(L-R) Ramki Gaddipati, Co-Founder and CTO, Zeta and Bhavin Turakhia, Co-Founder and CEO, ZetaJuly 2019. A bootstrapped warrior finally raised money. Bhavin Turakhia’s Zeta was being valued at $300 million by French employee benefits giant Sodexo, which pumped in an undisclosed amount in the banking tech startup. The funding was interesting for two reasons. First, Zeta managed to get the backing of an MNC biggie, which liked the global aspirations of the startup co-founded by Turakhia and Ramki Gaddipati in 2015. What made the funding most fascinating, though, was the background of serial entrepreneur Turakhia. He founded a bunch of companies with his brother Divyank, kept all the ventures self-funded, sold the first company Directi for $160 million in 2014, and his brother Divyank sold adtech venture Media.Net to a consortium of Chinese buyers for $900 million. In fact, the brothers were on the 2019 Forbes India Rich List with a net worth of $1.54 billion. For most founders, raising external money for the first time might have called for uncorking of a champagne bottle, but not for Turakhia, who got down to penning his thoughts. The jottings were neither about funding nor valuation. They were about how staying bootstrapped helped him avoid mistakes that could kill funded startups. “I’ve always been concerned about how the media glamourises lofty valuations and achieving unicorn status much more than value creation,” he wrote in his blog in July 2019. “We will soon run out of letters in the alphabets,” he exclaimed, alluding to entrepreneurs focusing on running through Series A to Series F. The focus is always on the next round of valuation. “I'm not against funding,” he explained. Focusing on valuation, though, is not the same as focusing on value creation. Cut to May 2021. Zeta makes a grand entry into the unicorn club by raising $250 million from SoftBank Vision Fund 2, and gets a valuation of $1.45 billion, a jump of nearly five times since its last round in 2019. For Turakhia, valuation still doesn’t matter. “I still don’t have anything against funding,” he emphasises. He is, however, quick to underline why the context has changed this time. “My every subsequent bet has to be bigger in size,” he explains. In Directi he co-invested Rs 25,000 and it grew to a $160-million company. In Radix, the domain registry firm started in 2012, the Turakhia brothers pumped in $25 million; in enterprise collaboration platform Flock, another $30 million was invested and in Zeta too, the co-founders invested $40 million till 2019. All the ventures, he explains, didn’t need external funds. Then why now with Zeta? What has changed? Turakhia reckons it’s the global opportunity, and aspiration to take a bigger, bolder bet. Banks across the globe, he maintains, spend roughly $200 billion in IP spend. “Our goal is to try and get Zeta to address a significant chunk of that,” he says. Zeta has over 750 employees across its offices in the US, UK, Middle East and Asia “We have extremely ambitious plans to scale up,” he adds. The investors are backing the vision. Banking software is a $300 billion industry globally, says Munish Varma, managing partner at SoftBank Investment Advisers. Most banks still employ technology which is significantly older than their customers, impacting user experience and engagement. Zeta’s modern Omni Stack will drive banking software upgrades catering to the digital consumer, and innovations in financial services globally, he adds. What has also whetted Turakhia’s global appetite is the massive tailwind over the last year. The pandemic, he explains, has made almost the entire economy, including banks, think digital first. “Our product lineup was just fit for their needs,” he claims. What made banks come out of their comfort zone was a bunch of pluses for them. A cloud-native SaaS (software as a system) that requires minimal capital investment, minimal IT infrastructure and training is something the banks couldn’t resist in their pursuit of a digital-first product strategy, he adds. Moreover, most financial institutions are looking to accelerate digital transformation and have realised the benefits of a cloud-native modern stack that can enable them to launch new-age banking products. “We saw a massive interest and uptake during this pandemic,” he says, declining to share the financials of Zeta. “We haven't provided any guidance around revenue numbers,” he says, adding that Zeta counts among its customers over 10 banks and 25 fintech firms across eight countries. Industry watchers are not surprised with Zeta’s brisk growth. “Anyone who has used a banking website or app will see the need for a player like Zeta instantly,” reckons Srikrishna Ramamoorthy, partner at venture capital fund Unitus Ventures. He explains what’s wrong with the banks. The user experience is not the best; in fact, at times it’s broken; and traditional banking technology hasn’t kept up with the times. Such issues have fuelled the rise of neo-banks and fintechs across the globe. Customers now want the ecommerce-like experience or the app store experience in banking which old banks can’t provide. “Zeta helps traditional banks reduce the ‘technology debt’ that most of them have carried for decades,” he says. By doing so, he adds, Zeta helps the bank upsell and cross-sell better. What has also worked for Zeta is morphing into a one-stop solution for banks. The fintech startup, Ramamoorthy lets on, has managed to ‘productise’ requirements of the banks, which might have earlier been managed by the bank using a dozen different vendors. As banking needs and processes are fairly similar across the world, it now makes sense for Zeta to cater to the wider global market. “That’s the bold bet now,” he says. Back in 2015, a bunch of Zeta’s domestic bets didn’t pay off. Turakhia calls them experiments. For a few months, the co-founders started to build the payments business, and piloted a wallet in Mumbai and Bengaluru. The idea was to design an effective payment mechanism for everybody, including autorickshaws, shops, and merchants. Unfortunately, the venture couldn’t scale. “But it had a lot of learning,” he recalls. The young startup then took a stab at solving the pain-point of cafeterias. The plan was to automate payments. Cafeterias, Turakhia recalls, are one of the most stressful places to collect payments. A typical lunch break lasts for an hour, and the entire campus or company descends on a restaurant. The scene gets all the more chaotic if hungry people get angry with poor services. “It's quite challenging as compared to any other payment problem,” he says. The experiment again couldn’t scale. Gaddipati, Zeta’s co-founder, points out another memorable mistake. “Bhavin and I got very excited about a product called Collect Card,” he recounts. “In fact, we felt it was a magical innovation,” he laughs. The logic behind the card flipped the notion of how payment cards work. Most card solutions, he explains, are about customers carrying a card, taking to a card machine and then the merchant swiping it. Zeta did exactly the opposite. While making the payment, the merchant would swipe his card, and the customer just needed to enter a PIN for the transaction to complete. The co-founders were delighted with the idea, which simply meant that merchants would not have to worry about getting a new payment terminal or sticking a certain QR code or anything. “We thought this would dramatically solve the mobile-based payment problem across the country,” he says. The product and the experiment were discontinued after a few months. Excitement, he lets on, at times doesn’t translate into success. Turakhia, though, views the imposters—success and failure—from a different lens. “We don't tend to think of success as an objective and failure as an outcome,” says the man who turned entrepreneur when he was a teenager. In 1998, Turakhia and his younger brother founded Directi as a web-hosting business from their parents’ house in Mumbai. The duo took a loan of Rs 21,000 from their father, and within four years, their fledgling business posted a revenue of $1 million. Over the next few years, the revenues leapfrogged to $10 million. Entrepreneurship, Turakhia maintains, is like a journey towards mastery. “There is no binary outcome. There is no final outcome. It's a lifetime journey,” he says. The serial entrepreneur views success and failure too from the same philosophical lens. “You learn from failures and you celebrate successes,” he says. The goal, though, is to become a better version of oneself.
*****Zeta’s Tech Factor