Prime Venture Partners Podcast
A podcast for entrepreneurs who are looking to build & grow their startups. Avoid common traps & learn uncommon strategies & tactics from makers & doers of startup ecosystem. Prime Ventures is a early-stage venture fund which focuses on startups that not only need capital but also require mentoring to transform them into disruptive companies. We share a passion for working closely with entrepreneurs and enjoy sharing their journey in a high-frequency, interactive and fun environment.Read more about us at http://primevp.in
Prime Venture Partners Podcast
The ‘Money & Opportunity in Bharat’ with Nitin Agrawal, Founder & CEO, Navadhan Capital
In this podcast episode, Shivani Kulkarni (AVP, Investments @ Prime Venture Partners ) speaks to Nitin Agrawal (Founder & CEO @ Navadhan Capital), an IRMA graduate, a former CEO of Spandana Sphoorty and an inspiring leader passionate about rural India.
Nitin highlights his journey from a lower middle class family in Meerut in Uttar Pradesh to CEO of India's leading micro-finance organisations.
He encourages entrepreneurs by narrating personal stories in Rural India from his 20+ years of experience travelling across every nook and corner of the country.
Tune in to learn about #bharat , rural mindset, demographics, smartphone penetration, #jandhanyojana and much more:
0:00 - Opportunities in Rural India
11:24 - Evolution of Rural Finance and Livelihoods
20:03 - Rural Tech Transformation and Opportunities
32:45 - Building a Tech-Led Scale-Up Business
45:32 - Parenting and Tech
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We had a debate saying that how much does a buffalo cost?
Shivani Kulkarni:Today, the focus is going to be on money in Bharat. Rural economy contributes to 50% of our GDP and is supposed close to 65% of the population.
Nitin Agrawal:I had the privilege of being brought up in a very, very lower middle class family. Number of people in the family who are above 8 years of age and below 80 years of age are working population, the jandhan, the adhar. The mobile penetration has played a transformative role, especially in rural areas, more than the urban areas. I I keep saying this rural is ready to explode. Whole lot of interesting stuff which is not on google, which is not on internet, which is not on facebook, which is not on insta, which is not on Insta, but happening. So go and enjoy that.
Shivani Kulkarni:Hello, I'm your host, shivani Kulkarni, part of the investment team here at Prime, and today we have a very special guest with us, nitin Agarwal, the CEO and co-founder of Navdhan Capital, a tech-led rural financing platform which focuses on the SMEs. So welcome to the podcast, nitin. We are very excited to have you here. But before we get started, maybe I can set some context and tell you what we are going to chat about. So today the focus is going to be on money in Bharat, that is, opportunities in rural India that the budding entrepreneurs can target.
Shivani Kulkarni:Rural economy contributes to 50% of our GDP and is supposed close to 65% of the population. The growth story that's playing out in India is also playing out in these parts of the economy, and not only the spending capacity. The income levels, the spending capacity and the consumption and, more importantly, aspirations of these people are growing, and so this is the right time for maybe entrepreneurs budding entrepreneurs to build for this, and who better to talk to us than a veteran in this space? So let me tell you a bit about Nitin. He studied at Irma and spent 20 years in microfinance and financial services across various institutions. In his last role, he was the CEO of Spandana Spurthy before the entrepreneurship bug bit him and he decided to start Navdhan. So again, welcome Nitin. And maybe what will help the viewers is if you can give a little bit background about your early you know growing up years, your childhood.
Nitin Agrawal:Sure. Thank you so much for having me. I was born and brought up in a small town called Meerut, which is in Uttar Pradesh, up north, and we always thought Meerut is the center of the earth, because we didn't know if the world existed outside or even if it existed, what we saw out there in Meerut was the center. For us, those were the ages when your source of information was only newspapers and not as much you know the current digital world. So life has changed quite a bit, but it was interesting to grow up in those years because we got to experience things firsthand.
Nitin Agrawal:I had the privilege of being brought up in a very, very lower middle class family, so my father had lost his parents very early in his life and was pretty much a self-made man, very hard-working person, doing two jobs at the same time, finding it very difficult to make the ends meet.
Nitin Agrawal:That hustle stays with me till today. So the value for time, the value for making things happen, is something that I learned from him. So he was working for a bank and pretty much one of the oldest retail financial services project called Pygmy Deposit Scheme by Syndicate Bank is what he used to do, and being an Agarwal and coming in from a Mahawari background, he was always enrolled in random odd jobs so he helped his brothers set up their businesses. He was dabbling in a lot of commodity trading along with his cousins. He was dabbling in some bit of small bit of play around property purchases, sales. There was no particular sector for him so he would just do anything whatever came up and there was no subject which was beyond his capabilities. So I think we did learn, know how to stretch our limits and to see beyond what we think is most obvious, thanks to his way of approaching life.
