Note to Readers: Germ of an Idea is a series about the entrepreneurial idea—how it was conceived, shaped and launched, detailing the early days filled with uncertainty and apprehension, the bold steps taken and the eventual success. The series hopes to inspire thousands of potential Indian entrepreneurs who are on the cusp of starting up or have ventured recently or are in schools and colleges dreaming of turning founders.
At sundown on most weekends, Shashank Kumar would take his Ford Mustang for a spin when he was working for Microsoft in the US. The year was 2013. The IIT-Roorkee alumnus had secured a high-paying job, was living the life of his dreams and was in no mood to miss out on all the hard-earned fun. The black Mustang, with silver streaks, represented the new-found freedom and success.
His father had wanted him to write the UPSC exam and become an Indian Administrative Services officer. “You know, I’m from Bihar, where many parents love their son to travel in a lal batiwaali gadi (car with a red beacon). Somehow, that didn’t appeal to me,” says Kumar.
Life was good but deep down, he wasn’t satisfied. There was a yearning to do something meaningful, something that would make an impact. To all his friends and colleagues, things could not have been better but Kumar wanted more.
Enter Harshil Mathur, his friend from IIT-Roorkee. “Harshil had created a good impression on me with his intelligence even back in college. He was one year my junior at IIT. We started talking and both of us felt we should take the plunge,” says Kumar.
Mathur was ready to quit his job at Schlumberger and join hands with Kumar. After dabbling with an idea to create a payment gateway for a donation portal, the duo realised that there was a vacuum in the small business space.
That was the time when small and medium enterprises (SMEs) were struggling to process orders online. In February 2014, the two friends decided to head home, leaving behind lucrative careers. They had found their calling. “My father was really upset about that decision,” says Kumar.
Today, Razorpay, the company they started, is valued at $7.5 billion, one of India’s most valuable fintech startups. The Razorpay platform accepts and disburses funds to small businesses and enterprises, besides running a neo-banking operation called RazorpayX that provides working capital and credit cards to businesses.
With Razorpay, you gain access to all payment modes, including credit and debit cards, UPI and mobile wallets. It even has an international payment gateway that covers more than 100 different currencies.
The company has raised more than $740 million from investors such as GIC, Tiger Global, Sequoia Capital and others.
The Mustang isn’t there in the garage anymore but there’s much more to look forward to.
Also read: Germ of an Idea | How three friends battled legacy players to turn Darwinbox into a unicorn
The germ
The realisation that smaller businesses had shabby experience in getting a payment gateway account or accepting payments had hit home. Kumar and Mathur didn’t arrive at this problem statement from the get-go. It took some trial and error and a bit of tech dabbling.
“It was just illogical and frustrating that small businesses couldn’t accept money from their customers easily. Why should the process be so complex? It was a tech problem that needed to be addressed,” says Kumar, who is Razorpay’s chief technical officer.
It was around September 2013 that the duo realised the problems people had with payment gateways. Their conversation was initially limited to themselves. It took some time to approach a bank and pitch their idea.
“Harshil was not convinced initially but later when he had this conversation with HDFC in February 2014 and got the verbal approval, he went ahead and quit his job. Before that, I was pushing him to come on board full time.
“In fact, Harshil did not even check with me once he made up his mind to quit. He resigned from his job and then told me about it…I took two months more to join, as I had to wind up things in the US.
I remember Harshil telling me that he didn’t want the job to be a distraction. Let’s take advantage of this opportunity and look to go in full time – that was the line of thinking.”
We were on top of the world. We felt like Ab to hogaya. It was like we got what we wanted from this world!”
Early days
Kumar and Mathur moved to Jaipur, which is also Mathur’s hometown. The plan was to cut the cost of living and lead a frugal life. There were no fat pay cheques and cash had to be conserved.
“In Jaipur, we were able to live with Rs 10,000 at that time,” says Kumar. When you move into a new city there will always be some discomfort initially.
“You have to build your network slowly. The fact was that both of us were out of India for a long time. So, we didn’t have any professional network. Whatever network we had was through our schools and college. That’s why we thought of moving into Jaipur because then we will have the comfort of a roof and food and that too free of cost. We would also be near to Delhi. That was another consideration. We had to often travel to Delhi for engagement with the banks. Technically, we could afford flights but we had a frugal mindset and we didn’t want to take them. We would travel to Delhi by train or bus.”
