Summary

The Offline Network Episode 14: The Next Identity Layer (aired 2025-10-01). Guests: Pratik Gadia, Bhavik Koladiya from Yarn Bazaar, OTPless. Pratik: "Like if you look at Indian textile industry, about 83% of it is unorganized SMEs and MSMEs." Pratik: "So if you look at apparel exports, right, India is at about 1,515 billion dollars compared to a country like, let's say Bangladesh, which is close to 40 to 50 billion dollars." Topics: venture capital and funding, AI and LLMs, consumer brands and D2C, B2B/SaaS. The Offline Network is India's live show on startups, tech, and venture — streaming M/W/F at 4 PM IST on YouTube.

Full Transcript

Dhruv Sharma: Hey, hey, hey, listeners, it's good to have you back on the offline network. Today is the 1st of October. What's up? How you doing? Good. Heading into the festive season, into the festive season. And what's what's the new cycle in our ecosystem looking like? Is it? Is it heavy? Is it light?

Utsav Somani: I think it's pretty heavy. I mean, of course, the global world is also influencing what we use here. So we're going to cover some of that. But first, touching on domestic markets, overdrive, overdrive, WeWork India is heading to the public markets. They're expected to list on October 10th, they're raising approximately 3000 crores offer for sale only. And funny enough, WeWork Global owns 23% of it and the rest is with an Indian group called Indesi. And they are, I mean, all over, I mean, they have 68 centers in eight cities. And you mentioned some number as well, right? How many seats do they have in India?

Dhruv Sharma: I'll get to the number in just a second. Do you think Adam Neumann is going to be watching this IPO closely after the 2017? It wasn't 2017. I think it was some such time.

Utsav Somani: Yeah. I remember watching this Apple TV show called We Crashed, man, what a series. Jared Leto did a great representation of the whole story and played the character as well. Yeah.

Dhruv Sharma: I haven't seen the show. But look, this business is an independent business and maybe the only thing it has in common with its parent is the name, which has worked to their advantage and obviously has global recall. But they have the backing of the embassy group and they bring with them a lot of execution discipline. You asked for some numbers, interesting numbers. They have like a 1,14,000 desks across some 68 centers, I believe, and they're making on average 20,000 rupees per member. It's obviously a premium offering, but those are interesting numbers. And unlike the global parent, they've turned a profit.

Utsav Somani: Yeah. Almost a profit. Actually, the Q1 loss is narrowing. So I think revenue is looking up and they've made a strong brand. Like it's one of the very few centers that actually gives that premium feel and still has the bells and whistles. Many of their companions in the ecosystem have gone for a listing as well recently. Smartworks, which focuses more towards enterprises and designing offices, of course, are tightly sponsored as well. And then we've got IndieCube as well, which is into the Flexi working space. So I think the market is pretty active for these Flexi working space providers.

Dhruv Sharma: Would you say COVID really hit the office rental space? Temporarily it did.

Utsav Somani: I don't know the state, but temporarily it did. But I think it came back in a decent way. So I think market's looking positive for these players.

Dhruv Sharma: Yes. Before we jump on to the next item, you know, what's interesting is through 2024, 20% of all retail space in offices in tier one cities was flexible, which is, you know, folks like WeWork and their peers, and it wasn't, you know, a company working out a long-term lease with CBR again and creating an entire campus for themselves. So yeah.

Utsav Somani: All right. Can't mention public markets without a mention of Zerodha. They recently came out with their numbers and seems like they've taken a 40% hit because of FNO changes that have happened in November 24. So what these changes specify, of course, apart from the contract value increasing to 15-20 lakhs, one weekly index expiry per exchange. So that has truly sort of affected the volumes on these. And you mentioned a Pareto principle at play here as well, right?

Dhruv Sharma: Yes, there is that principle at play. But also I have to say what I love about this company and about the CEOs, they're not a public company. They may never list. They may or may not list, but they treat themselves like a public company. They didn't have to disclose this, but they still came out and chose to speak about it, which gives other young founders confidence to do the same thing as well. So yes, to your question, they're, of course, a discount brokerage and they have a large base of traders, you know, on the platform. But, you know, the numbers I've seen is that almost 60 to 80% of their revenue would come from just 15% of the traders on the platform who were actually doing active trades, which is a combination of intraday trading activity and derivatives, which is FNO. And now with that market gone, who knows, people who were just using Zerodha to just buy stock and, you know, having it delivered into your Demat accounts might also have to start paying because they will have to pivot their business model. But it doesn't look like they're going to do that before the full impact is noticeable.

Utsav Somani: And they've tried, I mean, SEBI's tried different disclosure norms within the ecosystem as well. And they've really, I think what the moves are to, I mean, gearing up towards is basically curbing retail speculation in all kinds of markets, including gaming and stock market trading. So I think interesting to see where this all heads and talking about a peer of Zerodha Grow. It's also heading to the public markets very soon. And very surprisingly, the founders have started increasing their stakes very consistently over the last two years. Why is this at play, Dhruv?

Dhruv Sharma: I mean, I think it's a good sign. It's always a good sign when I just think, yes, you know, you're buying more of your company, more skin in the game. And these are all the companies in the IPO pipeline are all super healthy companies with great prospects ahead of them. I think it's a confidence signal to the market. And who else has been doing this, by the way, besides Grow? I know there's a lot of people.

