Byas Nambisan, CEO Ezetap & Harshil Mathur CEO & Co-Founder Razorpay chat with Sanjay Swamy, Managing Partner Prime Venture Partners.

Listen to the podcast to learn about

02:20 - Exciting Future Together

05:20 - How to Think about an Acquisition

10:10 - Convergence & New Opportunities

13:30 - Diligence & The Ability to Co-Create

24:00 - Building a Seamless Omnichannel Experience

Read the complete transcript below

Sanjay Swamy 01:25

Hi, everybody. Welcome to the new episode of the Prime Venture Partners podcast for entrepreneurs and people from the ecosystem. We have a very exciting show today, and this time it’s one where we have two guests; Harshil Mathur, the co-founder and CEO of Razorpay, and Byas Nambisan, who’s the CEO of Ezetap, and today we all got to know that Razorpay has just acquired Ezetap.

So, great to have the two of you on the show, and I’m sure everybody in the audience would want to know why, what, where, how, and perhaps how much. But we’ll start with some easy questions and dive into some of the thought process, and I think any of the insights you can share for other entrepreneurs in the ecosystem on the whole exit process will actually be very valuable as well. I’ll start with: What are your top three emotions? Starting with you, Byas.

Byas Nambisan 02:20

Okay. My top emotion is really at this point, impatience, and excitement. I’m excited about looking forward, and I’m just impatient to go out and see what we can do together. So really that excitement and impatience are one, two, and three.

Sanjay Swamy 02:48

I thought you were going to say relief, but I’m glad to hear that it’s excitement. Harshil, how about you?

Harshil Mathur 02:54

I think I resonate with Byas. The first emotion is definitely excitement. I think the excitement to work together with them, with Ezetap, and basically just to co-create so many opportunities of doing things together and so many synergies that I can just keep thinking about, and what all is possible now with on and offline coming together. So it’s just the excitement of that.

The second is I think somewhere gratitude that Byas and his team chose to work with us, and trusted us with this. I think we have the excitement, but at the same the responsibility of making this big together. Acquisition is not about: If it is one plus one equals two, you are a failure. It has to be one plus one is equal to 10. So if we can get there, and of course there’s a lot of excitement about it, and there’s a lot of sense of responsibility around now making it a success. And of course there’s been a lot of voices in the ecosystem congratulating about it, so we want to go back to them and say, “Hey, we have been able to do this well.” The closing of the deal is just the starting of the journey.

Sanjay Swamy 04:00

Wonderful. So, we’ll come to that part later in the conversation, but I would like to start with you, Harshil. Razorpay has been on a phenomenal journey so far, and kudos to you and Shashank and the team. I recall our early conversations while you were still coming out of YC, and it really felt there that you guys were onto something, and shame on us for having missed out on the opportunity to be part of the journey. But it’s great to finally be on the journey and the road ahead.

I think the one thing that we probably could not have predicted then, (or maybe you did,) that the whole online space has probably grown 10,000-fold since you guys got started, and you guys have grabbed the lion’s share of that. And that of course is stellar product and business execution. As you look at acquisitions, (and as they say, most good companies are bought, not sold,) what type of thinking goes into an acquisition? Apart from identifying a space, and players in the space, and the thought process. Before you even approach a company for an acquisition, what makes one an attractive target?

Harshil Mathur 05:20

Really acquisitions from our perspective are very opportunistic, right? It’s very hard to predict and plan that, “Hey, this is a space where we’ll acquire a company and do it,” because it’s not as simple as that. We’re still a startup at the end of the day, wherever we are, we’re still a startup, and we operate with a people-first approach.

So for us, the acquisition depends a lot on the people. It’s about having the right set of people in another company that you feel … See, it takes a lot of effort for us to hire even one person. Now imagine an acquisition of 300 people. That means you are hiring 300 people at once. Can you be certain that all those 300 people fit into your culture? That’s a very hard question, and very unlikely to be true.

