Episode 35: Pushkar Mukewar- Building Drip Capital from zero to $2 billion in transactions
About Pushkar Mukewar:
My next guest on The One Percent Project is Pushkar Mukewar, Co-founder and CEO of Drip Capital. Pushkar kicked off his career at Capital One, went to work for Oliver Wyman and Saama Capital. He has a Masters from Georgia Tech and an MBA from Wharton School of Business.
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In this conversation he talks about:
His journey building Drip Capital, going from 0 to 2 billion dollars in transactions on the platform.
Getting incubated by Y Combinator when Drip Capital was just two founders with just an idea.
Scaling the business across three markets, building a team of 250+ employees, and raising 500M+ in venture funding.
Key Take-Aways:
Building a startup is about experimentation, understanding the customers’ pain points and launching something - failing quickly - launching again.
Your success as a startup depends on how and why you uniquely solve your customer’s pain points.
Scaling up a business is like building a scalable machine. You start with generalists who can do everything and bring in specialists who can build specific functions once the business scales.
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Transcript:
*The transcripts are not 100% accurate.
Pritish: Welcome Pushkar, to The One Percent Project.
Pushkar: Hi, Pritish, nice to be here.
Pritish: What excites you the most about building a business
Pushkar: I would say it really comes down to two things, the sort of building out this business with really solving a customer problem, which we could relate to. Growing up, I had seen not a lot of small businesses struggling with getting access to credit, particularly the problem is a lot more prominent in markets where traditional institutions are not servicing the customer segments where and so, one thing which is obviously exciting is how our product is able to drive impact and really like a pain point which is close to our heart and is impacting a number of small businesses in the markets we operate in. The second thing, which excites me about building a business is that it's really all about people. As a part of this journey, we've now have a team of over 250 people. For a lot of the people, this is their career. At some level, enabling personal and professional growth for all the people who are associated with us in this journey is also immensely gratifying and exciting for me.
Pritish: How was the experience pitching to YC?
Pushkar: I would say obviously, a very different setup, then it was just the two of us, me and my co-founder, Neil. So, maybe I'll give you some more background on how we got started and then leading up to the YC pitch. We had already spent maybe over a year leading up to that point. So, my background was largely computer science and then I spent a number of years in financial sort of similar, my co-founder also had a similar background, he'd spent mostly a CS grad with a number of years in Wall Street. So, we were both itching to venture out and launch our own startup. But we're not very sure about what exactly we were going to do and we decided to choose on Fintech as the domain and within Fintech credit, specifically, just given our background, so, we decided to pretty much quit our jobs in 2014 without really knowing exactly how this is going to go, what problem we are going to solve.
We had some hypothesis, but we decided to quit and said that, okay, that's the only way we'll be able to go out there, figure out in the market and put ourselves in a spot where we had to figure it out almost. So, when we pitched to YC, by then we had probably spent 15 months or so trying out different things. While we were still two of us, there was a lot of work which had gone behind, really figuring out a customer problem, where we could come out with a solution and solve that customer problem. So, by the time we went to YC, we really had a good understanding of the customer pain point and that was something which YC really cared about. So, while we didn't have a team, we had launched with very few customers at that point, the one thing which YC kept focusing on and I do believe fundamentally, that is a crux of any startup is that, do we really understand the customer pain point? Do we really understand how and why you would be able to solve that pain point? So, yeah, I would say that we had done a fair amount of work on that. So, that was one thing we could crack in the YC interview. The interview itself was an interesting experience. I am sure you've spoken to other speakers, but it's like a rapid fire interview 15 to 20 minutes with four YC partners sitting across the table. No answer can be more than [Inaudible 03:16] sentences, because they cut you off if it's too long. So, you also obviously had to practice to get it right. But now we're really glad that they decided to take a bet on us at that point. It's the first external validation you get about your business, about your product when someone like YC decides to invest. That was, to some extent, like a changer for us, a game changer for us. And things started moving in the right direction post that.
Pritish: Your business has gone from zero to a billion dollar transactions on the platform. So, that basically shows how your product has actually evolved in the last few years and the product development or the product journey for a tech startup talks about the why how and what. So, walk us through that.
