SaaS Interviews with CEOs, Startups, Founders
India Fintech + SaaS Zero to $60k MRR in 3 Months Helping SMB's Fund Inventory
16 Oct 2021
Chapter 1: What is the main topic discussed in this episode?
So we share that revenue with the balance sheet partner. So we get all that revenue. And then there is a certain share of that that we give to the balance sheet partner and remaining we keep. It's almost like a 60-40 split.
You are listening to Conversations with Nathan Latka, where I sit down and interview the top SaaS founders, like Eric Wan from Zoom. If you'd like to subscribe, go to getlatka.com.
We've published thousands of these interviews, and if you want to sort through them quickly by revenue or churn, CAC, valuation, or other metrics, the easiest way to do that is to go to getlatka.com and use our filtering tool. It's like a big Excel sheet for all of these podcast interviews. Check it out right now at getlatka.com. Hey folks, my guest today is Anubhav Jain.
He's building a tool called Rupify. It's embedded lending and SME BNPL. He's an entrepreneur, angel investor, and credit risk professional with a decade of experience in banking, consumer, small business lending, including credit cards, loans, all across the life cycle, underwriting, acquisitions, etc. Anubhav, are you ready to take us to the top?
Yeah, really excited.
All right. So talk to me, give me the, paint the persona of the consumer who's taking capital from Rupafi usually.
Yeah, so we are in the B2B space. So we essentially work with B2B marketplaces. So our customer here is a small business. And these are the mid to long tail of small businesses right now in India, but it could be anywhere in the globe, across the globe. So
This is a very small shopkeeper or a retailer or an SME who's looking to, let's say, go to a digital B2B marketplace or an offline B2B distributor and source his inventory or goods. And because there is a certain credit cycle in which they are able to sell those goods, they need that working capital in the form of a credit or a line. So we provide that credit line to these small businesses.
Just to give you some idea about these businesses, they are typically less than, let's say, $20,000 of annual turnover. So they are really, really small guys.
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Chapter 2: What is embedded lending and how does it work for small businesses?
Then we go all out.
Which sector did you start in?
We started with FMCG. What is that? So FMCG is basically all fast-moving consumer goods like grocery, all your retail products which are being used on a day-to-day basis, fruits, vegetables, grocery items. After that, we launched in the pharmaceuticals and healthcare. Then recently, we started with agriculture. We're also present in fashion and electronics.
Interesting. Take me back to some of those first loans done the FMCG factor, fast moving consumer goods. What was the average loan side and help me understand some of the terms?
Sure. So an average credit line that we approve for these small businesses is something of the order of $1,000. And that $1,000, they utilize over multiple transactions. So the average transaction size for us can be as low as $150.
And how do you guys make money on that?
Yeah, so this is a very short tenure transaction. It's typically for like 14 days, 30 days, maximum 60 days. And we make money through the supplier. So it's a 0% interest or a zero cost credit to the retailer. But because we have acquired this retailer through the distributor or the B2B marketplace, so the B2B marketplace basically provides us a fee.
over every transaction that happens on their platform where Rupify BNPL is being used.
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Chapter 3: Who are the typical customers using Rupify's services?
So it's almost like the seller or the merchant is providing us some kind of a discount revenue. The way you use a credit card and you get paid by the merchant, the same way when you use Rupify BNPL, the user does not pay, but the merchant pays.
So let's just make this real. I'm a grocer in India, small shop owner. I use you guys earlier this year. I take $150 from you and you say, okay, Nathan, you have to pay that back in 15 days. Do I pay that back daily or do I just pay 150 bucks at the end of 15 days?
to you you have full flexibility okay you can pay daily you can pay it in part payments you can pay all the amount after 15 days and if you give me 150 today and then i pay it back in 15 days and i only pay back 150 bucks that's how that works right why wouldn't people i mean where how does how do people make money that there's no there's no spread
Sure. So what happens is this 150 does not come into your bank account. It basically goes to your supplier and you get goods against this 150. So we are only helping you buy your inventory from your supplier. So we charge that a certain percentage from the supplier because now we are helping the supplier increase their sales by offering BNPL to these shopkeepers.