Shivani Kulkarni:Oh, that's interesting. And what about your siblings? How many siblings? What did your mother do?
Nitin Agrawal:So my mother was a homemaker but she used to run a tuition center at home, teaching students of primary classes. I have a sister and a brother. Both of them are in tech space. My sister is a cloud computing expert and in process engineering and my brother is a crm expert, works for one of the largest consumer tech companies in the world. So most of us were techies as far as our education is concerned. But yeah, I mean, with tech taking supreme space in the house, the only other thing that we discussed was money. So it was money or tech. These were the only two topics of conversations and within that was education, where my mother was running the tuition center and we used to part-time help her well, when we used to come back from school and help her run and scale up that business.
Shivani Kulkarni:Interesting, but given that your siblings are more into tech, right, you went slightly in a different direction with Irma. So what were the motivations there?
Nitin Agrawal:Well, so, irma, I went after doing my tech. So I was working for four years in media industry and I was working in the pre-press section as an engineer, leading a team of other engineers responsible for taking. So I was with Times of India and India Today group for a total of four years, having seen that space enough. And newspaper life is tough. You know people say startups are tough. Let me tell you newspaper is tougher. There is no morning evening, the times are not calculated in terms of hours or minutes, they're calculated in terms of seconds.
Nitin Agrawal:And of course there was a whole lot of chemical engineering, pneumatics and, of course, digital play out there. I had kind of got bored of it and I thought I can't do this for life, so wanted to explore new areas. And when I was exploring new areas, this rural came across. And I think, because I was working in newspaper and I used to read a whole lot of the social stuff in newspaper, there was some bug somewhere to say that why don't we make money, make a career at the same time, while making a career, do something constructive for the society, not just for yourself, but do it for community at large. And when you say community at large. Either you go those back in those days, either you become a, you join an NGO and start doing social welfare oh, that's what jholawala is yeah or otherwise?
Nitin Agrawal:you join the government and start doing some development work block development officer kinds there were very few avenues to do things at scale and when I was doing research and back in the days there was no Google right so when I was doing research I came across this institution and a few of the likes and then I traced what people from those institutions have done, met quite a few of them. So one of them was in Tata Energy Research Institute. He was trying to look at the energy space and I'm talking about more than two and a half decades back. I met people who, working in water, sanitation, you know livelihoods for rural women. It just kept growing on me.
Nitin Agrawal:I got just so excited that you know this whole world of uh, you know, letting the country grow by doing constructive work and at the same time building it as a career is quite possible and honestly, that led me to Irma, and not selling Irma here, but once you land up in that campus it just mesmerizes you. So I was just enticed by the amazing lawns, the kind of history that the institution had, the kind of people-led, community-led institution that was built out of Amul and now replicated in a lot of places. That was pretty exciting. So hence Irma.
Shivani Kulkarni:Interesting the point that you mentioned that you spoke to a lot of people, right? I think a lot of students do miss out on that, like my own example. I got into engineering, but without speaking to even one single soul, right, just because electronics was a hot topic or the talk of the town. Then got into it. But I think talking to people does help, because that's where you can align your motivations. What is it that you want to do with the next steps that you want to take, right? And also, speaking of Irma, what are some of the experiences that you have had at Irma?
Nitin Agrawal:because I know one or two you have told me, but maybe anything that you want to share well difficult to pull out one, but I can tell you there are two, three points of amazement out there. First of all, understanding the fact that there is the bottom two-third economy of India and it's just not, by the way, restricted to India. That's the story of most of the second and third world. There is a whole lot of exciting things happening there and there is a whole lot of potential. So there are sub-sectors, for example, environmental awareness. You know now there is so much of green energy and and the green thinking which is happening in the est has come up, not as much back in those days.
Nitin Agrawal:Uh, financing per se, financing rather, comes more naturally to us because of our kind of backgrounds. Um, you know, theoretically I come from an artier family, so that comes more naturally to us. But otherwise also so many sectors that come up. I have truckloads of of you know stories to tell from irma, so I'll not eat up all of this. But I think one great thing was we landed up in irma and they, they sent us to a village to stay. For a week I went to a gujarati village and stayed in a gujarati village. This was in Himmatnagar district and I was staying on top of a milk pouring center.
Shivani Kulkarni:Oh, okay.
