"Entrepreneurship is only successful when you have no other alternative"

In 2006, we clocked revenues of Rs.5 crore. We were generating free cash flows. I was finally free from all my problems. Free from my father! At an alumni meet at Delhi College Engineering, one of my classmates told me I should raise money. Who would give me money? He was from PwC. I didn’t know PwC was this big consulting firm at the time. But I thought why not? He would tell investors to give me 15 minutes, literally 15 minutes, that’s all I got. I pitched to one investor as he walked from his room to go have breakfast in the restaurant! All was said in the elevator and the short walk to the restaurant.  

The first question that Ravi Adusumalli, the managing director of SAIF Capital India, asked me when he walked into my office was about the poster of Bono. It had the lyrics from the song Elevation… “You make me feel that I can fly so high”. Ravi was a Bono fan too. We immediately hit it off. Both of us were passionate about music, and we liked the same kind. He has been a co-founder of sorts. He has believed in my vision, my team and me. You need investors, who buy into who you and your team. Ash Lilani is another investor who bet on us early. 

SVB and SAIF capital invested $5 million in 2007. Our revenue was Rs.11 crore then, with EBITDA at Rs.5-6 crore. The second round of investment came in November 2008, at the height of the Lehman crisis. We raised around $10 million. In 2010, we decided to go for an IPO — we had revenues of Rs.200 crore and a profit of Rs.100 crore. 

The struggle had paid off. We had become significant contributors to telcos’ P&L by selling pre-paid lifecycles products such SMS packs, data packs, roaming services apart from the content and value-added services we started with. But the market was in turmoil, there was an LIC housing scam and the listing of OnMobile didn’t meet with great success. I thought maybe it was not the best time for us to go public. It turned out to be the best thing that could have happened. A big change was coming…

10 June, 2010 — Steve Jobs introduced a phone to the world. A phone with apps. I knew then that consumers were going to shift on to mobile internet, no one would bother about the content telecom companies were providing. Our business was going to die… After having struggled so much to get it up and running, I was going to be knocked down by the very technology that had been my saviour. When such an industry shift happens, there is no room for dilemma. We were a feature phone-led business and feature phones were on their way out. We had to re-invent…there was no other way.

We knew people would buy games and apps — mobile commerce had to happen. There was no payment system in place. So that’s what we were going to do...we would enable people to pay through mobile. That’s how Paytm happened. But there was an issue. There was little interest in what we were offering. I knew we had to become a consumer-facing company before the tsunami of smartphones hit us. We tried our hands at so many things — from advertising, content services, games to contests. 

The hit and miss brought an idea. Why don’t we try to reach phone users directly instead of waiting for a buy-in by the big guys? We didn’t want to get into commerce; we didn’t want the logistics nightmare. Cinema, bus and flight tickets were already taken….that’s when a colleague suggested recharges! We added post-paid bills, then bus tickets. We started selling digital goods so people created Paytm accounts and used our payment system. But there was a big problem. In cases, when the transaction didn’t get through, the refund to the bank or credit card would take 7-8 days! We got tons of emails, saying we were a horrible company, that money had not been refunded. That’s when we came up with closed-loop mobile wallets, wherein money can be credited instantly. That way, users were assured that their money is safe. Since we were selling bus tickets too, we had to apply for a semi-closed wallet license…that’s what we did… For the mobile wallets to take-off, we need to have an offline presence as well. So apart from the large retailers, we tied-up with kirana stores, paan shops, vegetable vendors even petrol pumps. We came with up a sticker with a personalised code which can be scanned by Paytm users through their phones and the amount is transferred to the merchant’s account. Now we have 85,000 offline merchants. 

At the 2011 conference, organised by the Wall Street Journal, Jack Ma was one of the speakers. I only knew of Amazon till then…I was blown away by what Taobao, Alipay and Alibaba had done. The rate of growth and the scale he was talking about was amazing...increasing the GMV from $64 billion to $120 billion in a year! I came back and told my team, we had to build the Taobao of India. For that, payments needed to ride on a commerce platform. I made several more trips to China to understand how things worked. Unlike most entrepreneurs who go west to learn more about the internet business, I chose to go east.

The board was not convinced about our transition from a B2B to B2C company. They felt I was a good techie but had little idea of how to build a consumer brand. I took it to heart. I was going to build a consumer brand the world will remember me for. They kept telling me acquiring customers is an expensive affair and we don’t have the money.  My board of directors were my sounding board, only this time I wasn’t listening… I came up with an offer. I put up 1% equity for Rs.5 crore on the table. The money from that stake sale would be used to fund the consumer business. Seeing how serious I was, the board gave me six months to get it right. They didn’t get why I wanted to rock a steady boat…we were doing well, making more money than last year…

I just knew that the future belonged to smartphones. To be part of that future, we needed to build a marketplace for our payments platform. We started one right after Flipkart raised a billion dollars in July 2014. They told us we were too late in the game coming after Flipkart, Snapdeal and Amazon. I couldn’t care less by now. I knew better than to let sceptics worry me. Not only was the payments business going to ride on the marketplace, Paytm was to be the platform for SMEs to use our payment and financial services. In less than two years, marketplace forms 40% of our GMV of Rs.20,000 crore and we have over 125,000 merchants on board. Paytm had not raised money till 2015. We were running the business with cash flows generated by other businesses. It was not until March 2015 that Paytm raised its first round of $200 million… 

It is overwhelming meeting someone you admire...it was the same for me. Little did I know that a presentation at SAIF Partners meeting in Hong Kong would bring me face to face with the man I idolised. Ravi had taken us to meet this partner from SAIF China, who wanted to know about Paytm, after my pitch that it would be India’s first internet company with 100 million users. He wanted to know our plan…he took me to meet Jack Ma…

That meeting of the underdogs was like a light and sound show – it had the right amount of emotion and little persuasion was needed. I was going on about trying to learn from what they were doing, when Jack Ma started to talk about how Paytm would be a good fit for Alibaba. It felt so surreal, I went up to him up and asked, ‘Can I take a selfie so that I remember I met you?’ A selfie, can you imagine? This was in October 2014. The term sheet was signed on 11 November, 2014, which was Singles Day in China. In less than a year since we made the presentation in Hong Kong, we hit our target of 100 million users in August 2015. Jack Ma told me this is just the beginning.  He is an incredible people manager…he told us that you should build a company that enables half a billion Indians connect to the mainstream economy. That’s the plan with the payments bank.

Entrepreneurship is only successful when you have no other alternatives. When things didn’t go my way, hope was the magic drug because there was little else to go on…As Jim Morrison says, “The most important kind of freedom is to be what you really are. There can’t be any large-scale revolution until there’s a personal revolution on an individual level. It’s got to happen inside first.” Once that happens, you will keep flying come rain or storm…Being an entrepreneur helped me break free…