Contrary to belief, Paytm is not an overnight success. The company—which shot to fame post demonetisation with its payments app that made digital transactions ubiquitous—has been in the making for more than two decades. Founder and CEO Vijay Shekhar Sharma started Paytm’s parent company One97 Communications in the early 2000, after he sold his first venture XS Corps, which built content management systems. Paytm was started in late 2009 as a B2C arm of One97. The company—which has received $3.54-billion funding till date—counts SoftBank Vision Fund, Alibaba Group, Ant Financial, and Berkshire Hathaway among its investors. It currently boasts of 333-million users, and has moved beyond just digital payments, offering everything—from e-commerce, insurance, gaming to mutual fund investments and wealth management services. In July, One97 Communications filed the offer document for its ₹16,600-crore IPO.

The Idea!

At the end of 2000, I built One97Communications. At the time, the Internet didn’t have revenue models. There was not enough money in advertising and e-commerce didn’t exist. I wanted to make money using Internet products. We built One97 based on Internet content on SMS.

We did live astrology for telcos. It started from content, and expanded into cricket, news, data analytics, etc. I started the company with two other co-founders. They left after 9/11 happened, and I got 100% equity.

In 2011, smartphones and 3G came in. I told my board let’s build a brand, where consumers can pay using the cellphone for something else beyond content. One97 did business in content and marketing led mostly by feature phones. Paytm leveraged smartphones and mobile Internet.

During that time, I saw that Internet companies didn’t know enough about mobile Internet. One of the early customers for our pay-through-mobile payments platform was Jasper Infotech (Snapdeal). We were the payment gateway for them on the mobile platform, they didn’t have traffic and they didn’t bother about it. I decided to build a consumer destination, and we launched Paytm, adding things like recharges, bus tickets and bill payments. Finally, we launched the wallet in 2014, and then a marketplace. We built Paytm as a payments platform, grew and got a payments bank licence. We could then do savings and current accounts. Starting from payments, we have landed in the consumer banking space and financial services such as wealth management and insurance.

Early Struggle

For One97, I didn’t raise money for the first seven years. I didn’t think there was anything called VC money and risk capital. I thought the risk is mine and capital is customers’. I would take loans from people so I could put the money in the platform and when money gets made, I will pay the loans. But I couldn’t manage the cash flow well and loans piled up.

During this time, I met this gentleman from a company who wanted me to do a large project for them. Once I completed the project, he asked me to become the CEO of his company. I told him I had my own firm. He gave me ₹8 lakh and an office space to work from so I could continue to help him and took 40% of my equity in One97. He later made an exit with a couple of hundred crores.

In 2011-12, the smartphone count in this country was 25-35 million. Cash was king. It became a challenge whether we can build Paytm or not. I was given ₹5 crore for six months (by the One97 board) to take a chance whether Paytm will work or not. I was lucky it picked up.

The Business Model

In 2011, we thought of building a smartphone-dependent business from a feature-phone dependent one. We wanted to become an app-based company, which would be Paytm. We wanted to build a payment ecosystem on the consumer side and the merchant side as well. How do you get a merchant if you don’t have consumers and how do you get consumers when you don’t have merchants? We started to acquire consumers for recharge, bill payments and added more digital use cases. We built a marketplace.

Tech Challenge

I was once in China. At a store, there was a queue, and I noticed that con- sumers would flash their smartphones and the cashier would scan their phone for payments. I was intrigued. My colleagues did the same thing at the counter, they opened the Alipay app on their phone, got a QR code scanned, and the payment was completed instantly. I wanted to do this in India, but merchants wouldn’t spend on the hardware. Also, consumers in India still had issues with trust when it came to cashless payments.

When we came back to India, I thought this wouldn’t work because of the lack of smartphones, Internet, lack of trust, and the fact that merchants wouldn’t spend on point-of-sale (POS) machines. So we took a 180-degree turn. Till now the POS was with the merchant, we shifted it 180 degrees. The shopkeeper had the QR code printout and the consumer had a smartphone and an Internet connection. The consumer would enter the amount, scan, and the merchant would receive the payment. For the shopkeeper to trust that the transaction was made, we made an app for them and a facility for SMS notification. We went to small merchants, general stores, chemists, kirana stores, etc. They started to like it, but people in India won’t do anything till they are nudged. In the beginning we offered cashbacks and then cash was out (during demonetisation).

HR Challenge

I have never believed that you have to force a team to work hard. I believe once a team and you belong to a purpose, you give your best and the individual with you gives you their best. That moment chemistry and ex- citement happen. I have told my team only one thing: we do not come to work, we come to change the destiny of a country and create history. That inspires or makes us work every day.

Managing Investors

These extraordinary accomplished and inspiring people (Paytm’s inves- tors like Jack Ma, Masayoshi Son and Warren Buffett) have a side of their personality which I associate with. I admire them for the underdog-ism I personally belong to or believe in. There was no tag on them of being successful when they started the journey. In the end they are some of the world’s most successful people who have never put a border on what they can be successful at.

You don’t raise money by giving business presentations, you do it by giving a light and sound show—action, passion, emotion, and drama. Investors see who you are, your team. It’s like selling a dream. They don’t give money to your business, they give you the money because you are an incredible guy and have a great team.

Venture capital investments must be done with a longer horizon and no pressure of exit in a shorter run. When you are looking at investment in new ideas, the revenue timeline should also be stretched. We are very long-haul investors. We have got our exits because companies that we have invested in have either done follow-on rounds or have exited themselves. We have received most of the money that we have invested. Anybody who is going to expand the use of Paytm wallet in sectors that we do not focus on will be a potential investment opportunity for us.

Riding Through Toughest Times

There was a time when I would reach office and not have any cash flow. I did odd jobs such as setting up emails or delivering lectures. The cash flow became so negative that having even two cups of tea was a luxury. At one point of time there was a ₹8-lakh loan that came from a family friend at 24% interest. I had to pay the capital and interest both, but I was not able to pay beyond interest. I did odd jobs to make ends meet and repay the loan.

Slowly and steadily, we built a business from this to a stage in 2007, where we raised money. In 2010, the LIC Housing scam happened, markets fell, and we couldn’t do an IPO as planned.

What Next?

Our technologies are not necessarily only for consumers in emerging or frontier markets; they are as good and useful for people in developed markets as well. My understanding has been [it has to go] from India to developed markets—Japan, to the Americas, to Europe. I would prefer that to happen than to go to frontier markets in Africa. Paytm will be mak- ing technologies for the world and the best benchmark for that will be the day when we go and land in the US.

[Having filed for the IPO, Paytm is in silent period. The article has been sourced from Vijay Shekhar Sharma’s interviews, podcasts, and talks at: MindBatteries: Swag of Paytm CEO | Vijay Shekhar Sharma | Startupreneur Series; 10,000 Startups - a NASSCOM initiative; Inaugural Keynote at TiE Global Summit 2018; Fireside Chat - Vijay Shekhar Sharma & Anand Lunia; Talks at GS - Goldman Sachs; Analyse Asia with Bernard Leong; Vijay Shekhar Sharma, Founder & CEO, PayTM: Retail Leadership Summit (RLS) 2017].

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