Nitin Agrawal:Morning 4 am, farmers would line up and pour milk. Evening 4 am, farmers would line up and pour milk and it was being scientifically assessed to see the fat and the SNF and people being paid out and a whole mechanism working. It was pretty amazing. I realized how process can marry engineering can marry business prospects and create it into a community defining, community benefiting business and talk us a little bit through what happened after irma.
Shivani Kulkarni:Like you have spent close to 20 years in financial services now was there that? Was that a conscious choice, or was that something that happened? And then you started, you know, building a career there?
Nitin Agrawal:well, when I was at irma I chose three sectors which which excited me the most. One was environmental impact assessment, because I thought india will go through a rapid infrastructure development roads, bridge, truck, telecom and there will be a role to play to assess environmental impact and do a counter activity around it. But there was no commercial models looking at it. The second space that really excited me was water, and you know this whole day zero concept which came in later. I firmly thought water is not an unlimited resource and there's a lot one can do with water. But again there weren't commercially viable models where one could make a career and, coming in from a lower middle class family, saved up for four years, paid for my MBA, I had to get a job in hand. So then the residual sector. Amongst the residual sectors, I thought financing was most exciting for me, and microfinancing per se.
Nitin Agrawal:That time was an emerging sector. It was not called so. That time it was more community-based, community-led financing opportunities. From campus recruitment I was actually placed in Amul. I joined a microfinance research institute. It was a community-based financing research company Doing research, doing ratings, doing assessments of community-based financing institutions, including mfis, cooperative banks. You know, entities which are built around the community, like some of the government programs, like the, the handicrafts promotion activity. Some of these may sound a little off track but yeah, those are the kind of activities I got involved in there.
Shivani Kulkarni:From there, I was hired by ICICI bank when they were building their microfinance team got it, and then the journey just started actually let's maybe go back to the research stint, right, how do you do research at that point? Like, what was research at that point? How did you do it?
Nitin Agrawal:well, I'll tell you some of the projects we did.
Shivani Kulkarni:Yeah.
Nitin Agrawal:So the Ministry of Textiles has a department called Ministry of Handicrafts. They were trying to do how the handicrafts industry could get access to credit.
Shivani Kulkarni:Okay.
Nitin Agrawal:So you have master craftsmen, then you have the weavers, the the various types of, you know, handicraft artisans. How do you take credit to them? Yeah, the government was trying to design a credit policy, for which this entity was hired to do a research and come up with a product design for this segment. So I was part of that project. I was part of rating of institutions slash banks. I was part of rating of institutions slash banks, cooperative banks, banks in India and few of the other poorer countries like Cambodia, bangladesh, nepal and a few others, where we would advise how their institutional build-out can be strengthened, what kind of product services they could introduce, how they can be supported for scale-up. This was both for investors, lenders, as well as for general capacity building activities. Then there was an assessment around the whole primary agricultural cooperative societies and the district-led cooperative societies. A huge network existed in India. Almost every few places in rural areas were existing, but they're not strong institutions and they're not able to deliver. So there was research around how to strengthen them.
Shivani Kulkarni:So a bunch of such activities were ongoing and this time research involved going on ground, assessing what they are actually doing and then coming up with insights, or what is that?
Nitin Agrawal:that was the fun part of the job, okay, so you know you have a job where you go, you slog out and then you're working hard, especially when you restart your career. You know move sectors. This was one area which was extremely exciting. So I told you I come from Meret and I thought Meret is the center of the earth. So when I went to Coimbatore first time, I called up my mom and told her mom, do you know? The traffic police here is women. I could not imagine how could a woman wear a traffic uniform, stand in the center of the city and direct traffic? And people were listening. For God's sake, I come from Uttar Pradesh. That too, meerut, it was impossible. Gujarat, you know the enterprising level of women in Gujarat. Forget about men and entrepreneurs famous from Gujarat. They eat so much that they keep cooking so much, but they keep working throughout the day. You go in UP, they are sleeping in the afternoon, not so in Gujarat. So every place in India was unique.
Nitin Agrawal:I got to travel to not only, let's say, for example, west Bengal and Bangladesh. I looked at both sides of Bengal. It was so dramatically different. Started developing appreciation for the rural space, so I could travel deep into tamilnad, deep into karnataka, odisha, rajasthan, gujarat. It just opened up a northeast. It's amazing. It's incredible. And what are the local issues? What are the environmental, economic, people issues? How institutions should be built, how processes, technology, engineering can play a role in those areas. All of that was very interesting to look at.
Shivani Kulkarni:Got it and at what point in your say, either any of these trends right. Did you start picking up on these nuances and then started converting them into some mental models or templates? And if there is one template or something that you can share, what would that be Like? How can we think about?
