Last year, Singapore-based fintech firm became the first business-to-business (B2B) payments unicorn from Southeast Asia.
As part of a panel discussion at last week’s Tech in Asia annual conference, Pratik Gandhi, co-founder and Chief Operating Officer (COO) of Nium, as well as Genping Liu, venture partner at Vertex Ventures Southeast Asia and India, came together to talk about the company’s journey, especially during the onset of the pandemic.
They also highlighted the need for a good relationship between a startup’s founders and its investors, which is critical to the company’s growth.
Cancelled funding, salary cuts during COVID
Sharing about the company’s early days, Pratik said that Nium had started out as a very different company. It was called Instarem, which offers digital cross-border money transfers to individuals and businesses, though it’s now part of Nium.
Within a few months of starting the company, they got a very interesting opportunity to have a B2B payment service in a particular country. They had no clue how to manage that country, or whether they needed licenses or anything else. They just went headlong for it and now, they are about “90-odd per cent B2B”.
Then when COVID-19 struck, it posed a very interesting challenge for many businesses, including fintech firms.
It was a great time to become a unicorn as well. At the start of the pandemic — in the first quarter of 2020 — there were about 25 fintech unicorns, which were being minted on a quarterly basis globally. By about the peak of 2021, that number became 150. And now, I believe we are about back to about 25.
– Pratik Gandhi, co-founder and COO of Nium
He described it as climbing a “mountain” and companies are now back to where they started. It was a great time, but this was not the way COVID started for Nium.
In fact, when COVID happened, Nium were just going in for a fairly large funding round, which unfortunately collapsed due to the pandemic.
“We were running out of funds, so we were a little panicky. And of course, we didn’t know how COVID would impact our business,” said Pratik.
They figured that a lot of companies would be in a similar situation and were determined to outlast everybody else in the industry. Their priority is to increase their runway, which meant cutting expenses to “cut the burn down”.
They juggled between laying off some people, and imposing a uniform cut in salaries for all employees.
They eventually decided on the latter because they felt it wasn’t fair to let go of their employees, and got everyone to take a 30 per cent salary cut instead. For CEO Prajit, he “pretty much led the way” and voluntarily took a 50 per cent salary cut.
Things eventually took a turn
The founders were obviously stressed about the situation and Genping, their investor — who Prajit affectionately calls his “other co-founder” for his significant contribution in growing the company –called him up one day.
He asked how much they needed to last a year or two, and Prajit did some back-of-the-envelope calculations and presented him a figure. Within a day or two, Genping granted him the funding, which served as a “great vote of confidence”.
With this new injection of funds, the founders were confident that Nium could stay afloat amid the pandemic. In fact, they realised later on that the pandemic was “generally good” to fintech firms.
The other big thing that happened during COVID is that they decided to take a punt on two very big acquisitions last year — one was UK-based B2B travel payments firm Ixaris, and another was Wirecard’s forex unit in India.
Explaining the move behind these acquisitions, Prajit admitted that the travel landscape was indeed doing poorly due to global border lockdowns.
“Travel was a very bad word at that point in time. They had negative revenues because they were returning more, in terms of refunds, to clients. So it was a pretty big jump for us — we had hardly any funds in the bank, but we are okay to acquire another company. That was the kind of confidence that we had about ourselves.”
He further described these acquisitions as a “complete steal” because these two companies are now the “biggest money-spinners” for Nium.
But why did the founders spend so much money on acquisitions at a time when many other companies were shutting down?
We just wanted to be opportunistic. We had to pay a million pounds upfront for a company, and after giving that money away, we had a couple of millions left in the bank. It was a tough call, but we really believed in that company and we believed in ourselves as well.
– Pratik Gandhi, co-founder and COO of Nium
Achieving the coveted ‘unicorn’ status
Last year, Nium also raised more than US$200 million in its Series D funding round, which saw its valuation rose above US$1 billion.
The round was led by Riverwood Capital, and participating investors include Temasek, Visa, Vertex Ventures, Atinum Capital, Beacon Venture Capital and Rocket Capital, as well as a group of angel investors.
We were always super confident that we will become big at some point in time. It really helped that the entire world seemed to think that the tailwinds of COVID will last forever for most companies. It has in our case, but in many other cases, they have not really lasted. So we started getting a lot of investor attention, and we picked the one that gave us the right valuation.