So it takes a lot of effort to get it there, and I think the most important asset that a company can have for us to believe that this acquisition is useful is having the right kind of people. I think that is what worked for us here, that when we spoke to Byas and his team, the people and his team and everything, the one thing that hit us is that these are the kind of people that we would hire at Razorpay. These are the kind of people that we would want to lead us at Razorpay. And getting them on board on day one quickly and bringing them together, I think that’s the first and most important aspect.

Of course product, of course market, and of course execution capabilities, all of those things matter. But that came second. Having the right product mix that we would want to build out, having the right kind of execution that we want to build out, building the company in the right way. But all of that is also an answer coming out of people, right? If you have the right set of people who think like you and who work like you, then they would have built a company that you can feel proud to put your name on it, as well. I think that is what has been the primary driver for us.

Sanjay Swamy 07:05

Wonderful. That’s great to hear. Because especially when you’re buying a complimentary capability, I think some of the insights that that company has derived over several years are not obvious and not easy to evaluate because it’s a new capability. Tell us a little bit about complementarity and how you look at that from a decision-making process.

Harshil Mathur 07:30

I think for us, the first decision-making was that we wanted to get into the space of omni channel payments. That was the first starting point. We felt that the online and offline stacks are merging together, like the lines between them are getting blurred over time from a business perspective, from a consumer perspective. So it should happen from a payment ecosystem perspective, that we should have one single stack targeting both online and offline.

So, that’s the first thought. There’s a lot of compliments that we could see, and alignment that you could see with our vision. Our vision being to provide a single platform for all financial transactions for a business, and offline payments played a very important role in covering that vision. So that’s the first aspect, that something aligns with our vision, and this did.

The next step was to talk to people in the market, and of course as a product company, our first approach always is to build. That's just what we default to, that if nothing happens, we build it ourselves no matter what it takes. But a lot of times when you go out and speak to the ecosystem to understand what's happening, I think the most important aspect is that if you find a company or if you find a team that has built a business or built the product in the way that you would build it yourself, and you could fast-track the journey with them, I think that becomes the key to the acquisition. And I think that's what ended up happening.

We spoke to a lot of people, and then we spoke to Byas' team, and then we realized that this is exactly the way we would want to build it. They started in an offline direction with the embedded POS, and then over time scaled up. And unlike a lot of offline companies, they didn't stick to offline. They also did card and delivery and stuff like that. So they were also thinking about omni channel even before we started talking to them, serving clients like Amazon and Big Basket.

So I think you could see the alignment in the visions, not just of what has happened so far, but where we want to go together. I think when that started getting aligned, that's when we felt that, okay, the complimentary things really align well together. Because these guys are in the offline POS market and then moving towards online. We are in the online market and we want to move towards offline. Both of us are seeing the world in a very similar direction, that both of us are very clear that three years downstream, these worlds will not be different and they will be together-

And I think if we start working together with them, we can build that combined world together. So I think that's where it came down to.

Sanjay Swamy 09:40

Great. So, Byas, we'd love to hear the reverse view from your side. I, having served on the board the nominal plan was to continue building and perhaps raise a round of capital and scale up because the company was around profitability and at decent scale.

So when the inbound came in and then you had the first conversation, what made you think that this is the right opportunity to explore, and what were the considerations from your side?

Byas Nambisan 10:10

Even before the inbound, I think something we shared, that we didn't know it at the point, was that our outlook on where the industry was going and how we needed to play it was actually similar, in that we too thought about convergence and felt we too needed to figure out how to play in the online space in some manner.

As we went out to raise capital, that was one of the areas as we wanted to build and grow was to say, we need to be able to scale up our play there. And clearly when we are starting from scratch in online play, in the online space, we would be taking a different path when you're going up against established players. So when Haarshil came to us and chatted, obviously the new opportunity was, oh, this is really complimentary, it takes us and allows us to do things without the limitations we would've had of trying to go up against big players.

