and then finally third party products. Income at bank is divided into fee income and non-fee income. Rana Kapoor, chairman of Yes bank, wanted to build the bank without having ATMs in its early days and other traditional banking services initially. We started with mutual funds and then we expanded into regular banking services. This is what we call reverse banking. I have setup 37 branches under two years. I was given ESOPs but couldn’t cash them out. I was the first ever employee to receive a CEO trophy from the hands of Yes Bank CEO.

Then I moved on to Nagarjuna constructions and successfully handled Asia’s largest PPP residential project at Ranchi. I have adopted “no down payment” and “zero interest” concepts from banking and introduced them to the real estate industry in India. We sold 1700 units in just three months that too with just a single news ad.

We started our entrepreneurial journey in 2014 with a single vision. Money is worth only when you need it, otherwise it’s worthless. This is the value of money. I have seen as a banker how highly a borrower values money. People come into the bank and cry for each rupee of loan. No one is ready to give you small loans in real life that fulfils your needs while banks offer loans that fulfil your desires, dreams / wants by offering high value loans that last for longer tenure, mostly that suits there business model but not customer requirements. It is a materialistic world out there. We wanted to address this basic point. Our vision is to provide unsecured short term loans to the borrowers as easily as hailing a cab.

Our weakness is that we are not capital intensive family. We started studying about global markets. I did study all alternate finance markets. Trying to copy something like Lendingclub from USA won’t work here in India. In India, people invest in savings, fixed deposits, real estate property, mutual funds and then equity then you Startup yourself. This is the order in which we do it in India.

We told ourselves to create an alternate Finance Engine. As easy as hailing a cab, you should get money. If you lend privately, you hesitate to ask or repay. We will take care of it for you. We started with vote4cash.in around the time Modi was campaigning for general elections in 2014. My conviction being strong, I went ahead with it without thinking about profit and loss. I just believed in “I can do it”. I was giving loans at 1.5% daily interest. It is 45% per month. We wanted to stay profitable and make lenders happy. Hence this kind of high interest rates. We were taken for ride by many government agencies. Threat calls came too. Many chased us. We didn’t flinch. My conviction was not to squeeze borrower but ensure my lender sees wealth in investment. I want to give good ROI to my lender and fulfill the need of my borrower. With this strategy, we crossed one crore of monthly disbursement at 45% interest in a very short time. The endeavour was to develop a science / algorithm that eventually generates good returns for lenders, yet be cost effective for borrowers and in this pursuit we didn’t wanted to carry R&D at cost of lenders hard earned money.

From those days of 1.5% interest per day at vote4cash to today’s 1.5% of interest per month at ATL, we have transformed and established a proprietary, scientific algorithm.

Coming from risk and finance background, we are building these things for generations. We then did vote4edu to target parents for their kids’ education loans.

Off late we started serving even MSME clients.

We merged all these three business lines into one entity that we named AnyTimeLoan, also known as ATL. We say “Paisa hai to ATM verna ATL”. It means, if you have money, then ATM, if not then ATL. This is for borrowers. The name ATL is the baby of T-HUB. Thanks to Srini and Jay for helping me brainstorm the name.

Lot of credit goes to T-HUB. Focus and conviction are there but if T-HUB hasn’t been there ATL wouldn’t have existed. It was tough time with cyber crime and all other agencies lending business attracts. The responsibility of taking money is in giving back. ATL has responsibility in making lenders happy. This is a business that requires a lot of mettle. If not for T-HUB, this funding might not have happened. One thing led to the other. T-HUB led to KPMG. KPMG led us to Spice.

We took resolution to become number one that we are and also profitable that we are. I took a call in last August with this angel investor Subir Mehra, global head at HSBC Global service centres. There are seven angels like him from financial industry’s who’s who. All the seven are dissimilar and are from different parts of the world. Each gave us 25 lakhs. We raised 2.4 crores of angel money but we never used it. We put the funds in fixed deposits. Even today we have those fixed deposits. When it comes to debt, we got to be more careful is what people say. But I think it should be reverse. Someone, as an angel investor, trusted me and I must ensure if tomorrow i am not there, the investor has to be taken care. I would say, when we take equity money, we got to be more responsible than our own money.

This deal is confidential. I will transfer what I have learnt during the past few weeks. ATL is number one in peer-to-peer lending industry. We dispersed 78 crores in aggregate during the past 39 months. We are cash positive. ATL has been very attractive in investor world. We have been choosy on which money we invite. We don’t want money to drive us on non-core values. However, we have to respect the “multiple of X” mentality of investors.

When we closed with Spice, I used the criteria of having funds hit the bank as of December 31st. We met them first on 4th December. This is because we have RBI regulation with a deadline of 3rd of January 2018. RBI takes 6-9 months to grant us a license. If I raised funds in between, I have to reapply with the changes to the equity holding. It will delay the license approval process. For me, time is money and investment is growth and life. I didn’t want to lose any time. Funds have hit the bank on 30th of December, within 25 days of my first meet.

I believe I want to give my last drop of my blood as if I have only one day in life. I am not a big pay master. I hire only if prospects believe in my vision. I do a haircut by hiring them at 40% of their market value.

Before this, we got term sheets from two other VCs. We know that they take 4-6 months to close though valuation is three times that of what Spice offered. Spice is strategic in nature. We met them on 4th December 2017. Their board room got 117 seater. It reflects that people can come sit and deliberate together. No information gets lost in layers. Spice as a company has brought everything new first time to India. They are one of the first to introduce mobile, Modi xerox and I thought “let me be part of the Modi wave that is currently going on in India.” Unfortunately, though they were the first movers, they could never succeed in making their ventures big. I see this as an opportunity.