Utsav Somani: Zomato, Policy Bazaar, many others. And I think my read on this whole situation is that typically, I mean, if you compare Indian public market companies versus the US ones, especially the new age tech firms, they've taken a lot of capital before heading to the public market. So that means a lot of dilution has happened for these founders before they actually hit the public markets. And when there's a pot of gold at the end, they really don't want to miss out on that. And especially, I mean, Zomato, like Dipinder's 4.24% stake, which he bumped up via ESOP issuance closer to the listing, is now worth over, I mean, almost one and a half billion. So I think impressive for them to really just double down. And the investors will see you want the operator at the helm to have skin in the game. So I think that it's a factor of these things at play. They got diluted too much, too fast. And eventually, when the public market listing comes, you want them to steer the company into success. And so they end up raising their stakes as well.

Dhruv Sharma: Yeah. Which is, of course, which is a global company. And many people say it's going to be forever private, has recently been doing buybacks as a counter to the dilution they've had over successive fundraising rounds. So it's interesting to see different companies and different founders deal with this in different ways.

Utsav Somani: Yeah, same thing happened with Swiggy, Harsha as well, I think 6.2 to 8.5%. So positive numbers overall. Now to your favorite person, the guy who's doing all-in podcasts, Chamath is launching a new SPAC. He's already launched and raised actually, 5X oversubscription.

Dhruv Sharma: Since when did he become my favorite person?

Utsav Somani: I just wanted to talk about this. So yeah, let's hear it.

Dhruv Sharma: So what's he done this time? What does the beat say? It says I'm back.

Utsav Somani: Yeah, classic, right? He basically raised this American Exceptionalism Acquisition Corp SPAC $345 million with 5X amount of demand at $1.4 billion. He's going to focus on AI, energy, defense, or decentralized finance sectors. But interestingly, there's, I mean, I know all the retail people hate him on Twitter for this, for all his past acts and majority of them, I don't think any of them have actually performed well. So he's restricted 98.7% of it to institutions and only 1.3% for retail. So people who are coming in know the risk reward that you get when you're backing a vehicle like this.

Dhruv Sharma: SPACs have been around for listeners who might be curious, SPACs have been around a long time. This is, by the way, a special purpose acquisition company. And Chamath in 2017-19, or whenever that happened last, he said this is IPO 2.0, and he had arguments in favor of SPACs that people didn't always agree with. But basically what they would do is create a company, a non-operating company, which was the SPAC. And that used to be public. And they would raise a bunch of money for this company and put that money into a trust. And then they would go looking for an acquisition target. They would merge the two companies. And a company that was dilly-dallying and not listing on its own, this would be its sort of public market debut.

Utsav Somani: Faster access to public markets, yeah.

Dhruv Sharma: Or you could say, yes, it was faster access or maybe even circumvention of the average listing process where you have to make SEC disclosures and pressure the company and so on and so forth. But this time around, it looks like Chamath's learned his lessons. And there's hardly any retail participation. I saw the tweet also, and it's like 98% of the SPAC is made up of handpicked. There's very little room for retail.

Utsav Somani: All right. So there's a debate brewing. OpenAI. Of course, AI has to be covered. We've covered public markets. Now our second favorite topic, AI. OpenAI has come out with a new video model, and it's making all the noise on Twitter for different reasons. I think Meta first announced Vibes, which is a short-form video app where you see TikTok style videos, but all entirely generated by AI. Now, Sora2 has come out, which is a huge increment in advancement compared to their previous model, which apparently has better physics motions. The improvement in the model is pretty significant that people have started loving it on Twitter. There's also a counter argument that people are making. Have you seen some of those tweets?

Dhruv Sharma: Yes. So let's get this straight. OpenAI now actually has not one, but two apps. There's ChatGPT, which everyone had been using all this while now. There's a second app called Sora2, and it comes pretty close to TikTok is what some people are saying. Bottomless scroll of AI-generated content. I think the arguments are, some people are saying, hey, all of this for what? All of this, you know, AI build out and all of this money and all of these brilliant people, like what's it amounting to in the end? You know, yet another place where you've got a bottomless scroll. That's one argument that we're seeing. The other argument is people say that no matter what you might say, OpenAI has a way of closing the loop on the consumer products. They will turn things into an app and consumerize technology the best way they can.

Utsav Somani: And they have to make money, right? I mean, eyeballs make money. And eventually, I mean, the same argument was made for Google, that whatever ads you see, it ends up funding all the projects that they do, DeepMind and the Google X projects and these things. So OpenAI will funnel some of this back. I mean, they can only raise the per-seat pricing for ChatGPT so much.

Dhruv Sharma: So unless we want our own subscriptions increasing substantially, I guess we should be okay with ads paying for a little bit of the research and compute and everything else that's an influence that's going on in the background.

Utsav Somani: And Elon Musk always has a dog in the fight. He's announced that wine but for AI is also coming soon. So yeah, let's wait out for that. But before we, I mean, chat about this any longer, let's welcome our first guest, Prateek. He's digitizing a very traditional industry with Yarn Bazaar and he was also featured on Shark Tank. So Prateek, welcome to the show.

Dhruv Sharma: Thank you for having me. What's up?

Utsav Somani: Thank you. Yeah, why don't you explain for our listeners, what do you do at Yarn Bazaar?