Pushkar: Post YC, we had realized that the business model which we were operating, which was really focused on US, SMBs was not something where we had a differentiated acquisition strategy. So, we couldn't really acquire customers economically and the risk also, we couldn't basically figure out a way to manage risk at scale. So, we pivoted from there, too. So, one of the things which we had observed during those conversations was that many of the customers we were working with in the US, oftentimes sourced products from factories in Asia. Also, we realized that the credit problem was more exasperated when it came to emerging markets, perhaps in the US. So, in early 2016, this was three months after YC, I had moved back to it, it was still just the two of us, Neil and I and Neil was still in the valley and I had moved back to India and we were like okay, this is a pain point, we know it exists. So, let's start really focusing on customers in this segment of the market.
So, for the first three or four months, I was pretty much doing everything from pre sales, to sales to operations, to really getting the customer on boarded and working with them, and we signed up our first three customers, obviously, given that it was a credit business ran out of all the seed capital we had raised. So, clearly, the next step for us was to raise more capital. We were like, okay, we have some equity, and we need to raise more debt capital or credit capital. Neil started focusing his efforts on that, largely focusing on Valley investors. The realization we had that was in the valley, people didn't understand credit, but they understood startups and they understood, basically venture. So, while in an attempt to raise debt, what we ended up doing was raising a large seed round of like about four and a half million dollars. We're like, okay, as long as it's capital, obviously figure out how we best optimize the use of it. So, that was like the next phase. So, we had four and a half million in the bank, so it was not just YC capital, but we had raised another four and a half million, we had a few customers, we clearly had a problem which we had identified. Now we really needed to start scaling things up. So, we ended up hiring our first three hires at that point.
So, the first one was our engineering lead, who really started building version one of our product, we got a trade finance domain expert, he had spent about 20 years working with Standard Chartered, ICBC, many of the large trade finance banks, because he obviously had an understanding of the different issues which customers have when it comes to trade finance, more so from a regulatory standpoint, from a risk standpoint, and so on, so forth. Then we were a team of five ending around end of 2016. So, we started with five, 2017 was, again, continuing to expand that team, investing more heavily on the technology side as we started getting more customers and more transactions on the platform and it's been exponential since then. Now along the way, that five member team is now about 270 people. India was the primary market, we focused on mostly 2017, 18. The vision was always to build a global platform because we believe that the problems we were solving for Indian SMBs, was not very different when it came to other emerging markets as well and we launched in Mexico in 2019 again, trying to continue to ensure that we had one global product, but we had distribution teams built out in different geographies.
So, Mexico was the first market we launched in and that's been scaling up well, for us. We also launched a US business after that, which was focused on U.S small businesses, came more organically to us and along the way, different teams, different functions have scaled up. I think, for an organization to scale up, ultimately, you're building a machine and you're making that machine scalable. So, every part of that machine has to scale up. Initially, it was a lot of individual contributors who just had to get their hands dirty and do whatever it took. Then it became about setting up processes and starting to build out teams. We had smaller teams, so managers who could manage small teams, then it became about how you get senior people on board who can really think about the function or think about that particular domain and think about how to scale it up for handling 5x, 10x, 20x, the scale of it. So, that's been an iterative process, people have scaled up along the way, we've obviously brought on many more people along the way and it's been an exciting journey
Pushkar: Finance has a very simple business model, you lend money, people return it with interest and you repeat. Looking back, would you build demand first or supply?
Pushkar: I would say, definitely demand from the standpoint that even supply providers require demand. But I would say that maybe let me take a step back. I would say that you actually have to build start with demand, of course, you need to get your first pilot set of customers get that going and then you start building more and more supply. Once you have a lot of supply, then you continue to build demand. So, you are effectively operating in a marketplace model where you need customers who are requiring this capital. Obviously, you need capital providers and investors who are looking to invest in this asset class and it continues to be like a process where you need to keep expanding on both sides and ensure that both of them are in sync. So, I don't think it's one or the other. It is a simultaneous process.
Pritish: How do you keep your competitive advantage in this space?