Nitin Agrawal:well, I had gone to, uh, look at, uh, you know hindsighting model of one of the community financial institutions and I was in varangal and I was with a colleague and we we had a debate saying that how much does a buffalo cost?
Nitin Agrawal:okay interesting debate now. Uh, that time, buffalo costed anywhere between eight thousand rupees to about sixty thousand rupees. Today, a buffalo could go up to a lakh as well, okay, uh. So we ran behind a woman and asked her, because we didn't know as much telugu, so intadabu, intadabu, she didn't understand what we were saying. We figured out eventually that that particular buffalo whom we met and saw costed 45,000 rupees. Okay, a goat costed 5000 rupees. Now think about it 9 goats is equal to 1 buffalo. Both are liquid assets.
Shivani Kulkarni:Okay.
Nitin Agrawal:Right Now, lot of us do not appreciate cattle, bovines, slash goats as assets.
Shivani Kulkarni:We don't yeah.
Nitin Agrawal:But they are sources of livelihood. They are sources of their life, their lifestyle and their liquid assets.
Shivani Kulkarni:So some of these nuances happened as we saw things happening and how the economic you know um, I would say the economics in the rural space plays out so when you think about, then, a rural household or anybody who has cattle uh in at their home, then you need to think from okay, this is a means of livelihood and that essentially is adding to their income statement, like if you were to draw pnl yes that goes in the revenue item or asset, the interesting nuance there is that, uh, we use this internally number of people in the revenue item or asset.
Nitin Agrawal:The interesting nuance there is that we use this internally number of people in the family who are above eight years of age and below 80 years of age are working population, about eight. Who can do some, yeah, who can do some contribution, right? A nine-year-old child can at least feed a cow right. He can just take the fodder from here and put it in, so he's productive, okay. Um, the question is, how do you see what level of incipient labor can become productive? So, therefore, number of adults in the household versus number of working potential people in the household versus the cattle they have in the household is an interesting ratio. So if you have four adults in the household and you have four cattle, you don't need external labor.
Shivani Kulkarni:Yes.
Nitin Agrawal:Then the free labor or underemployment can cover. Unless you're a waged person and you have to go out for work, some of this adds to your income levels, but if you discount the labor, you're not loading up the free labor that is available at home. It's the same thing like a housewife is not getting paid a salary. It's very similar to that. So when we do these assessments, not only do we look at them as assets which can be liquidated, but also as how have they deployed the incipient labor to productive use?
Shivani Kulkarni:And that's very different in a rural household than an urban household, right? Because in urban household this dynamic may not be true at least to my knowledge is not true, because there aren't enough things that you would do that can be income generating just around the household. Wow, that's very interesting way of thinking about it. So, yeah, maybe, moving on, would love to understand from your perspective, if you were to point out two to three big changes that have happened that have been real enablers for rural India. What would you pick and what is the impact that they have had?
Nitin Agrawal:Well, if I tell you . There are still challenges where the villages don't have potable water, they don't have regular electricity supply. But you know, you could look at extremes or you could look at generalizable growth. The growth is interesting. In fact, rural customers have now become far more discerning. Earlier it was, you know, seller's market. It's no longer a seller's market. They're discerning enough and now it's a buyer's market. It's no longer a seller's market. They're discerning enough and now it's a buyer's market.
Nitin Agrawal:The biggest change there has come because of the advent of tech, telecom and the whole jandhan layer, right, so we call them as jam trinity the jandhan, the aadhar. The mobile penetration has played a transformative role, especially in rural areas, more than the urban areas. The benefit of the public. Tech rails are visible in the top one-third of the economy today, correct, but it has still not started playing out in the bottom two-third because it is still about to reach, or let me say it is yet to reach that inflection point where it starts showing deep impact, but the penetration is fast. Penetration is growing and it is going to be further transformative, beyond what has happened over the last 20 years.
Shivani Kulkarni:Got it. And Ben, what do you think? Like? How can you assess whether the inflection point is coming? Like you as an entrepreneur building for rural India, right, how do you assess that? Okay, if the internet penetration is so much, if people are using xyz apps, is when this inflection point, while using maybe, say, either digital payments or online kyc or whatever it is that you want them to do, right, like online transacting through a bank account. How do you like? Is there a method to track this?
Nitin Agrawal:well, I would go reverse. Instead of saying what is working, we know what is not working, okay, and when what is not working will become smoother, it will become easier. For instance, banking is still not working. You will be surprised to know that the bank account that you and me open, the average balance requirement for that bank account for us versus what a rural plain vanilla account is offered, is very different. A Jandan account does not offer proper withdrawal facilities For a rural customer. While there is enough banking penetration, there are enough bank branches, but the number of hours the bank branches are open and they're available, even to deposit cash, is very restrictive.
