TechCircle Walkabout: A peek into Paytm's growth journey and venture debt firm Trifecta's strategy

23 Aug, 2016

Every budding entrepreneur would like to hear first-hand the success story of Paytm, the digital payments and e-commerce platform started by first-generation entrepreneur Vijay Shekhar Sharma. TechCircle made that possible with its "Walkabout", organised a day ahead of the Delhi edition of News Corp TechCircle Startup 2016 event on 24 August.

About 15 entrepreneurs and investors attending the event visited the Noida headquarters of Paytm, and got a chance to interact with the company's senior vice president Shankar Nath. He kick-started the discussion with a brief introduction of Paytm's journey and touched upon various facets of the business including brand promotion, customer acquisition, funding, e-commerce and payments bank as well as its Chinese investor Alibaba.

Speaking about the nuts and bolts of the wallet business, Nath said getting the product right was crucial at the time of starting up. Gradually, as the company realised that most transactions were likely to happen on phones, a lot of focus was on apps while keeping in mind various constraints such as limited real estate on feature phones. He also said customer engagement was crucial and the product needed to be in tune with the goal of providing good consumer experience.

Nath touched upon the marketing and promotion part of the business saying the company, which was fighting against the cash economy, initially started with Internet and affiliate marketing but soon realised that this kind of marketing was not helping it reach a larger set of customers. "So, we partnered with larger FMCG brands and that helped us acquire customers at a much lower cost. Paytm, then, started spending heavily on cricket sponsorship for brand promotion and distribution in rural areas," he said.

One participant asked why Paytm entered the e-commerce business. Nath explained that since Paytm aimed to cater to the digital economy, e-commerce was a natural progression. He, however, added that e-commerce was not an easy business and while Paytm wanted to be part of the digital economy, e-commerce involved a lot of offline play, too. "We have lost some money on that business and have done that with limited success," he said.

Nath also spoke about the separation of Paytm's marketplace and payments business saying regulations demanded that payments be spun off as a separate entity from the e-commerce business.

He also said that e-commerce business in India was on the verge of consolidation. "The big worry for everyone is Amazon, and at some time everyone else has to consolidate to take on this big giant, which is doing extremely well," Nath said.

Trifecta Capital

In yet another walkabout session, at the Gurgaon office of venture debt financier Trifecta Capital, managing partner Rahul Khanna explained the concept of venture debt funding as well as the background, history and philosophy of the company. He delved upon Trifecta's investments, its current team and the capital support it offers to its investee companies.

"We tend to focus on top one or two companies in certain sectors. We tend to back mature companies which have been in business for two years or so," he said.

Speaking about slowing investments in 2016, he said: "This is more of a cooling off year. There will be focus on great consumer experience and unit economics."

Trifecta had also invited two founders from its portfolio companies—Ambarish Gupta, founder of cloud telephony company Knowlarity, and Rahul Gupta, co-founder of B2B e-commerce platform Industrybuying.com–for the discussion.

Ambarish Gupta shared his experience of early days after graduating from IIT-Kanpur and before founding Knowlarity. He also talked about his first shot at entrepreneurship and how he raised funding for Knowlarity.

Rahul Gupta, too, streamed through his journey from IIT-Delhi to founding Industrybuying.com in 2013. He spoke about how Industrybuying.com was bootstrapped for 18 months before it raised venture capital and talked about how the company raised two consecutive VC rounds in less than 12 months.

Speaking about his relationship with Trifecta, he said: "We were dealing with enterprise businesses and Trifecta has a good network. The deal with Trifecta also had a strategic side to it."

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