Pushkar: I would say two things. One is really the technology which powers our risk management. The while trade finance is an industry which has existed for a long time, the SMB space has not been serviced well, and the reason why it's not been serviced well is because banks have perceived it always thought of SMB segment as a risky segment. The second is, banks haven't really figured out a great way to manage risk at scale when it came to SMB segment, and that's where our focus. Where we focus on is how do we continue to enhance our data infrastructure? How do we have a completely automated risk management system? How do we continue to understand more and more build models where we can predict risk better, where we can manage this better? How do these models keep improving, as we add more and more data on our platform, and that data is proprietary to us, we've gone through this experience of doing over $2 billion of transactions. We've also had, of course, our share of delinquencies in the past, which have been very instrumental in teaching us and hopefully, we have not been making the same mistakes again. But that has been a key competitive advantage. The second is our supply of capital providers.
Also, any new kind of credit platform has to go through a journey where they can attract institutional capital providers. The reason is, of course, any institution who is coming in and investing and looking to invest in the assets from the platform, they're looking for track record. Unfortunately, you can't have track record till you have one. So, we've had to go through that journey of really starting with small family offices and hedge funds and credit funds to them smaller community banks to now having a bank like Barclays as a partner. So, that's been a journey as well and it's taken us four or five years over 2 billion in transaction volume, a lot of track record to get large institutional investors comfortable with our platform or product or model. So, I would say these two will continue to be our competitive advantages even in the future.
Pritish: Your relationships with your initial investors, to your present investors, YC has a very different mindset, they are willing to actually back to founders probably who have a great idea, and today you raise from institutional investors as well. So, how has that experience been? How have you been able to adjust that communication or that relationship? Is it the same or is it different?
Pushkar: So, the relationship has also evolved with the maturity of the business and accordingly. For example, investors like YC, are very comfortable with seed stage like they understand the challenges which a seed stage company has, and we could easily have conversations where we would say that, hey, this is not working out. Because at the end of the day, they also recognize that a lot of times, building a startup is all about experimentation, about understanding of customer pain point, launching something failing, quickly launching again, and they're very comfortable with that model. They understand probably more than any other investor in the world, how early stage companies work, and what are the challenges which they face. As we've matured as an organization, the kinds of relationships or the kinds of investors we have been able to get on board have also mature and also changed or evolved along the way investors have come in and participated in our let's say, Series B, and C rounds, they also have a certain level of expectation, which is a lot more around predictability of the business there. It's a lot about how we can be very predictable in terms of our quarterly monthly numbers. But then how, what are the kinds of things we continue to do or we continue to need to do in order to accelerate growth and keep removing the bottlenecks and keep growing.
So, the conversations are a lot more data driven, they're a lot more structured, we, during YC days, we never had a board meeting, it was literally an officer with one of the partners. Today we have quarterly board meetings, we have monthly MIS calls, and we have monthly MIS reporting. So, the discussion is lot more richer in terms of data and the analytics and a lot of the data which coming which is coming from the but the one common theme has been that you always or at least I have tried to have a relationship with the investors where they know what's happening and build a relationship where I can be open with them. They can also have that same level of trust and openness with me and that's very important because to large extent, any investor relationship is almost like a partnership. Definitely more so from folks who have come on board earlier, where you are constantly working together to build this into a large company that has remained constant, while the nature of conversations has definitely evolved over time.
Pritish: So, now you manage a team of 250, 270 plus people. Six years ago, you were two people. How have you evolved as a leader?
Pushkar: As I mentioned, it's all about people and of course as the founder CEO, it's also always a personal challenge and a great learning opportunity. Because my role has to evolve every three six months as the scale of the team and the scale of the company grows. So, I would say that a big change has been first maybe two three years of the company I was lot more external focus, meaning that a lot more focused on talking to customers really understanding the customer pain points and also being quite involved with getting my hands dirty. So, if it required me to make a sales call, I would do that, if it required me to help out on product, I would do that, and so on. At some point, as we started building out a sales team and building out these different teams, the role became more about hiring and bringing on the right set of managers initial set of managers who could manage the team at that scale, and could perhaps were scaled to take the team to the next level over time, that role then, as we had more functions and more managers, and over time, even more senior managers, the role became a lot more internal, where you're focused a lot more, ensuring alignment.