Pratik Gadia (The Yarn Bazaar): Okay, so the Yarn Bazaar is a B2B tech-enabled supply chain platform for textile raw materials. So what we do is we streamline yarn sourcing for mostly fashion brands, but specifically focus on fast fashion brands. So if you look at the textile landscape, right, if you look at, I mean, most users won't understand the finished side of things. So you have apparels, which is the clothes we wear, you have home furnishing, which is curtains, things like that. And there are multiple other applications under technical textiles, which is a very, very diverse range. If you look at any of these end products, especially the clothes we all are wearing, our yarn is a building block. So you won't find anything apart from yarn, right? So which is why we felt that streamlining yarn sourcing in an industry, which is a legacy traditional, but extremely fragmented. Like if you look at Indian textile industry, about 83% of it is unorganized SMEs and MSMEs. So that's what we do. We're trying to streamline this entire supply chain.

Utsav Somani: And how do you streamline? What are the steps involved? Because I'm guessing many of these manufacturers or partners or vendors of yours are very traditional SME businesses.

Utsav Somani: So that's the beauty.

Pratik Gadia (The Yarn Bazaar): So if you look at, let me give you numbers first, right? So if you look at apparel exports, right, India is at about 1,515 billion dollars compared to a country like, let's say Bangladesh, which is close to 40 to 50 billion dollars. And China is, I mean, about 160 billion dollars. Whereas India inherently has all the advantages, right? So we are the only English speaking country in the world, which has an entire infrastructure from farm to fashion. Yet the export numbers are not there, right? So because there's a lot of complexity in the Indian supply chain. So what I mean by that is, you know, typically it's OCD. So QCD, so your quality, cost and delivery. So getting the right qualities in place and ensuring the right prices, which is competitive to the other countries or to the other vendors, right? Ensuring that you can do OTIP deliveries. So ontime and full deliveries. This is where the fragmented supply chain is completely broken, which is where we come in and the idea is to kind of put all of these things together, stitch them together and be able to work with a, let's say a brand like H&M.

Dhruv Sharma: Prateek, on the demand side, how frequently do the buyers place an order? How much inventory do they hold?

Pratik Gadia (The Yarn Bazaar): So see, our buyers are apparel vendors who are receiving POs from fashion brands. So typically, if you look at a fairly mature enterprise, which is like a large enterprise of about 500 crore plus annual revenue, they would, what, how they would operate is the moment there's a PO in place, they will kind of cover the entire order by placing the raw material orders, which is done in this case. But then there are slightly smaller enterprises who function a lot on speculation, right? So the purchase frequency can be as high as every day or every week.

Dhruv Sharma: Okay, that is interesting. And so go ahead.

Utsav Somani: You were involved in your family's fabric business as well, right? What practices do you carry over from there or left behind?

Pratik Gadia (The Yarn Bazaar): So, good question. This is my personal belief. I think in this kind of a model, your modes can be capital allocation and operations excellence. And what I really, really like, I feel it's a blessing that I've got a chance to work in my family business because these two things come inherently to you. And because family businesses is your own capital, you have to make sure that, you know, your entire operations are extremely, extremely frugal and efficient. So that's one part that really helped me. But apart from that, I don't look back to whatever insights or learning from the family business because that does not translate well here.

Dhruv Sharma: And beyond the transaction between the buyer and the seller, Prateek, what else does Yarn Bazaar get involved in at this time? Do you do credit? Do you do logistics? Do you take care of those things? All of it.

Pratik Gadia (The Yarn Bazaar): Yes, it's a full stack platform. You have to do all of it. And especially in industries where the margin profiles are not very high, unless you stitch like every service together, it's difficult to make a lot of money.

Dhruv Sharma: We'd love to understand how you've led that stack. Like what was the first layer? What was the second layer? We'd love to understand the sequencing of it.

Pratik Gadia (The Yarn Bazaar): Right. So, see, typically there are three important building blocks. One is your commerce layer, which is pure transactions, enabling transactions. Second is the lending part of it, because, you know, credit is inherently part of every transaction. And the third is the logistics part of it. And we started with the commerce layer. So mainly to do with sourcing and transactions. Then we also understood that if you want to ensure OTIP delivery, which becomes very important for these large enterprises, because the AOEs are very high. Our AOE is about one crore. Right. So OTIP becomes super important. So then we got into logistics and then into lending. Oh, you know, using our lending partners.

Dhruv Sharma: And so do they count on you to underwrite these borrowers?

Pratik Gadia (The Yarn Bazaar): We don't do that. We are super clear that our expertise is in the sourcing side of things, not lending side of things. Right.

Utsav Somani: And is there a global play into all of this? Like, I mean, do you help these partners go global or, I mean, do source demand from overseas as well?