So that was clearly exciting to us. But the other thing that Harshil mentioned was very on top of mind for me and my team was, from a fit, from a culture fit and a product fit, how are we? And this was one company, as we talked to them and what we knew of, that we felt very comfortable with in terms of our fit. That was important, because there were other people who had expressed interest in talking to us, where we were not certain that that fit would be as good.

Then as Harshil said, our vision of where we wanted to go gelled very well with what they said, when we had the discussion. Hey, this is what we are doing, and that's where they were looking to go. It was a 90% match in terms of how we saw where we wanted to go. So that too worked out really well. So that got us really excited.

Sanjay Swamy 12:40

Excellent. So let's talk a little more about synergies. You talked about quite a few of these things, but obviously technology stacks and things like that. Eventually in the grand scheme of things companies need to come together on all fronts. So how does one go about diligencing and evaluating, and to what extent do you think one can confirm some of these things? Of course, the fact that one is based in Koramangala, and the other is down the road in HSR layout, was kind of convenient.

And actually, how much of a factor is proximity as well, in some of these things? At the end of the day, as you said, it's about the people business. And so would love to, if you can share some insights again for our listeners in terms of the thought process on each side, and when does that comfort really get solidified to move forward.

Harshil Mathur 13:45

So I think a lot of these play an important role. Like I said, and like Byas said, it starts with vision, it starts with people, and all of those things making a lot of sense. Then of course, all of these things play their own role. So it was a long drawn process and it took us some time to get to the firm commitment. And the reason why that is like, the size of deal is public, but whatever, the amount of money that we are spending to make this deal happen is equal to the total amount of money we have spent to build Razorpay today. So it’s that big of a commitment, right? Like we have raised a lot more, but actually we have spent only less than this, right?

So it’s almost equal to spending the amount of money we have spent in last eight years in building Razorpay in one go. So it’s not an easy decision. Every factor counts, and you want to be completely certain. It’s more than checking the boxes, it’s more about having the comfort that yes, it is the right decision for us to take, convincing yourself, convincing your investors, convincing your board, and of course, convincing the company that we are working with, that it is the right decision to make.

So yeah, we took a lot of time in doing all of that. Like the tech diligence, the business diligence and everything else, and the proximity does help. It’s not essential. I don’t think me and Byas have physically met more than three or four times during this, but it does help that when you have something you want to clarify, you can just fly down and you can just walk down the road, you can just go into same city, meet at someplace and discuss some of these things.

So it does help, but in today’s world, I don’t think those are major criteria, like even the diligence and everything. What matters is I’m getting that comfort and when we are doing a tech diligence, what we are trying to sense is not the tech product out there. I mean, the product is out there deploying thousands, and lacs of merchants out there who are using it. That itself is proof that the product works. What we’re trying to get a sense is that, can our team work with their team to co-create something together? Can our tech teams talk to their tech teams and co-create things? Can our product teams talk to the talk to their product teams? I think that’s the comfort that you’re trying to get answers to, that are we speaking the same language? Are we thinking in the same way?

And I think those things become really important, especially when we talk about our diligence perspective, even from finance team perspective and our finance teams are talking to their finance teams. They’re just trying to sense, that are they looking at the right things the way we look at the right things internally? Are they worrying about things like burn or profitability the way we worry about burn and profitability?

That is the aspect of diligence, right? Whether it’s tech diligence, product diligence, financial diligence, business diligence, I think those are the aspects we are trying to cover. And as you start getting comfort with all of these things, see, we all know it’s a startup. We are a startup ourselves. It’s not like any of us is going to be a hundred percent perfect in everything that we do.

What we want to see is that we are building with the right intent, with the right approaches, with the right people in place for each of these things. And as long as that is in place, small things here and there can be fixed.