So, if I was to summarize it, the first part was really like doing a lot of the work. Second part was really around figuring out delegation effectively. Third part has been lot more about motivation and align where delegation is something which anyways, you have to do, just given the scale of the business, there is no option, but ensuring that all functions, all leaders are aligned, we are all running in the same direction, we are moving in the same direction and all our energy is going in the same direction is also equally critical. Now, one thing which starts happening is, it's not just alignment, also ensuring that the culture of the company continues to scale as we scale. When you're small, everybody knows, everybody's friends with everybody and there's less conflict. As you scale up, as you have more and more senior people, there is a likelihood of more conflict, and that can really derail the organisation. So, the focus really right now is around alignment and around culture and preserving the culture of the company.
Pritish: You have a very interesting hire, you have a chief of staff, who has a very strong product background. So, what was in your mind bringing a very strong product guy to be a chief of staff?
Pushkar: I guess you're talking about Akshay. Akshay joined us about four months. So, he had a background in both consulting and product. So, he was with McKinsey in the past. So, the idea was to basically bring on someone senior who can drive organization wide initiatives, organization wide projects. Chief of Staff, in my view is a really high leverage position. Because a lot of times when you get to the stage, we are in where we are 250 plus people with multiple managers and leaders, it's very critical to do a strong job driving organizational wide initiatives, organization wide projects. Secondly, a product management background helps because in general, I see that folks who come with a product background are first of all, first principle problem solvers. Secondly, they're also very data driven and both the skills are actually quite critical to be able to get multiple people aligned and drive these organizational wide initiatives, making them a lot more data driven, being very first principles in their approach to problem solve. So, it's been working out well, it's been great having you on board
Pritish: You've hired a number of people across different functions. Do you have a favorite question?
Pushkar: One question I do try to get a good understanding of what do people believe is their greatest achievement that generally speaks volumes about their motivation. What drives them also talks about perhaps the difficulties they've had to go through to achieve what they sought out for. So, that is one question which I usually definitely ask in every interview to get a better understanding of the personality and the people we bring on board.
Pritish: Now the business is in three key markets, Mexico, SF, and also in India. How have you seen the culture amalgamation across these markets?
Pushkar: I would say that a key aspect of being able to ensure that there is consistency in culture across different geographical locations is really around two things. One is bringing on the right set of leaders who are very culturally aligned with the organization. So, for example, the person who heads Mexico for us from a cultural standpoint, is like the perfect fit, he is someone who embodies all the traits, we would say what we would want in a high performing grip employee and ensuring that he came on board or bringing on someone like him has also ensured that the entire Mexico team which we've been able to build embodies that culture. We've been able to have the same culture same kind of speak the same language across geographies. The second thing has been really articulating it. We've started doing it now perhaps we could have started earlier as well, but it is we also realized that it's important to make to be more explicit about what we mean by buyer. So, we've done an exercise very comprehensive exercise of really understanding what are the traits which we as an organization exhibit what other traits we strive for and then really articulating that culture and ensuring that then flows in every aspect of your employee lifecycle, whether it's hiring, whether it's a rewards, whether it's appraisals. Those two things, bringing on the right set of leaders who are culturally aligned, and then ensuring that you're really articulate the culture in very specific simple to understand language with specific examples across the employee lifecycle, would be critical sphere in my view
Pritish: Brilliant! By the way, it's all your experience. For you, the US market, the India market, is something that you are exposed to already. So, you had a very good understanding with those markets. When you enter a new market, Mexico or different parts of the world, how do you think about entering the market from hiring people and actually building an establishment? So, how do you think through that kind of market expansion?
Pushkar: Sure. So, I can specifically talk about Mexico. Maybe if we reflect back, there obviously have been some positives or pros of launching in a geography like Mexico, there have also been some obvious challenges, which we should have, perhaps thought about again, but experience teaches you a lot of things. So, when we launched in Mexico, the thought process was much more analytical again, which was the fact that Mexico is a large market, 300 $400 billion in exports. A large part of Mexico exports go to the US where it's much easier for us to underwrite the transactions, just given the data availability, and so on and so forth. The practical challenges which we may be slightly overlooked, was that firstly, it's Spanish, that has obviously resulted in us hiring more Spanish speakers, in fact, training some of our centralized ops people who are sitting in India to learn Spanish and that was not something which we maybe gave it too much thought. But then there are a lot of practical challenges when it comes to that. Secondly, given that a lot of our operations are central, and there's also time zone challenge when you're dealing with folks, customers who are, of course, in a completely different time zone. But that being said, so these are challenges, which obviously, we are able to overcome.