Shivani Kulkarni:Got it.
Nitin Agrawal:So, therefore, the biggest beneficiary of transition from cash to digital economy on the cash side is actually going to be that population, but the limiting factor there is going to be how much digitally penetrated you are. So, while I say it is going to be transformative, I think we're still yet to see the full change happening. Change is still happening. There's a lot of noise around it, but I think it'll happen, just to give the full change happening. Change is still happening. There's a lot of noise around it, but I think it'll happen. Just to give you a few examples, if you look at only the smartphone penetration, we did extensive field surveys and we do baseline surveys and repeat surveys every year.
Nitin Agrawal:This is outside the regular business. We do some academic search also so that you know we are updated to the situation. Beyond you know anecdotal evidences purely on survey basis 2019, 10% of the households had access to smartphones. That has increased to about 40% households in 2023, october I'm talking about October 2019 to October 2023. However, the access to regular data so they have a smartphone, they may not use it full time If even one member of the household is using it. We are qualifying that as a household which uses mobile but smartphone having regular access of data is still limited 10 to 15 to 20%.
Nitin Agrawal:Now for this space to go from 10 to 50, 40, 60 is going to be tough. From 60 to 90 will not be tough. From data penetration of 10, 15 percent going up to 30, 40 percent will be tough. Once it reaches 30, 40, inflection point from 40 to 60 will not even be visible. It will be a smooth sail. So there are these nuances which are coming through where in a few years time and let me not put a date to it things are going to look very different thanks, nathan, for sharing that.
Shivani Kulkarni:uh, maybe what would be helpful is also to understand what, given all these changes at the macro level data penetration, just the rural population growth being there so that they have more income levels what are some of the opportunities that you see for a business to grow in these areas? It can be a startup, non startup, but what are the opportunities?
Nitin Agrawal:Well, I think opportunity set is massive. I keep saying this rural is ready to explode. It's going to explode big time. People haven't even scratched the surface. The opportunity set is really really big. Just the sheer size of population, the kind of gdp growth potential that rural markets have, the scale of informality in those economies becoming slightly formalized and eventually coming to the mainstream is massive. I can't even put a number to it. So if you go sector by sector, segment by segment, you know a lot of people are trying to do a lot of interesting things. But I think I'll stick to financing for now.
Nitin Agrawal:From a financing standpoint, I think the space is really big because the only other other players which have cracked it is the government led program. So you have the Kisan credit cards. You have the priority sector, push, where microfinance companies do lending. You have the banks going and doing directed lending to agri-traders. You have small and medium enterprises, mid-corporates operating in rural areas which are getting funded.
Nitin Agrawal:But those are very sparse and very in-between and very focused on certain segments and very driven through product and it is not a place where a customer makes a selection right. But there is an opportunity to provide access to a much larger bouquet of services where customers can select and reduce costs using technology to both provide access, deliver, deliver and then scale those services up. So I see a massive opportunity and that's the reason. Working in larger corporates, I thought this is the time when rural has to be hardest. This was the time when technology had reached that inflection point, I would say. The launch of Jio the data becoming democratic became a trigger for at least me and my co-founders to decide and just jump into it.
Shivani Kulkarni:And I think it's been what four years since you guys started Navdhan. So starting with like lending, just building some lending products for this customer right, do you also see you know things like insurance and maybe mutual funds or any other savings products being relevant for this audience and them finding value in it?
Nitin Agrawal:Oh, absolutely they are. See, the way we look at rural customer is that we look at rural small businesses. Because we lend to rural small businesses First of all, we look at business and household as a consolidated unit. A rural customer, a rural household and a rural small business is one consolidated unit. Now they don't have just the business and working capital requirements. They have many more requirements. Lending is just one form of providing money to them. Lending is just one form of providing money to them. But uh, you know there is this. There's this understanding that credit is nothing but the reverse form of saving. Right, you draw down first and then you keep saving up. A reverse could also work. So from a product fitment standpoint, yes, savings investment products could do really well.
Nitin Agrawal:Insurance is one area. It's not just rural. Even in urban space we have a basic lacuna of what is required and what is to be delivered, because the way insurance industry is structured is very, very different. It's not a service oriented industry. It's, even today, a product and a product distribution industry. The whole focus is on sales. So I'll not go on that route, but purely on providing multiple services to the same household for that household slash business. This is only cash in and cash out. You know, beat whichever form, be digital form or physical form, but it's nothing but cash in and cash out. We start with lending because it gives you viability, it gives you profitability, but once we scale, we definitely want to bring micro investments, micro savings, those kinds of products to these customers.