Pratik Gadia (The Yarn Bazaar): Yes. So, you know, that's, that's very important. I was mentioning the export numbers earlier. One important reason we understood why global brands, right, while being present in India, are not able to increase their business is because of two main reasons. Number one reason is, let's say if you're a brand like H&M, you know, I'm saying H&M because it's a very popular name. When H&M places, let's say, an order for this black, round neck, basic tee to any vendor, they want the price locked in for the entire season. So how fast fashion would operate is they'll start with a smaller demo queue, see how it sells in different pin codes or different geographies globally, and accordingly increase the order size with their vendors. Now, what is really difficult for Indian manufacturers to do is commit to a price because your yarn supply chain is not structured that way. The yarn price keeps changing every day. And the delta variation is very, very high. So that is where we come in. We've started underwriting capacities as manufacturers where we can provide a price locking for an entire season depend. And when I say season, it ranges from two months to six months, depending on every brand. That is super difficult. So by virtue of doing that, you're able to increase, you know, the business that these brands do in the country and then kind of increase the export numbers for us.

Utsav Somani: So you're acting like MCX, sorry, just I wanted to touch upon that price, the commodity pricing thing. MCX, I mean, if you're acting like say MCX of yarn, I mean, I'm guessing there's significant risk in the thing also. What are the variants typically in the commodity pricing?

Pratik Gadia (The Yarn Bazaar): So see, the thing is, yarn is not a listed commodity, right? So there's no MCX, so there's no listing for determining yarn prices. And it's really complex because if you look at any SKU, right, every SKU from supplier to supplier varies a lot in terms of its performance efficiency. And not just that, for every supplier, the same SKU varies lot to lot, right? Because your raw material is cotton, which is a natural crop. So you cannot really control that. So every cotton lot is very different and hence your output will always be very, very different. So understanding the right quality for that particular requirement becomes super complex. So we don't expose ourselves to any risk, whether it is credit risk or inventory risk or price risk. Everything is back to back for us.

Dhruv Sharma: And Pratik, does organizing and aggregating the long tail of demand help you negotiate better prices in the supply side?

Pratik Gadia (The Yarn Bazaar): Yes, absolutely. Yes. So A, all our vendors get paid 100% advance free shipment, which allows us to extract better prices. B, because we are underwriting capacities, we are able to make better terms, right? And C, every yarn that we sell to whoever vendor, to brands like Walmart, Ballman, H&M, any brand, it is 100% white label now. It's a combination of these factors allow us to make better margin profiles.

Dhruv Sharma: And if you take a step back from your business, can you give us a sense of what's being done at the government level, at the industry level to make India more competitive when it comes to textiles? Because things are pretty competitive, even in our neighborhood, right?

Pratik Gadia (The Yarn Bazaar): So at the government level, there has been a lot of work done since the beginning. I mean, since 50 years, I look at textile as more of a welfare industry, not an industry where the players are investing a lot of money. It's always dependent on government schemes. So there's been a lot of that PM Mitra Paks and, you know, 5F scheme of PM Modi, but off lately, especially last two or three months, it's been super chaotic with US tariffs, right? So the first version of US tariff that was announced, India would have benefited the most, right? And this is coming right after last year, the Bangladesh political crisis, which happened in August, post which a lot of orders came to India. And then the US tariff would have helped India further. But then the change of tariff has been really, really bad for the country, right? So we are one of the most, like the highest tax when it comes to textiles.

Utsav Somani: And what is the sentiment like amongst manufacturers in India?

Pratik Gadia (The Yarn Bazaar): Overall, it's chaos. It's absolute chaos because in such industries, you cannot bear additional 25% and brands or retailers, brands like H&M or Walmart are not going to bear 25%, nor are the consumers. You cannot pass on this cost to the consumers. And so that has been difficult. But what we've seen amongst our buyers, there are some smarter buyers who are no longer chasing the American brands or retailers. The quantum of imports for US is almost at par with the imports that Europe does. And now with India, UK, FTA and other FTAs in progress, there's enough work you can find in other countries, right? So we've seen the two cohorts playing out. One is the legacy players who are still sticking to American business. And then there are other players who are just activating their sales team that go to Europe, go to UK, go to Africa. There are now a lot of brands coming out in the Middle East also, say Max, for example, which is doing good volumes. So they're activating sales team to focus or diversify their sales to other networks. And the beauty is Indian brands now. At least what I have noticed, right? My personal opinion is now is a time when there are a lot of Indian brands, domestic brands, including from the likes of, let's say, Tata Group Studio to Reliance Group to also D2C startups, which have been able to showcase that they've been, they've kind of captured a fairly good market share and they're growing at a good caliber. And Indian consumers are actually paying for Indian brands now. So whether it's a 500 price point to a 5,000 to a 10,000 price point, Indian consumers are willing to buy Indian brands. That's a great signal because they're able to offset a lot of the export hit that these enterprises have faced.

Dhruv Sharma: Prateek, do you think you could tell us how different are the supply chains for natural fabrics and synthetic fabrics?

Pratik Gadia (The Yarn Bazaar): India's advantage is natural fabrics like cotton. 70% of India's textile industry is cotton. Synthetics, man-made are something that we are not there yet, especially compared to China. We are about 30% more expensive to China, but there have been a lot of government policies, PLI scheme last two years, which are pro-natural, so, I mean, pro-polyesters and man-made fibers.

Dhruv Sharma: And that's interesting because they have environmental considerations also to balance. Yeah, we should look into this a little bit more.

Pratik Gadia (The Yarn Bazaar): So I'll give you a great insight now. What is happening is per capita consumption of textiles globally, as well as in India, is going up by 3x, 4x. So, I mean, if I want to look back when I was a kid, right, you would only buy new clothes for, let's say, certain occasions, Diwali and all, and once they turn old is when you start wearing them as a casual wear. Now the landscape has changed. Now you're buying different clothes for outerwear, different loungewear, different activewear, your casual wear. I mean, now they're different purchases. So you're essentially changing clothes four times a day, which is great for such industries.