Sanjay Swamy 16:30

Terrific. And then of course, given that Byas was CFO before so that would’ve helped a lot in clarity on the numbers and stuff. Byas, your view on the experience?

Byas Nambisan 16:50

I think having been through a lot of acquisitions in my past at Intel, so I expected what I saw. It did take much longer than I would’ve wanted it to, but when I put myself in Harshil’s position, I would echo what he said, which is, hey, it makes sense to make sure you’re not doing this as an afterthought. And really this is the right thing, and doing all the due diligence.

Really, this is the right thing. And doing all the due diligence and his perspective of, “Hey, this is as big as what they’ve invested so far in the company.” I hadn’t thought about that but that just reinforces that it was that big of a deal. Right? But through the process even though it took time, there wasn’t ever a sense of second thought really, right?

Throughout it was a reinforcement. Yeah. This is the right thing. It’s just going to take us a few more steps to get there, but this is really the right thing versus saying, “Hey, do we have sellers remorse or buyers remorse? Are we walking down the wrong path?” That never came to mind.

Sanjay Swamy 18:20

Right. Great. And that actually really stems from the culture and the people question. Because it’s actually a period of time during which you get to know people a lot better as well.

Byas Nambisan 18:30

And in any business deal, there’s always going to be tough moments, right? And how we handle ourselves through those moments really gives us insight into each other, right? And that will either reinforce, “Hey, look, this is really … let’s figure out how to make it work because it is actually good for both of us.” Or you can get a sense of knowing what this … there are red flags warnings, et cetera that is going come with a significant compromise. And we didn’t sense that.

Sanjay Swamy 19:10

Terrific. Great. So let’s think ahead here, right, and the path forward now. This part is done for shareholders. That’s one milestone, but for the two of you it’s now building the business together, right?

And of course, we’re all shareholders and continuing to root for Razorpay now to become that much bigger and more successful. And how are the two of you thinking about it? I know there were some media reports about some certain dollars of investment that you had in mind and things like that, but I’m sure beyond that I think it’s more sort of the phase of digesting the acquisition.

And then after that really investing in the next phase of growth as perhaps collective growth. How are you thinking about it? And most importantly, what will your customers, your existing customers, perhaps some joint customers, and moving forward all the way down to the consumer, would do you see as something that we should be excited about?

Harshil Mathur 20:15

Yeah. So, yeah, as I was saying earlier, right? Like the closing of deal is really the start of that journey and I think that now the most exciting where the hardest part begins, right, is getting this right. And I mean this is known in the world that like nine out of 10 acquisitions in the world fail. And this is because it’s really easy to close that deal, sign documents and everything, but getting this right. And it’s a learning experience both for us as well as for Ezetap.

I mean, we haven’t done acquisitions for this size and we are very cautious about how do we approach it and ensure that it gets done in the right direction. There are a lot of axises under which you’re thinking, but the first axis is, of course, what we said is the first axis of deciding this is getting the people part, right? Like ensuring that the 300 people from Ezetap that are now become part of Razorpay, feel part of Razorpay and feel aligned to that common vision that we are going to chart together.

The second aspect is the business aspect, right? Treating that business vision on where we want to be. And then the related aspect of that is the execution vision, which is the product tech and everything else, GTM and everything comes along with it that what we want to build next and how do we get it there?

I think each of these aspects has their own importance and we need to find a way to balance all of those things out. But I think it all flows down from the people aspect, right? Like getting that right, like, see, you can miss the business goal here and there and it wouldn’t matter. We are not doing this equation for next six months or next one year. It’s going to be a long journey that we’ll build together for us. So all of those things can still be figured out, but if you get the people aspect wrong then it like it sets the path for failure from there on.

So my focus personal focus will be to ensuring that the team that comes on with Ezetap feels connected and aligned to the larger vision. The team from Razorpay side that’s going to work with them feels connected and aligned towards the larger vision that we are going to build together with them. And as we get that part sorted, we’ll start focusing on the other aspects, which is the product execution, the tech execution, the GTM execution and finally the business execution.