Shivani Kulkarni:So, yeah, to service this particular customer in terms of, say, reducing the cost of distribution and just being able to service them better, how big a role do you think tech will play?
Nitin Agrawal:Tech will play an extremely critical role. I did mention that customers are becoming discerning and they're out there on the ground. They're still getting digitally included. They're not fully digitally included today. So unless we reach to them and service them or process them through tech, it's going to be very expensive to offer profitable, scalable and dis and designing products, which is what the customers need. So just to tell you, for example, how we are approaching this is in terms of dimensions. One dimension is purely making the workflow automated end to end. The other dimension is there are opportunities to leverage tech and leverage intelligence to do underwriting, and underwriting is not just at one stage.
Nitin Agrawal:You know, for example, we have built ai wrappers around the, around the credit information. You're more familiar with some of this because you did our due diligence but we have developed a model around agri cash flows discounting. Now this is a typical ai machine learning kind of model. Some of these models have not been able to, you know, function so far because they were being more looked at as macro models or, you know, very generalized models. We are doing it at a hyper local level, which means that we go at pin code level. Then our assumption is it is far more replicable, scalable and far more predictive in that sense. But to make it replicable, scalable, predictable, we need to templatize it and we need to build intelligence around it. That can only happen if we build through tech tools, right? There is so much of noise around Gen AI. You know, people like us have been using machine learning for a while, and not just learning. Machine unlearning also becomes important. So we need to get the right data points and the right pieces around it.
Nitin Agrawal:So I just to recap so one is pure play workflow automation. Second is building these tools at various legs to make it happen, to make the workflow function. The third is also bringing the lenders digitally to their households, to their businesses, right. So we work in collaboration with lenders. We originate loans on the balance sheet of other lenders under co-lending format.
Nitin Agrawal:So the lenders who like this space as priority sector asset, who like this space for their granularity, who like this space for the high yields it offers and good quality portfolios that can be built in the space because usually you would know that quality of portfolios are far superior we offer them opportunity to participate through the tech platform. So we have built a BRE based credit allocation engine which allows various lenders to partake the curated loans that we do. We cannot do this one at a time. It has to be done at scale. It has to be in our on-tap method. Therefore, the Asantech platform which we have built goes and ties up, integrates with the existing systems and processes of the banks and NBFCs and then, seamlessly, it starts moving the data in and out so that these loans, these data points, converts into transactions these data points converts into transactions Makes sense Because, from a bank's perspective, I think what will help them is also reconciliation, visibility and, just for their compliances and processes, data being readily available, right.
Shivani Kulkarni:So yeah, tech will, of course. If you want to scale of balance sheet, I think tech will be a big, big part of it. So great, I think. Moving to the next section, right, I also want to, given that you have traveled extensively and understood the customer on ground right, what are some of the tips that you would like to give budding entrepreneurs who would want to build in this segment as to how should they go about understanding this customer?
Nitin Agrawal:Well, I don't think I have the authority to advise, but I can just tell you what excited me and what worked for me and maybe it can work for others. First of all, if you have not fallen in love with the segment and with the space, you will find it frustrating. So there is a little bit of a lunatic, little bit of a romantic out there who has to love that space, who has to love that space? To me personally and I see this in a lot of my team members they just enjoy that feeling of working in that space, which is so interesting. Right, you come across so many nice and beautiful things. Just this afternoon in a conversation I was saying the names of places we work are far more exotic. Somebody named a place. Oh yeah, these are such exotic names. I mean, if you start hating them, you'll not like them. You meet such diverse livelihoods, such interesting work people do.
Nitin Agrawal:People are talking about gender inclusivity. You know we as a culture have a huge respect for gender inclusivity. It's very difficult for people to imagine. I come across so many small businesses in my portfolio where they have employed only women, not just because they are doing welfare, but because they find their skill set superior for that particular job than the menfolk, and they are able to get beyond their gender hang-ups to allow women to participate in a equal manner. There is no discrimination right. So some of these beautiful things you come across when you go down on the ground, if you love it, you'll just incrementally keep loving it, but if you don't like it, don't do it, because then everything that you see you will not be able to appreciate and respect it. There is whole lot of interesting stuff out happening out there, whole lot of interesting stuff which is not on google, which is not on internet, which is not on facebook, which is not on insta, but happening.
Shivani Kulkarni:so go and enjoy that well, that's we actually do tell our entrepreneurs as well. Right, because there are a lot of entrepreneurs in the early stage who have an interesting idea but don't have co-founders. I think that is going to be the most critical decision for you, right? Like most entrepreneurs have two marriages it's one with the wife and one with the co-founder so you better get it right, absolutely so.