Utsav Somani: Prateek, before we let you go, we've discussed Shark Tank on the show. How was your experience?

Pratik Gadia (The Yarn Bazaar): Great. I mean, great experience. I was part of the first season. So the OG guys.

Utsav Somani: Positive, negative, Spitai. I think for people who are tuning in, a lot of founders were, I mean, expected to go on Shark Tank, must be tuning in as well. So positive, negative, unfiltered version.

Pratik Gadia (The Yarn Bazaar): Okay. If you're a D2C or a B2C brand, a lot of positives, right? The mileage you get from the show in terms of the brand awareness, it's insane. It's insane. And I think what I have seen is it has been just going up with every season. Negatives, I don't find any. I think I had a great time. We got a very good response publicly in the industry, especially, right? Only, I think a few founders where they've not had a good experience in terms of how their pitch came out or how they were projected. I mean, of course, then it's not just your business also that founders credibility that gets impacted.

Utsav Somani: But closures, people have complained that closures take longer or people or the sharks wait until the season airs before actually closing a deal. And I think the number that was publicly reported in some media outlets is 50%.

Pratik Gadia (The Yarn Bazaar): I think what I know, and also I can speak from my personal experience and other folks that I know who had a similar experience, the numbers are at par with any other format, Whether it's Shark Tank US or Dragon Dance UK or any other format. Because see, if you look at a typical venture deal, right, there's a lot of conversation that goes on before the IEC decides to invest in your startup. And then the DD happens. In a Shark Tank format, until you walk in, none of those investors know who you are, what you do. So a 30-minute, 60-minute conversation is just not enough for them to get a lot of substance. And not just that, often what happens is when you're facing the cameras and all of those that environment, you end up misrepresenting some numbers or some certain facts. So when the DD starts, it's either that some of these misrepresentations do not give investors enough confidence to go ahead or at times is the founders backing out because now they're getting better valuations in the market.

Utsav Somani: I don't know. So plays on both sides as well. Awesome to speak. Thank you so much for tuning in. I really enjoyed the chat. And thank you for educating us about your company. Thanks for having me. Bye. Awesome. Now we have our second guest for today. We've known him for a while. His peers have come on the show from Bharatpe. You've heard from Suhail and Dhruv Bhel before. Now we have the king himself. Bhavik, welcome.

Bhavik Koladiya (OTPless, ex-BharatPe): Hey, what's up? How are you guys? Great to see you.

Utsav Somani: I saw your LinkedIn post that this is your first podcast. We're a live tech chat show. So we're not actually a podcast. So you're actually on a live show.

Bhavik Koladiya (OTPless, ex-BharatPe): Yes, and that is actually the first time I'm going to be live on the screen.

Utsav Somani: So where are you from? You're in Gujarat now? Yes, I'm in Surat. You can see Surat in the background. Should we start with OTPLess or Bharatpe? Whatever you choose, man. It's your call. You've been part of both the journeys. So Bharatpe, we'll come to that later. OTPless, the thing that's keeping you busy. What is it for our listeners?

Bhavik Koladiya (OTPless, ex-BharatPe): Yeah, so how many OTPs did you get today?

Utsav Somani: Man, I think at least six, seven. Honestly, it's a pain in the ass, to be honest.

Bhavik Koladiya (OTPless, ex-BharatPe): So I mean, the mission is that you should not receive any OTPs ever. We've been working on this idea for almost three years now. One thing is that it's finally working, right? So just this month, if you think about it, 70 million users authenticated themselves via OTPless. That's going to be almost 10% of the Indian internet population, at least once a month, are now OTPless, right? And the reason is, so it's been more of a personal pain, just like when we started Bharatpe, right? We as a merchant didn't enjoy how the QR codes were working. Same with OTPless is that, you know, from three sides. As a consumer, you hate it, right? It's always a surprise. Either you get it, either you don't. By the time you get it, it might have been expired. From the business side, losing 20% of your user on the most important journey, which is sign up and check out. That's a big pain. From a developer's view, integrating and building an authentication system in-house, it's a pain. So we are trying to, you know, solve all those three pain points by building OTPless.

Utsav Somani: And the numbers are fascinating. I mean, you mentioned 70 million. Like, what is the method? Like, I mean, you've mentioned, I mean, the name itself of the company is very descriptive, OTPless. But what is the science and the tech behind it?

Bhavik Koladiya (OTPless, ex-BharatPe): So basically, there are three different methods where you can verify the user's mobile number, right? The one being ubiquitous one is WhatsApp, right? We always sign in with Google. We love it. It verifies our email within one tap. There should be login with WhatsApp, but unfortunately, you know, it's not there. So we ended up building that first, which is still the largest and most popular method for the users to log in with.

Utsav Somani: Do we have streaming issues with Bhavik? Oops, let's hang in there for a second.

Dhruv Sharma: You'll be back soon enough. What's in the, what beverage are you having on serve?

Utsav Somani: Is it water? Honestly, I've started avoiding coffee after 2 p.m. It just gets horrible and then sleeps for. Bhavik is dialing in from now. Happens to the best of us. Yeah. Yeah. So you were, Bhavik, before you got disconnected, you were talking to us about how login with WhatsApp is your biggest offering right now.