– Pratik Gandhi, co-founder and COO of Nium
But back in 2016 when Pratik first joined Nium, ‘unicorn’ — referred to as a company that is valued at over US$1 billion — was not a common term.
He first came across that term when CEO Prajit was talking to him about his Employee Stock Ownership Plan (ESOP). “He was talking in terms of what happens to the ‘x’ percentage if the company becomes a unicorn.”
He also recalled the time when Genping had a conversation with them over drinks. They were discussing about how difficult the funding landscape is, and at that point, Nium was already valued at a couple hundred millions.
Prajit had drunkenly said then that they were going to be a unicorn in a year’s time, so “the sets were always high,” said Pratik.
“[Being a] unicorn changed the way that the world saw us, although we are the same company. Now, people wanted to join us. Earlier on, we used to keep requesting people to join us from big companies, but they wouldn’t. After we got that ‘unicorn’ tag, suddenly everything changed.”
Today, Nium has doubled in size and from its initial pool of 500 employees, it now has 1,000 employees.
Supporting startups in times of crisis
In the pandemic era, the role of venture capitals (VCs) became more pronounced in terms of supporting startups, and it’s clear to see in this scenario between Nium and Vertex Ventures.
Genping vividly remembers their meeting at Nium’s office during the early days of COVID. He was pressuring them to cut down the burn by cutting the team members, but eventually left it to the management team to “make the hard decisions”.
The same thing happened when it came to the acquisitions. Genping questioned their decision to acquire because Nium has yet to close its funding round at the time. If it doesn’t close, they would probably need to get existing investors to chip in.
As investors, we know our role to play. We have the experience and give advice accordingly, but at the end of the day, the decision is for founders to make — they are the ones who are running the business. All we can do is try our best to give them the information and knowledge to achieve the result that they want.
– Genping Liu, venture partner at Vertex Ventures Southeast Asia and India
He also shared Vertex’s involvement in Nium’s early days. It had led Nium’s Series A funding round when it was largely a customer-to-customer (C2C) remittance company.
“We have the vision to aim big, but we are not very certain if the C2C will ramp up. I remember when I was writing the investment memo, I was intrigued by the large cross-border market size and the increasing globalisation. But I was also having a lot of concerns on the C2C business — same like everyone else on the team — and I know everyone feels that it’s wrong to be at the bottom of the game,” said Genping.
“As a matter of fact, some of these concerns became a reality in the coming years. Some of the potential we were not able to explore in the beginning, but we thought that there’s a possibility, turned out to be much bigger in the future. So yeah, I will just say that everyone should have a wish and just be clear that you have to be ready to adapt along the way to make sure that you can achieve that vision statement.”
But how necessary is it to have big visions from the start?
For both the founder and investor, a vision is a vision. A vision should be there to inspire everyone to build together for the long run, and it needs to be big enough. Be it a vision of building a multi-billion dollar company or a NASDAQ-listed company, everyone knows the journey is going to be tough, but it’s important to have a vision to keep everyone going.
– Genping Liu, venture partner at Vertex Ventures Southeast Asia and India
Advice for startups
Sharing advice to early-stage founders who are trying to fundraise, cut costs, or go the profitability route, Pratik said that it’s important to think big.
“You may start with a certain vision and a certain business model, but you don’t have to necessarily stick it because ideas have this tendency to morph. And that’s what happened in our case — we started as something else, and now, we are a completely different company.”
“You also have to opportunistic and seize the opportunities when you see them. Don’t let them pass — some risk is bound to be there, but take those calculated risks.”
For instance, the companies that they acquired were actually down in the dumps at the peak of COVID, but have since come up the curve.
“To that extent, I think we are well-served by the strategy that we have laid at the initial part and I think that’s the way we’ll keep it,” said Pratik.
Separately, Genping also stressed the need for founders to “stay aligned with investors”.
An investor needs to be someone whom you can share your mission with, beyond just financial output details. An investor also needs to be someone whom you can trust and work with you through difficult times, such as during COVID.
In the case of Nium, Vertex Ventures has showed them the meaning of solidarity during these tough times.
Featured Image Credit: Screenshot by Vulcan Post