Moving from a temperature of 10 degrees in the US to 40 degrees of heat in Jaipur was tough. Both of them used to travel on Mathur’s bike to various schools and colleges trying to sell their product.
“We used to tour the city extensively for sales. The college authorities would think we came there to seek admission.”
The move to Bengaluru came later in April 2015 after they completed their Y Combinator programme in the Bay Area and had raised the seed round. They lived in a flat in Bengaluru.
“Startup founders like Kunal Shah and Naveen Tiwari were in Bangalore, and we wanted to connect to a network of angels. Our customers were also from Bangalore and Delhi, majorly Bangalore. So, it was easier to have face-to-face meetings with them,” says Kumar.
BackstoryGrowing up, Kumar had not even thought of being an entrepreneur. “I was more like an underdog as a student. Since I was not an exceptional student, my friends never expected much from me.”
During his IIT days, Kumar met Mathur in the college lab when he was scouting for juniors to do some projects on the side.
“I was in my third year and Harshil was in his second. Usually, students find it difficult to do projects which are not part of their curriculum. There’s enough to keep them busy, even otherwise. Harshil had a good name in the campus as he was technically very sound and I asked him whether he’ll be interested in it.”
He invited Mathur to his room one evening. “Harshil was 6’1” and had an imposing figure. The chair I offered him seemed to be too small. There was an aura around him.”
According to Kumar, most students would wonder what they would get in return from a tech project that won’t earn them any academic credits. But Mathur was quick to say yes. “Yeh karne main bahut mazaa ayega (this would be so much fun) – that was Harshil’s response. Any guidance from any senior was a welcome thing for him. He was highly motivated. That came across in that conversation.”
Also read: Germ of an idea: How edtech firm Eruditus was founded
The road ahead
Razorpay offers a full-stack platform for small businesses which often struggle to manage finances effectively or in dealing with compliance issues. Besides the payment gateway, they have RazorpayX, a payroll management platform called RazorpayX Payroll (Opfin) and Razorpay Capital, a lending platform.
The company is looking to provide end-to-end digital solutions, making it the ideal platform for payments, banking and lending products.
The company has turned profitable, with a net profit of Rs 7 crore in FY21 on a standalone basis. Its revenue from sales climbed to Rs 841.2 crore in FY21, a 65 percent jump from Rs 508.9 crore in FY20.
IPO is something that will happen, but not in the short term. “Over the next one and one and a half years, we want to focus on growing the product. How can we get to a $100 billion of TPV (total payment volume)? How can we serve more than 10 million merchants? These are the objectives in the next couple of years instead of the IPO. We have to scale up our neo banking platform to serve a larger scale of customers. For us, the neo- banking product (both on the banking and credit side) will be critical,” says Kumar.
Today, the company deals with over 8 million merchants with a TPV of $70 billion.
Kumar says he enjoys his day-to-day journey more than the milestones. “But if I have to really point in any direction, real success would be achieved when we make every business a digital business. If we can digitise their businesses and digitise their financial line to a large extent, we will be a success. Rest is all about milestones.”
People should do their life’s best work at Razorpay. “That’s the culture we want to build,” says Kumar. People should be happy and productive. They should feel proud of the work and achieve exponential growth at Razorpay.
“We have a fast career path at Razorpay. We share a transparent office environment and believe in sharing plenty of information with employees, as they should know the direction the company is taking. Leaders are highly empowered and they take ownership.”
The business slipped when the coronavirus hit home. Kumar and Mathur had to quickly think up ways to cover lost ground.
They decided to focus on online education and ecommerce, leaning less on segments that were struggling due to the pandemic. The plan worked, as a lot of businesses wanted to do digital during this phase.
While Mathur’s father wants to know when the $10 billion valuation will be achieved, Kumar’s father still hasn’t given up on the UPSC exam. “He’s however happy to note that I’m working closely with the big banks and is looking to expand overseas,” says Kumar.
In February of this year, Razorpay announced its first international expansion with the acquisition of a majority stake in Curlec, a Malaysian fintech firm. It was the company’s first overseas acquisition and fourth overall.
Not a bad time to let go of that lal batiwaali gadi.
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