Bhavik Koladiya (OTPless, ex-BharatPe): Correct. Interestingly, that is not the only email, right? If there is a technology which is not very well known called silent network authentication, which is becoming very popular, right? And, you know, the way it works is also amazing. Think of this way. If you are an editor subscriber, right? And if you are using, you know, 100 MB of your data in a session, how does Airtel connect, you know, usage with your phone number? So underlying tech is basically built on top of it. We ended up building an OAuth layer on top. And that is the second most popular method. Also the SMS again, right? You know, we have done a lot of work on the SMS. SMS have been optimized for delivering marketing and transitional messages. But when it comes to OTP, which is time sensitive, right? It was never optimized for latency. And that is our third most popular method. This is how we authenticate.

Dhruv Sharma: I'm probably going to ask Bhavik a little more about the world of OTPs. Bhavik, who first thought OTPs were going to be a good idea? Why are some OTPs four digit and some six digit? Why do they all have a different shelf life? Some of them pop in 30 seconds. Some are good for 10 seconds. I'm sure you've studied this space in depth. And why can't all of us just be known by one OTP, right? Which is unique to us.

Bhavik Koladiya (OTPless, ex-BharatPe): Yes, it is very interesting, Dhruv, right? You know, OTPs were not meant to be used as an authentication method, right? But it was the only thing or the only tech available. If you just trace back the history, right? The first message actually on the internet was login. This is how you identify yourself, your computer, you know, your server on the internet. So username was the thing, right? And then you type in password. And that's how you logged in. What happened over the years is that you cannot communicate with a username. I can't send you a message. So then email became your username, password became there. And then this very innovative company called Google, they said, okay, we have, we are the identity provider of email. How can we federate this to the other apps? And that's how sign-in with Google came. And this single sign-on, social login, sign-in with Facebook, almost now there are 200 different methods you can log in to some app. On the mobile number side, actually India takes the credit, right? Of introducing OTP. Number one was that in India, we don't use email, right? I mean, we are the power users, right? If you go on the street, the way email is being set up, when you buy your phone, the shopkeeper creates an email for you and you don't know anything about it. So this is how it came up. But underlying philosophy is through that whenever you want to authenticate a user, you have to check three things, right? One, something the user knows, which is your pin or password, which is usually static. Now that is shareable. So if you share your password, right? Anyone can actually log in. And that's when the OTP came and became a popular method to check the position. Does user have something where they can prove? It's like your car key. If you have a car key and if someone takes it, they can drive away with your car. And this is where I think all three are now emerging and finding out something really user is, which is your biometrics, your face ID. So this is how the industry is evolving from one factor to two factor and hopefully three factors soon without compromising the user experience and ensuring all the auth is secure.

Utsav Somani: Because in India, mobile number is your identity. Like, I mean, I thought about changing my mobile number so many times, but I don't even know what all places have my mobile number and random OTPs, which are probably once in a year as well. And I think biometrics like face ID and touch ID, I think are solving that to some extent. But it's so deeply ingrained, this thing. What do you see as the next evolution? I mean, mobile number is identity, but where does it all go for OTP less from here?

Bhavik Koladiya (OTPless, ex-BharatPe): So we're super clear, right? So when we named this company, the mission was super clear. OTP is a glued, everything is glued together with it. It's not actually the final answer. Eventually everything will move to biometric. Now the problem with the biometric is that there are also privacy concerns, right? You can't actually, so whenever you do your biometric on your phone or on any app, actually the app cannot read the biometric data.

Utsav Somani: Sorry to interrupt you. Your screen is, I think, shaking a little bit. If you just do that.

Bhavik Koladiya (OTPless, ex-BharatPe): I'm really sorry. My first live stream.

Utsav Somani: And we're unfiltered, man. So he was taking the call from a bar. So he was trying to hide the bottles, this thing. We spoke about cocktails as well with him. So this totally works.

Bhavik Koladiya (OTPless, ex-BharatPe): Thank you. Thank you. Is it better now? Much better. Thank you. Yeah, so biometric is the future, right? So SIM-bound, device-bound authentication. This is the final name where you can actually check all three factors. And actually, if you read the news last week, RBI announced a new framework as well. RBI was the one to introduce SMS OTPs in our life. If you trace back in 2012, suddenly Uber stopped working because they could not verify a payment transition. And this is the major shift now again. Are we seeing that that circular is outdated? There have been new technologies now and we have to figure it out and make India okay to do this.

Dhruv Sharma: Kunsub, do you think there's enough OTP-less related questions? Do you want to get into the good stuff?

Utsav Somani: I just have one final, this thing. What all kind of partners do you work with? And I'm guessing convincing banks or get out to, I mean, integrate this where they have rigid structures. Imagine convincing HDFC Bank to tie up with a young company. Like run us through that sales process.