And I think each of these components will have come with its own set of challenges, with its own set of issues. I am aware of that, but, but I’m also confident that with me and Byas and the leadership team at Ezetap will be able to work together and find great answers to all of those things. And I think the last few months of journey of getting this deal through has just given me more confidence that we can work together with them to answer any complicated problem, right? And as long as that is true, we’ll figure it out together.

Sanjay Swamy 22:45

Any comments on that, Byas? And I do want to come back to Harshil and put him on the spot a little bit and ask for some sneak previews of what he’s thinking about in the integrated offering.

Byas Nambisan 22:55

I would echo what Harshil said, right? The nine out of 10, I think I’ve been in those nine. I’ve seen where, you know, we’ve been part of the acquiring team in my old company where we’ve not done the best, but that keeps me very informed of the different ways of failure. And one of my roles ongoing would be to watch out for that, for the things that can lead us to that path. So, I look at that, learning from failure and hopefully translate that into success.

Sanjay Swamy 23:45

So I have to mention for our viewers that Byas spent almost 20 years in a little company called Intel. So when he talks about the nine acquisitions, they probably have acquired 1,000 companies during that period of time. So not true. Just to set some context there, but yeah, let’s talk a little bit. you guys dream a lot about exciting products, what would be the top two or three things you would love to see happen in the market?

Harshil Mathur 24:15

Yeah. You know, opportunities are immense, right? And let me give some context. Globally there are very few companies across the world that have been able to have significant presence in both online and offline payments, right?

Like you have company like Stripe, huge in online, your have company like Square, huge in offline, but they’re very few. Maybe you can name like three or four companies, which have been able to balance the online, offline together, which have significant presence in both online and offline.

And being able to build things together for them. I think one of the exciting aspects of India, first of all, is that our stacks are already truly omnichannel. Stack like UPI is truly omni channel. Like the UPI stack doesn’t really care whether the transaction happens on online channel or offline channel it is the same stack.

And I think similarly things like tokenization and stuff that are happening in India are built in an omnichannel fashion. So we have the stacks, we will be one of the few companies that’ll have significant presence in both online and offline, right on day one, because Ezetap already does like 10 billion plus of transactions, offline space, half a million merchant touch points.

We have like $70-80 billion in online space. So we already have sign presence in both. So what I’m really excited about is the synergy that comes out of it and the product experience that can build. The simplest answer would be that an Ezetap customer needs online payments. And they can take it from Razorpay.

Somebody from Razorpay’s side needs an offline payment, so they can take it from Ezetap. But that’s not doing justice to the execution. Justice to execution would be… Let’s say you walk into an offline store, for example, we power Jockey India. So you walk into a Jockey India store and you want to buy something and it’s not available at that point of time, but it’s available in the online site or some other store.

Today you can’t swipe your card in the store and get that order delivered from the online channel or get the order delivered from other store, because those systems are not talking to each other. But what if we can connect those systems together? You walk into a store, you like the product, you touch and feel the product, you like it, but it’s not available in your size. You can place the order and you can get it delivered at your home right from that store. You don’t need to go to a website and then do all of that process all over again. By that time, the customer would most likely go to 20 other websites.

So that is just one example of things we could do. Similarly, tokenization is getting big in India. Today if you tokenize your card in a… Let’s say you go to a McDonald’s and you tokenize your card in their app versus you go in the store. They’re not talking to each other. The tokenized card in the app is not useful in the store, what you do in that store is not useful in that app. But you are the same customer. Why should you think about all of those things? So those are the kind of stacks that we can build where you tokenize your card in the app. And even if you place an order from the app or you place it in the store, the same card works. The same tokenized card works. You don’t have to type it all over again. You don’t need to enter it all over again.