So, in hindsight, was that the best market to go after immediately after India? Maybe not. But then if I look at it today, it took us time to fix all these issues. But it's also prepared us to be more global today. So, if we can handle Mexico, we can perhaps definitely launch in Sri Lanka. So, the challenges we had to overcome has prepared as better to be able to launch in other markets. The one learning which we've also had on the distribution side is as soon as you have more and more offices in a more decentralized team, of course, it results in more challenges when it comes to people management when it comes to scaling up your people processes across multiple offices. One area of focus for us has been really also around how do we ensure we are focusing on lot more product led growth rather than thinking about having multiple offices and having a distributed sales team. So, in the US, for example, which was the third market we launched, you will be surprised, but our entire inside sales team. So, first of all, it's all inside sales, the entire inside sales team actually operates in a night shift in India.
So, while we do have a US office, and folks in the US office, the entire inside sales team for the US businesses run out of India, and that was again a learning from Mexico that we should build out an inside sales and product lead growth strategy and experimented with us but having cracked that, I feel in fact, the next 18, 24, 36 months of expansion will be largely focused on that strategy. So, we would continue to launch in other markets, but make it a lot more growth driven by product and focus or sales efforts with a remote inside sales operation, mostly centralized in India or Mexico
Pritish: So, can you double click on as you mentioned, product lead strategies? What does that mean?
Pushkar: Yeah, so I would say that, like we focused so as the product has evolved, if I reflect on last four or five years of the product evolution, I would say that 80% of our product efforts have been really focused on building out the risk management engine building are the internal product. So, to say, and a lot of the distribution to the customers has been sales lead, which means that sales is the primary point of contact. So, if you come to our website in India, for example, you can submit your contact information and there will be a sales agent who will get on get in touch with the customer to aid them through the on. So, how we are looking to change that paradigm in the next iteration is focus a lot more on the acquisition side. So, want to create a lot more of a self-served experience rather than an assisted sales experience, which is what we've had. To some extent, even the market is a factor, different geographies are different in terms of customer adoption and their comfort with basically opting for a self-served journey versus an assisted sales journey. So, like US and India, are the two extremes. In the US, most customers actually expect the self-served journey they want, they don't want to interact with anyone to the extent possible, they want to sign up themselves, they want to explore themselves. On the other end, you have a market like India, where the customer doesn't want to do anything, it's a very do it for me economy and market. So, you have to adapt your product, adapt your approach to be much in line with what the market demands. So, yeah, that's what I mean by product lead strategy.
Pritish: One question that baffled you while you were pitching to investors or you found interesting.
Pushkar: So, more than the questions, some of the comments have been very valuable for us. Maybe I can talk about that. So, one comment, or one specific angle on our business, which a couple of investors pointed out, which has been important for us to or at least has helped us think about the business certainly is really the network effects which we can drive in the US. So, because we are an international trade, we obviously started with sellers, we have been onboarding buyers, who the sellers sell to, also have a buyer side product. Now through onboarding those buyers, we're getting more sellers on the platform. So, how do we really crack that? How do we make our product or make our business so viral that sellers are getting more buyers and buyers are getting more sellers, and that's when we become a platform. That is something which continues to be a work in progress. But just this initial thought around thinking about the business in the longer run, as more of a platform play, which can have massive network is something which has stayed with us. That is something which we constantly think about. If you think about most valuable companies, that's a common pattern you would see. Amazon, for example, you have you get more customers, you get more merchants, you get more merchants, you get more customers, and the value of the marketplace or the platform keeps increasing as you become bigger. That's how at least we would like to think about our businesses where they're.
Pritish: Really quick, rapid fire. Three questions, one word, one sentence. The toughest thing about your job?
Pushkar: People management.
Pritish: One book or blog that has transformed you personally or professionally.
Pushkar: Hard thing about hard things.
Pritish: Your most favorite superhero.
Pushkar: Superhero, I don't know, Hulk!
Pritish: Pushkar, it was a pleasure having you on the show.
Pushkar: Yeah, it was great joining the conversation. Thanks!