Bhavik Koladiya (OTPless, ex-BharatPe): So that's what we are also figuring out. To be honest, when we started, we launched it as a developer tool. Where we found actually the product market fit was in this large consumer apps. I'm at liberty to disclose you a few names like Misho, Zepto, Physicswala. These are the apps that have adopted OTP-less. And when it comes to the banks, it is not about just the success rate. This is more about ensuring and there are a lot of things happen in the background. Think of this way, you will never share your password with anyone, right? OTPs have a practical usage of sharing. You share it, I share it also, right? Now, if someone calls you pretending that I am your banker and I'm trying to do your KYC and if you share your OTP, how do you stop that? Second thing is that once that is done, actually the responsibility of preventing the fraud lies on the issuing bank. So if something happened, I can call my credit card company and say, okay, I haven't done this transaction, right? And you have to give me my money back. So how to prevent chargebacks itself? So this is going to be a year-long sales cycle. You've asked me like HDFC Bank, right? We have a lot to build and a lot to prove before we can even go and command OTP-less for the banks. So that's going to be a journey. Awesome.

Dhruv Sharma: We're about to get use cases right now. So now I want to ask a few OTP questions, OTP-less questions before we do this segment. So who would be the ideal customers, Bhavik, to the extent that you can share right now? Who would you love to have?

Utsav Somani: You're already seeing Bharat pay, Ash.

Bhavik Koladiya (OTPless, ex-BharatPe): No, I mean, OTP is something which cuts across different use case and the user journeys horizontally, right? When you download an app, you log in, you sign up, you check out, give a consent, you access your other credentials. Even when you get your stuff from Zepto or you are hopping into a cab, you have to share your OTP. So for us, actually the ideal customers are every single app. And that's the mission, right? We don't have the liberty to choose that if you want to one day put it on Airbnb or Zepto or anyone, right? Everyone is an ideal customer for us.

Dhruv Sharma: Would you say that just like UIDA created the identity layer, population state identity layer, now your aspiration is to create an authentication layer that maybe they could have built, but they never did. And there's room for private market innovation.

Bhavik Koladiya (OTPless, ex-BharatPe): Absolutely. I believe that NPCI has created the national payment switch where every bank and every app is integrated, right? There has to be a national authentication switch. And if we get a chance to build it, we would love to build it.

Dhruv Sharma: I mean, so in the world of tech, we obviously use solutions like Google Authenticator or UDPs, but you have 70 million people who are transacting on ODPs, like this is not everyone's cup of tea. So it's a big unaddressed market. All the best. Thank you very much. So now do we get into the good stuff?

Utsav Somani: Yeah, before I start the Bharat Bay stuff, I actually want to recap on how I met Bhavik. So Bhavik messaged me on LinkedIn in 2018 that six of us from IIT Delhi are building this new app which is going to make payments free and interoperable across apps and stuff. And my question to him, I saw that LinkedIn exchange. I said, how are you going to make money? And he said, we'll figure it out. And then came, of course, his other co-founder or ex-co-founder. I don't know how to address him.

Bhavik Koladiya (OTPless, ex-BharatPe): Once a co-founder, always a co-founder.

Utsav Somani: Yeah, so lovely. And then Ashneer came into the picture and then I think the round got done and then we participated as well. And yeah, I mean, Bharat Bay has done really well. I mean, of course, you closed a recent secondary transaction as well at the last round valuation. So I think that's a great validation that the company has left behind all the troubles. But how was it living through all of this whirlpool of, I don't want to say mess, but the drama which was happening, like what was going in your head?

Bhavik Koladiya (OTPless, ex-BharatPe): So to be honest, first, you know, when things started going this way, I actually went into depression, right? Like what's been happening, right? Everything just suddenly came, right? We were not prepared for it. If you trace back that time, 2021, we were in peak, right? We closed Series D and three months after Series E, we became a unicorn. We ended up getting a bank license and the job was defined that you have to build a most innovative bank in India. That was the job. I was actually deep in the trenches building a poor banking system from scratch. I think the first one in the world that someone tried to build a CBS from scratch. We were in that and here comes Christmas and, you know, so like I've been kind of a very quiet person and one pop-up and I see every article has my name. I was like, what's been happening, right? How I navigated that was also just staying to the mission, right? Keep your heads down, focused on that and don't worry about what's happening. Around you. It wasn't easy. But again, that was the job.

Utsav Somani: It was a good system, Tab. Like I mean, as a founder, we only celebrate and talk about the successes but going through these low moments in a company, like, I mean, it doesn't happen to me. Like, of course, you've hit scale, you've hit peak, you've done all of those big things but I mean, the seriousness of this situation was, I mean, huge, right? I mean, every week there was a Bharat Pay article coming out. Who was your support system and what did you do to deal with all of this?

Bhavik Koladiya (OTPless, ex-BharatPe): No, it wasn't just affecting us, right? It was affecting everyone around us. Beat the team, beat the investors, beat the board, beat the founders, all three of us. Also, you know, our customers, right? I mean, Bharat Pay was built on a promise of trust. If you trace back, you know, before KTM started, if you ask someone to take a picture and the money will come in your bank account, who would have believed you, right? So, over the years, we were able to build that trust from the merchants that, okay, we're going to safeguard your money and we're going to give it to you in your bank account instantly. And when you hear something, the allegations, right? So, at that time, the board, the co-founders and the investors and the team itself, they were the ones who were cheering for us. Like, don't worry about what was happening in the media. Of course, the media had a different kind of a perspective how Bharat Pay was being run. And we were a three-year-old company at that time. So, fast drilling, you know, moving, and it was like a, you know, bulldozer going through the entire payment industry. That was a reminder for us that it is not about us. There is a much bigger, you know, responsibility out there. I still remember one of our investors and then, and, you know, I'm an emotional person, so I just started, you know, attacking everyone. And he said, well, calm down, right? Again, you have started it, but everyone else will finish this, right? Bharat Pay is a systematically important financial institution. And your name, the company, Resilient and Innovation. So, focus on innovations and stay resilient. So, that was the support system, right? It wasn't that some angel came again. Of course, you came in 2008, we didn't find another angel in 2011. We already had all of them on our capital.

