Alok Mittal, who quit as managing director of Canaan Partners last year, has co-founded a startup that runs an online platform connecting small businesses with formal lending institutions. Indifi has also raised funding from Accel Partners and Elevar Equity among several prominent angel investors. In this interaction with VCCircle, he talks about the startup and what sets it apart and shares that he plans to continue making angel investments even as Indifi would be his focus area.
How does it feel to be an entrepreneur all over again? What propelled you to launch a startup?
It’s the inclination to do something hands-on. Small sector financing is a big gap area. So, clearly there are problems to be solved. The timing is right as small businesses are moving to electronic transactions. And the approach towards underwriting will have to be different than conventional ones.
What will be Indifi’s differentiator in the online lending facilitation space?
Our emphasis will be on optimising the borrowing experience. One of the key problems is that the process of getting a loan calls for a lot of documentation. We have automated the entire process so that the user does not have to run around. Second is speed. Conventionally, the process takes months if you do it at a bank. From application to disbursement, we are trying to bring it down to four days. We also make sure that the borrower is getting the right product. We are going segment by segment and crafting our lending products accordingly. Fourthly, we are not a balance sheet lender. We bring banks and NBFCs on our platform so that they get to choose what’s best. Our universe is centred around the borrower.
Some of your competitors use algorithms to determine a credit score. What method will Indifi use to evaluate borrowers?
We will not lend; we will just provide a platform for lenders and borrowers. We cannot call it a marketplace, as it does not take into account the curation part. We are bringing credit scores from different data sources while running our own data extractions and analysis. A lot of the underwriting is curated by us.
Indifi has received institutional investment from Accel Partners and Elevar Equity in addition to funding from a bunch of angel investors. How are the funds being deployed?
We haven’t used most of the funds. Right now, we have enough money to finance what we have to do for the next 12-18 months.
The platform went live two weeks ago. We presently cater to three segments—travel agents, cab aggregators and e-commerce companies. For each of these we have segment-specific offering.
Lenders can see credit scores differently depending on what they value more. If a lender wants to lend to someone with more than five years’ of application history, he will only see those kinds of applicants. If another lender is interested in only high growth companies, they will only see such companies. We have built an allocation system.
Would Indifi look at adding new segments?
We are exploring. By the end of this year, we should have three more segments. We are evaluating which ones those should be. The common theme for Indian businesses is that an online platform always gives them more business and visibility from a marketing point of view. So, the marketing part is already solved by them. Our approach is to solve their financing needs.
Secondly, we would also go after businesses that are not necessarily online but are still rich with supply chain data. One example is handicrafts. Any player who aggregates these manufacturers and artisans gets insights into what the artisan produces, how much he has been producing and for how long. So, they have an idea of revenue. We would want to tie up with such players as it would give us access to loads of information about small businesses and enable us to create underwriting for them.
We do not want to necessarily chase sectors which already have a lot of financing. We are getting feedback from our pilot projects, and once we know we have the right product for the right customer, we will step up our marketing.
Would you continue to make angel investments?
Entrepreneurs continue to approach me and I continue to invest in startups. However, my focus is Indifi. This will take my time. Angel investing will not cease; if there are people I know who are doing something exciting, I will continue to participate in (investment) rounds. I do not take an active role in startups post the investment.
As an industry observer and investor, which segments within the tech space excite you?
Generally, I don’t look at themes such as food-tech or edu-tech. I think it’s about finding a specific problem, and applying a specific approach to solve it. I don’t think these labels mean anything. Some people say Indifi is a fin-tech venture. We don’t lay much emphasis on that as long as we are solving the problem of the borrower in a manner that is scalable and can lend to value creation. So we will concentrate on solving the customer’s problem than putting hashtags to it. The same approach applies to B2B and B2C startups.
Several well-known startups seem to be going through difficult times and layoffs are happening….
Layoffs happen when startups fail. The fact that a startup fail is an imminent part of the process. Everyone who engages with startups has to understand this bit.