Nitin Agrawal:I was lucky, but let's hope all the new founders are lucky as well.
Shivani Kulkarni:And I was lucky, but let's hope all the new founders are lucky as well. And when do you invest in tech? I think this is a question that founders ask us. We keep asking founders right like show me the tech in the business. So at what time do you think is the right time to invest in tech for a business? I can tell you.
Nitin Agrawal:For us tech, we had a tech first approach. We were very clear that we are building a fintech for rural markets. We are not really building a pure play lending business. We have done lending all our lives. We have also seen how tech is so very critical and we knew for the next 20 years journey how a tech led is more important than tech enabled. I think it's very critical to differentiate between a tech enabled business versus a tech-led business. What I can tell you is that the first two years of our coming together as co-founders, we did not book any business. We only worked on tech. Barring me, rest of the three co-founders do not come from tech background, but please engage with them now. They can give any techie a run for their money. Also, the product mindset is extremely important. What are you really trying to build and why is tech important? If that is very clear, then it becomes. The life becomes very easy.
Nitin Agrawal:We we started by thinking that we'll cobble up solutions and build a platform. We realized very early in our journey it won't work because some of those solutions do not exist. You have to create. So these were beyond make or buy decisions. These became the core decisions of running the business. So we started by investing in tech in the first two years itself. So the first investment we ever did was tech and it's been like a tech-led business throughout. In fact, today is the third anniversary of our business operations commencement.
Nitin Agrawal:So we commenced business after first two years of working on the platform, once the platform was in certain shape which was live and active, and we had to clearly think differently. Right? So in lending space, people have loan origination system, loan management system, this system, that system. And then we looked at the consumer space. Right, look at how Swiggy looks at solutions. Right, it's not a restaurant management system. Right, it's a microservices architecture. Who in financing space, is using it? People have LMSs legendary systems or archaic systems and doing it.
Nitin Agrawal:Here was an opportunity to build something new and disrupt the way traditional lenders have been thinking or traditional financiers have been thinking about tech. So, therefore, workflow automation, building tech tools, disrupting the whole piece to say that you can build applications on a basic database layer at the same time. Make all the functions happen and not call it an LMS and LOS, because it's like a plug and play and multiple products can be run on the same time. Make all the functions happen and not call it an lms and los, because it's it's like a plug and play and multiple products can be run on the same solutions.
Nitin Agrawal:Some of this thinking to develop asan as a product and a platform, you know, first we built it out and like a you know a suit of micro apps and now it has slowly transformed into a fully fledged platform where we are able to go and plug and play. In the lenders books we have been a lender ourselves in the past, right, so we know what pains we face and especially when you're going into a high opex zone, you better do it uh, you know through automation than otherwise. So we had to go beyond tech enabled and automation and simple rpas, which are typically used in in tech, to looking at what kind of solutioning we want, how to use intelligence if People try to use Gen AI and AI and ML these days but it's just pure play intelligence to build systems which can make things work and agile enough, you know, to keep making changes, updating them and run them at scale.
Shivani Kulkarni:So now that we have spoken about a lot of rural businesses, and especially in financial services, right, how do we think about scale here, like how big can this, uh, can a company be?
Nitin Agrawal:well, I think, more than the scale, I would say the pace of building scale is very, very critical, right. So from a time standpoint, market size standpoint, profitability, pool standpoint, it's amazing. There's, no, no reason to question that. But the critical piece is how do we scale fast enough to reach largest number of customers, provide best possible loan variant you know, non-loan variants and how quickly we are able to meet larger requirements for that customer's wallet, right. So gain wallet share both for the small business as well as that household. I think that's the big big game. The undue advantage I have there is number one I have my co-founders who are extremely seasoned and who know how to manage scale, who know how to manage scale ups, and they can do rapid scale ups. So you would have seen, right, last four months we have tripled in our matrix. So rapid scale up is definitely a DNA that we are building, rapid scale up, at the same time, making sure that the customer service quality is intact, right. So financial services is not about only GTM, it's not only about finding the right CAC, it's also about how do you build customer stickiness, how do you service the customer the way they want to be serviced, how do you get the money back right. So collections quality, portfolio quality, collection efficiency. I think scaling up fast and with good quality is critical, and that cannot happen unless you templatize, create modular methods of scale up and use technology to work with your founder.