Got it. Okay. And what's the fee typically like on 150 bucks? What would it be?
It would be 2%. So 2%. Okay.
So let me just play this back to you. I, as my local shop owner, get my bananas from banana company. Uh, I know I need X amount of bananas. I'm you're going to give, I'm going to say, Hey guys, I want to get 150 bucks, send it directly to my banana company. That banana company is going to pay you guys a hundred, uh, uh, three, what is it? $3. So 2% of 150 bucks.
Yeah. Correct.
I see. And then they're getting the cash up front. It's better for them. They don't have to wait for me to pay them. And then the whole cycle goes faster.
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Chapter 4: How does Rupify manage its balance sheet and partnerships?
What was it? You said in May, it was how much?
In June, this was $5,000. Okay.
That was your revenue? 5,000? Wow.
It's gone more than 10 times.
Well, so if you were doing 5K in revenue, what was total GMV in June?
Total loans done. That was close to around 100,000.
Wow. So you went from 100,000 in loans done in June to three months later, you're like at 7.5 million in loans done in the month. Yeah. What would you credit that growth to?
So I think it's a mix of a few things. One, we've kind of now expanded to some of the very large players. We work with a couple of the largest B2B marketplaces in India.
Can you name a couple of those?
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Chapter 5: What growth metrics has Rupify achieved since its launch?
You can actually see a demo live instantly right now. Check it out. Nathan Latka.com forward slash flat file. Do you own the relationship with me, the shop owner? Do you have my email address? Do you have my information? Or do you just own the relationship with the banana provider?
We own both. So to begin with, we go to the banana provider. They tell us that, hey, I have these many customers. Can you provide them a BNPL option? Once they provide those details with us, we get a consent from the... from the individual shopkeepers. We collect their data, we get their KYC done, we offer them a credit.
And then now I have complete ownership of individually all those SME customers.
I see. So the 7.5 million loans and in September, how many SMBs was that across?
Sorry, can you repeat that?
Yeah. Of the 7.5 million loans you did in August, how many SMBs was that across?
that must be around 15 or a thousand.
Uh, 15,000.
Yeah.
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Chapter 6: Which sectors is Rupify focusing on for expansion?
So we are now launching an offline BNPL as well. So we want to be omnichannel. And I think in the next couple of years, that's where we would be.
And have you built all this bootstrap or have you raised?
We raised a couple of rounds. So we started with a pre-seed from some of the well-known angel investors in the country. And then we raised a pre-seed from a couple of financial investors back in March. So yeah, and we've just raised a venture debt last week.
Okay. So in the pre-seed round in 2020, how much was that for?
That was a little less than a million. And earlier this year, we raised a pre-series A that was around $4 million. Okay.
Interesting. I'm curious, the $4 million, what valuation was that at?
We've not disclosed that, but very standard series A. Well, that's actually why I asked.
I'm not sure. I mean, are you seeing the same multiples in India that we're seeing here in the States? Did you sell, what, 15%, 20% of the business for $4 million, something like that?
Yes. Something like that.
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Chapter 7: How does Rupify generate revenue from its lending services?
Yeah. Interesting. What bank did that? Was that SVB or what's the equivalent to SVB in India? Yeah.
So this was not from an SVB equivalent, but one of the top three venture debt funds. So yeah.
Interesting. Was the cost of capital in that under 10%?
No, it's a little higher, but I think considering the cost of capital that we would get from a bank, it's very much in line with that. So if we were to borrow from a bank unsecured today, I think we'll not get it at a rate lower than what we are getting from the venture debt.
Interesting. From the venture debt fund, did you have to give them warrants as well?
Yes. It's a very standard warrants.
Interesting. I do. I, you know, I see, I don't know what our standard warrants are anymore. I see them all over. I see ones low as 1% and I see some as high as like six, 7% warrants. Where were you guys?
No, we were in the, yeah, in the, in the 1% range.
Okay. So you already got it. I would say that's a good deal then. So it's a 1%, but cost of capital more than 10% from an Indian sort of credit fund effectively. Yeah. Interesting. What are capital markets like in India right now for this kind of things?
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