Spice guys have white label ATMs. You can pay any bill. We took lot of metrics in terms of what spice can bring in strategy. They have representatives across India. Close to 20 million foot falls happen in their stores. Most of them are from the bottom of pyramid (BOP). Company wants to get into PPI license. RBI understands them and respects them for what they are. We do joint filing for our license. That’s another reason.

Whatever capital ATL needs will be blessed by Spice as an institution. My search for an investor stops with them. I don’t have to worry about next round of funding. Overnight, ATL will be available at 33,000 foot points of Spice at the end of this month. Otherwise, it takes three to five years for ATL to do it by itself. Am I game for investing my life? As a blood, I will not fail. I am going to make it big.

Number of physical pin codes that Spice brings is the key. These local spice outlets act as deterrent for borrowers in respective local regions. When Spice can bring that indirect pressure on borrowers, it helps us. Our gross default is 0.63% and it is world’s best. I am still not happy as I control growth.

We offer three types of loans. Rs.1000 to one lakh for loans upto 90 days at 5 paisa per day interest. No bank can compete here. We are the only player in K12 (education) space. We give loans starting from Rs.10,000 upto 10 lakhs for SMEs. Banks won’t even offer any loan to these SMEs. This is the convenience. There is huge credit card gap too.

Spice can help me aportion the marketing cost as they have ground level distribution channels that we can leverage. Modis and their vision of “sustainable, profitable and market leader” is in alignment with our own vision.

We are hitting 4 crores a month disbursement now. My target in 12 months is to take it to 100 crores per month. In three months we need 273 employees. Today everything is on promise.

When they started negotiations their starting offer was 75% dilution. I said I wouldn’t do more than 20%. That is how we started. I said 26% and then they said 30%. 30% with a call to commitment of $4 million. We got the right to call. Window is minimum July and max is March. Spice will ensure the vision we see happens as they want 51% eventually.

We have given them CCPS.

Through T-HUB. KPMG was their M&A partner and they met me through T-HUB.

More than thousands. That includes customer and employee hiring pitches too.

Lending is uniquely poised and it will never die. Spice sees that RBI regulation gave the moment for peer to peer lending.

We need to ensure we are sustainable with defaults that would grow with growing business.

For the entire team, I am available to them. It is important as an entrepreneur. Friends may say I am very aggressive in handling the team. In our business one mistake could cause the lender to lose his money. I can’t afford. In this business customers comes finding you. No customer acquisition cost. When a customer gets his requirement fulfilled, he will not forget you.

Globally P2P lending is risky in execution as making lender available to lend is tricky. India took nine years for mutual funds. P2P takes five years. We do entire loan life cycle management. We make money only when lender gets his money back. Only when the loan is closed. Lenders do 28% post-risk returns on an average. Banks go with baggages like 15 years and so on. I tell the borrowers lesser the tenure, pay less interest. More the tenure pay more interest. We encourage and incentiveze for smaller tenure loans. We are a hybrid of payday and peer2peer.

I approve a loan every three minutes. We do lobotic (loan extending bot) and mobotic.

We do one time due diligence. Rest of the life they can borrow with a click. We ask the customer to update the changes every six months. Whenever there is a mismatch on the data you enter, we make red flags.

I ask everyday myself whether I am doing right job. 39 months. We haven’t been a profitable unicorn. Lack of regulation is one more. Local legal bodies may try to blackmail you. Onething that kept us driving is that “we are making profits. We are growing.” This keeps me driving. This journey of 39 months I made more money personally and for our lenders than I made in my entire life.

Now that I got funded, we have been approached by Wallstreet and Capital18 and so on. Suddenly game changed. When the water is flowing very fast, everyone wants to swim along. Naysayers are always there and they are my motivation.

Traditional banks can’t do things differently as it creates friction. I can’t take money from them as investment and expect them to change their behavior. Spice fits the bill strategically. Better fit is more important than more funds for me. I prioritized network over capital. Spice got that network. If I succeed, Spice gets life. I have nothing to loose. I try to change the mindset of whoever I touch. If I can turn things around big, win-win for us. I don’t believe in knocling doors for capital. I never believe in leveraging my relations. It is always to keep arm’s length distance with banks. They are good partners and customers for us.

We have 5% in ESOPs.

Recruit masses and covert them to our class, few may fallout.

We would like to see 20 crores come from SMEs and 10 crores from the bottom of the pyramid: Rs.1000 to Rs.15,000 range.

I call fintech is frenzy. We may dress ugly but our soul is beautiful. I still fit my trousers from 12th grade.

They underwrite their own funds. CashE is the lender here and in our case we make others create wealth and in that process we create too…

We don’t cherry pick. Even my own funds are allocated with borrowers automatically. We got a 7 point algorithm. Bot Selects the lender. We limit the exposure of the lender to 20% of the loan money to borrower. It mitigates and distributes the risk among lenders. We give post risk minimum 20% yield to out lenders.

I travel 21 days out of 30. I travel by overnight bus. Not to save on hotel cost but to understand consumers in their own environment. What they do and how they think. 67 P2P products sell FAB: Features, Attributes and Benefits. I do BAF: Benefits first, Attributes and Features next.

Next 12 months are going to be very crucial for us. Hope to meet our goal of 100 crores in monthly disbursements by next new year.