Nitin Agrawal:When I say founders, I don't mean just my co-founders, but also people who work with you are my financiers, the lenders, right. The lending ecosystem is very ready to help you. It's priority sector asset for them. They like the space, but they don't want to build a distribution reach. We are using both both tech and people on ground as an extended arm, and then we are also doing it in a regulated manner, right. So we ourselves have a license. It ensures that we are able to do co-lending. So I think the big gameplay for us here on is not as much how big we can grow, but how quickly we grow large and how compliant we are in that growth, how quality and efficiency conscious we are in that growth excellent, uh, and maybe say two things that you feel are essential for success.
Nitin Agrawal:Well, I think, passion and compassion.
Shivani Kulkarni:Okay.
Nitin Agrawal:Right. So you drink, feel, drink, feel, drink, feel. So this morning, when we were having breakfast, one of my colleagues said this bhagni is a chain. And then he immediately said you know how many CFCs Navdhan has? Does Bhagni has as many?
Shivani Kulkarni:You're just breathing and living in Navdhan.
Nitin Agrawal:This is the passion which you need to have, which is infectious, which people around you, your teams, are able to buy in, and it is a whole lot of positive energy. So I'm in my middle ages but I have young guys working with me, so I derive energy from them and I can only derive energy from them if I am compassionate towards them. So compassion is not just for your customer and your segment. Compassion is always towards all the stakeholders and, more importantly, your own team members. You know you have these annual appraisal processes. No, we have a, you know, every minute appraisal process and you're there, some of the policies, processes you follow, and team sees through it and that helps you at scale Right. So I would say passion, compassion, these are the two ingredients to the soup for success.
Shivani Kulkarni:Wow, that's actually pretty good. So I'm going to like move on to the last section. Maybe let me ask you two, three rapid fire type questions. Okay, what is the one common misconception people have about being an entrepreneur?
Nitin Agrawal:Being an entrepreneur. Well, some people think they're rude, rough and arrogant. Some people feel they are unfairly rich. Some people feel they are the poor souls who are doing all the slogging and rest of the people are earning salaries. I would say all of that is correct. None of this is a misconception. You know, people, even who are in jobs, are entrepreneurs. In a certain way, entrepreneurship is a spirit right. So you either have it or you don't have it. You can be building a business, but you're not an entrepreneur. So, entrepreneur, I would say, the first job is to manage risk, because the fact that you're an entrepreneur is the biggest risk you've taken. And after that you're in the business of risk management to make sure that your objectives for the institution are being protected, that your objectives for the institution are being protected. You can, for example, I mentioned about scaling and scaling fast. So I need to protect my organization from any risk that comes where I can't scale up fast, be it regulatory risk, business risk.
Shivani Kulkarni:You know any kinds of risks. What is the weirdest advice you have gotten?
Nitin Agrawal:Don't start up, you won't be able to do it. You don't have patience and I'm a little. I'm from Merit right, so I'm a little arrogant. My wife didn't believe that I would be able to have my team sticking around me. Forget about anybody else. We have zero attrition in my tech team my original co-founding first 50 team members are all intact. She is actually surprised. She's an HR professional. She's surprised that how come this madman has all these people rallying around him? I think the advice was not to start up because I can't keep people, but I would say people have turned out to be my biggest strength.
Nitin Agrawal:Got it and that advice came from my wife Good.
Shivani Kulkarni:And what do your kids think about? You know your startup.
Nitin Agrawal:Well, I would say, first few years they thought he's gone mad. It was very simple, they didn't think anything about it. They thought he's just gone senile. He's worked for so many years. Now he's tired. And you know, there was COVID for first two years. So I was working from home. So you know, the whole world had a situation where the fathers were free. They were, you know, doing things at home. Well, I was also doing things at home. I was cooking, I was cleaning, doing all of that. But at the same time I was always busy. I mean, I still did not have time to just sit, yeah, play Ludo or watch Netflix or watch Netflix, while the whole world was just watching Netflix.
Nitin Agrawal:And then they don't understand why does he study so much? So my son, who's in sixth standard, says Papa, your books are bigger than mine. Basically, I just keep you know, keep studying, keep reading, keep reading. I think that they thought I was mad. But I think when the external validation works well for children, they don't know. Now they first thought he was a CEO of a, a big company. Now he's got this bichara khobcha happening. But I think now, after five years, they have developed an appreciation because they have grown up so they understand and I think the awareness levels of what startups are is far higher. So my daughter, who's in 10 standard, she understands it fully. Well, I think she knows what what Navdhan is doing. She knows you know, especially on the tech side. She's very excited and she keeps herself updated on what all we are building.
Shivani Kulkarni:It has been great chatting with you, nitin, thank you. Thank you for sharing the advice, as well as life lessons, that you have learned, and thanks to our viewers for joining us.
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