In 2017, Decentralised Finance, or DeFi, was not yet a buzzword in India, and cryptocurrencies were being viewed suspiciously as the country's regulators were mulling if they should be banned or okayed, even as Bitcoin rallied.
Around the time, three Indian entrepreneurs -- Varun Deshpande, Ratnesh Ray, and Siddharth Verma – founded Nuo Network, a decentralised crypto-lending platform, aimed at emerging economies. This was the second startup founded by the trio after their previous platform, BeeWise, built for commerce apps, was acquired by Aditya Birla Money.
Cut to 2021, cryptocurrencies are still struggling to find complete acceptance in India. The industry is dealing with a 30 percent tax rate, with no clear regulations in sight. Some entrepreneurs are moving to Dubai, others are contemplating whether India can, in fact, be a favourable market for their businesses amidst the current policy scenario.
During these years of uncertainty, Deshpande, Ray, and Verma decided to close down Nuo Network and start up again to cater to the US market, a safer haven for cryptocurrencies. They came back in a new avatar – OnJuno.
After a $3-million seed round in 2019, OnJuno started garnering eyeballs from users and investors, and has closed its Series A round. The startup counts Sequoia, Polychain and Dragonfly Capital among its investors.
Its list of angel investors has marquee names, like Etheruem co-founder Joseph Lubin, former Coinbase CTO Balaji Srinivasan, Pine Labs’ Amrish Rau, and Jupiter Money founder Jitendra Gupta, to name a few.
Rau, in fact, said OnJuno is his most memorable angel investment, and the founders, among his favourites, in a recent interview with Moneycontrol.
"They try the toughest problem possible and their energy is unbelievable. I absolutely love those guys,” Rau said, a ringing endorsement from a seasoned entrepreneur, and investor.
But getting here wasn't easy. We take a look at the journey of the founders and the startup from being a DeFi platform before it was lit, until now, when they are looking to make it big in the US.
What OnJuno does
In 2019, OnJuno started off as a neobank focusing on cross-border remittances for Indian immigrants. Today, it has evolved into a crypto- native platform, enabling users to convert a part of their salaries into tokens with ease.
“No one else has been able to achieve switching between a crypto wallet and a bank account. On our app, you can move between cash and crypto in a single click,” said OnJuno’s CEO Deshpande in a chat with Moneycontrol.
The app serves as a tech layer over a customer’s bank account and allows for further crypto-related use cases. Customers can direct the app to convert a specific share of their salary to crypto tokens of their choice every month, after sharing details of their salary accounts.
The most preferred token to convert their salaries for customers on the platform is the United States Dollar Coin (USDC), followed by Bitcoin.
USDC is a form of cryptocurrency that is identified as a stable coin, meaning it is linked to an existing asset, in this case, the US Dollar. Stable coins stay at a fixed value, in line with the asset they are linked to. This lends them stability and results in fewer drastic fluctuations. So, in this scenario, 1 USDC = 1 US Dollar.
The platform provides a complete loop to convert the currency to USDC, earn a 4 percent annual yield on the same and also a metal MasterCard debit card that allows users to spend their USDC.
Changes in business strategy
At a very early stage, the founders realised that the only way to build a sustainable business in cryptocurrencies is to be within the ambit of the regulations. That is also why the startup shifted focus to the US market, which has been accepting more cryptocurrencies, albeit with a few exceptions.
Their previous startup, Nuo Network, was a decentralised non-collateral based crypto lending and borrowing platform based on smart contracts on Ethereum.
That product has long been under the scrutiny of the US securities and capital market regulator, the Securities and Exchange Commission (SEC). More recently, US’ leading crypto exchange Coinbase was sued by the SEC for offering the same lending product.
The other easy and usual route chosen by DeFi platforms is to introduce a token, which is usually an easier way to grow the platform. However, the founders refrained from taking that route because token or not, the crypto lending product would lead them into the crosshairs of the SEC.
“Back then, we thought that eventually the product may get regulated. However, that has not happened till date. We did not want to be in that grey area. So we decided to shut the platform down and start again because we wanted to build something for the long term,” says Deshpande.
After launching OnJuno, they partnered with a bank in the US to start again with baby steps, first as a neo-banking platform. For young entrepreneurs, being patient and waiting to build the right product once again can be an uphill task. The rejig also meant that the team will have to undergo changes to onboard more employees who can work towards building crypto products eventually.
However, patience was not a hassle for the team.
“This is something that comes naturally to us – taking big bets at critical junctures and being patient about it. It was tough but we were used to this by then,” explained Deshpande.
But was it difficult to convince investors of this drastic change in strategy? “No, not at all, actually. The team and the founders were so convinced about it, the investors were fine with backing that conviction,” he says.
North America is the fastest-growing market for neo-banking, and, according to data by Insider Intelligence, there will be 45.7 million digital-only bank account holders, just in the US, by 2024, accounting for close to 20 percent of the country’s population.
“We decided to not focus on crypto at all, initially. Instead, we focused on the immigrant use case and got customers onboard. Once we became more compliant, we introduced crypto slowly.”
The journey to going crypto native
Through the bank partnership, the startup became compliant with the country’s Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines.
While the startup does not have a banking licence of its own, it possesses a Money Services Business (MSB) licence. Additionally, through its bank partnership, it comes under the purview of the Office of the Comptroller of the Currency, which regulates banks in the US.
With the apprehensions around regulations behind them, it was time to go for the kill and introduce crypto-related products.
Currently, the platform has 30,000 checking accounts and plans to increase its users to a million. Currently, 25-30 percent of its users earn in crypto ($1,000/per month), the pie of which OnJuno plans to increase. Others earning in USD convert an average of 20-30 percent of their salaries into tokens.
The platform is also working on native coins of the apps, which can be used to pay fees and plans to add more services in the near future.
In the past three years, the company has been building from India for the US. Starting up again during the pandemic had its benefits as most processes and approvals were executed online. In fact, 95 percent of the team did not even had to travel to the US.
At this point, OnJuno is not looking at building for the Indian market. Over time, if there is regulatory clarity and the environment is favourable for crypto products, the founders will build for India.
Deshpande sums it up, “The journey till here was tough, but now it's rather easy since, in the last six months, we have found a product market fit.”
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