I think those are some of the experiences that I can just think on top of my mind. But the opportunities are immense, and I think we can be one of the few companies across the world who can drive that omni channel payments wave. And I think the exciting part about India is that, like people think of omni channel, they think of one or two merchants here and there. But the fact is, post COVID, every offline merchant is an omni channel merchant. Every offline merchant, whether you look at like Jockey India, whether you look at like Croma, whether you look at like Louis Philippe, everyone has an online store, everyone has an offline, and a significant presence in both online and offline.

So the businesses are already omni channel in their ways, but they’re talking to two different systems, two different operations, two different reconciliations. But if you can combine that together, the amount of value that can create for the businesses is immense. And then some of the consumer stories that I talked about can create immense value for consumers. So I think it can be a win-win for consumers, businesses and the ecosystem if we can get this right and create some amazing experiences translating across online and offline.

Sanjay Swamy 27:35

True. And also with ONDC and things like that coming in now, I think, again, all these worlds are going to merge together.

Byas, what are some of your… You’ve been also talking to a lot of customers. And we’ve had, as Harshil mentioned early on is, some earliest customers were actually seeing Ezetap as online and offline as sort of omni channel. What are some of the things you are hearing and you are looking forward to doing together?

Byas Nambisan 28:00

Which is really just the same as what Harshil said. Because even before we did this deal, there were instances where we were partnering together to go offer a converged solution. We were bidding for some places, we were talking to merchants. We are doing stuff along with the bank in the space. So to me, what Harshil just said is exactly where how we saw it evolving as well as being able to converge and give that truly omni channel merchant experience, not just in payments, but in credit, and the customer experience made just seamless between the online and offline world.

Sanjay Swamy 28:45

Wonderful. No, actually I was going to… I missed that point earlier on, but you made a very nuanced point here in terms of… Companies are already working together at some level, and then that’s also a great way to get to know each other before such conversations happen. And I think for entrepreneurs also sometimes, it’s important to know what might be companies that you want to partner with over a period of time. Whether or not an acquisition happens later is a different issue, but building the relationships early because a lot of this, as you mentioned, is just the overall culture and team and product teams and so on.

Harshil Mathur 29:25

Just want to add that, I think that brings a lot of comfort for both parties. The fact that the teams have worked together on joint programs and joint products before, it builds a lot of comfort that, “Hey, we can execute this in a larger way when we complete something like this.” So that played a very critical role. I think we forgot to cover that little earlier. So thanks Byas for bringing that up.

Sanjay Swamy 29:50

Great. Look, I’ve been of course involved with Ezetap, right from first day, or day minus 365 perhaps, as I would call it. And watching the journey, it was very convenient for me that Byas lived four houses away. So even for us I think half our board conversations, were actually just a walk around our gated community here. But look, we’ve been big fans also of Razorpay throughout and we were really excited to see this deal come to fruition for more reasons than one. Thanks a lot for your time today. I know it’s been a hectic day for both of you and I’m sure you’ve been getting all kinds of calls from the media. So I appreciate you making the time for this podcast.

I would just say that, look, this is, I think, going to be a very exciting time for businesses in India, and I think eventually for consumers. As a consumer, I’m very excited that we’ll have much more integrated and exciting offerings. I can just imagine walking into a store and having done a lot of online transactions with them, as you said, just getting treated better because you patronize that store well. And I think stores would want to do that. I think they would want to treat their online customers very well. And historically there’s not been too many ways to do that, but this opens up a world of opportunities and I think consumers are going to win in the end. And I think making commerce friction less or friction free to the extent possible is a shared mission here. So congratulations once again to both of you, and I’m really happy to hear the word excitement, that says a lot, and looking forward to seeing some exciting years ahead.

Harshil Mathur 31:36

Thank you. Thanks so much Sanjay.

Byas Nambisan 31:38

Thanks. Sanjay.

Sanjay Swamy 31:38

Thanks Harshil. Thanks Byas.

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