Dhruv Sharma: Why did you choose to stay quiet, Abhik, through all of it?

Bhavik Koladiya (OTPless, ex-BharatPe): So, I always believe that, you know, your work should talk. If you have to, you know, tell your story, or if you have to go and put out whatever is happening in your mind, that's not how it should be done. Your actions should speak and not the words. And I still believe in that. I don't think, you know, writing a book or doing a vodcast, of course, thanks for letting me in, but I don't think that's the job.

Utsav Somani: When is Bhavik's memoir coming out?

Bhavik Koladiya (OTPless, ex-BharatPe): Oh my God, I don't know. I have even, I don't think, yes.

Dhruv Sharma: I'm just going to say his story is still being written. So the memoir is a long way off, I would imagine.

Bhavik Koladiya (OTPless, ex-BharatPe): No ambition to write a book, Dhruv.

Dhruv Sharma: What's it like to be building such an innovative company in Surat? I know there's a set of tech entrepreneurs in your city as well, but talk to us about that.

Utsav Somani: No, Surat is from Gujarat. You and Sashwat, both were from Gujarat.

Bhavik Koladiya (OTPless, ex-BharatPe): Yes, we actually started Bharat Day from my bedroom in Bhavnagar, right? And I'll tell you how it happened. So yeah, it's a full circle.

Dhruv Sharma: It's a full circle. And how's the local ecosystem coming up, Bhavik? Maybe let's ask that question.

Bhavik Koladiya (OTPless, ex-BharatPe): Dhruv, it's amazing, right? I mean, Gujarat has been always a state of entrepreneurs and investors, right? Unfortunately, I believe that we have skipped this startup phase and the ecosystem haven't really understood how a technology startup has been built. One thing that I, as a Gujarati founder, we always believe that, okay, giving away your equity, that is like parting with something that you can never get it back. That has been the resistance in the mindset. But if you look at it, I mean, there is a startup who just closed a 15 million seed round from Salesforce Venture and Excel from Surat. So it is changing super fast. One catalyst and a driver is that COVID, right? After COVID, so we have had a lot of technology talent. Unfortunately, Delhi, Bangalore, either one, Bombay has taken that. But what happened after COVID is that people say that, okay, we don't want to go back to a large metro and they will stay. Just within my city in Surat, there are 1,200 so-called IT companies, just within that. So it's just a moment building up when services will move to products and to startups and to unicorns. Even though Bharatpe was built from Bangalore, we moved to Delhi and ended up building. But I think we are one of the very few unicorns in Gujarat. And I think there are 10 more lined up.

Utsav Somani: And I mean, Gujarati investors are active in the startup world as well. This new secondary round that happened in Bharatpe, I think it was a Gujarat-based firm as well, right?

Bhavik Koladiya (OTPless, ex-BharatPe): Yes, absolutely. So, and that is something I'm super excited about. So Gujarati investors and family office have always have been LPs into the venture funds. Now they're opening up to the direct investments also. And that is super interesting. They've understood how startups work, at least the capital providers, what it takes to build a large company, why it matters that we have to move with the speed. We've been very patient kind of the founders or as a population, right? But that's changing. That urgency of building things fast and scale fast, that the investors have understood. For this secondary, right? It also happened in a very Gujarati style, right? There was no dumb shit. There was no process. There was no IC committee, none of that. Actually, the family office I spoke to, they have a very small 200 square foot office without any chair. So we actually signed the papers sitting on the floor, right? You have to take your shoes out. So that style and that culture still remains. But that ambition and comfort around, I mean, $2.8 billion, it is not a small number in any sense, right? So buying something at that valuation. But yeah, that happened. And it's surprising, right? Of course, I also talked to the investors in larger cities. They weren't able to build the connection with this small family office.

Utsav Somani: And IPO market is hot. We've been discussing IPOs on this show as well. I mean, it's lined up, like number of companies, tech companies and new age companies going for this thing. When is Bharat Pehka happening?

Bhavik Koladiya (OTPless, ex-BharatPe): I'm not in that place to now say that.

Utsav Somani: But if you want to do an educated guess on the show.

Bhavik Koladiya (OTPless, ex-BharatPe): I think Utsav Bharat Peh's IPO, it will just happen suddenly. I'll tell you why. And through this exercise of doing the secondary, I got to understand the market, right? And of course, the venture capital and the IPO markets are two different animals, right? The set of investors, the way and the horizon. Gujarat, interestingly, process is almost 70 to 80% of the total IPO application. Yes, there are three cities, Rajkot, Ahmedabad and Surat. They command the largest share. You should read this article on Ken. It is about the Hyundai IPO and how Gujarat had a part to play in this. So I think investors, they're ready. It is just that we've been through a lot, Utsav, right? We have kind of lost three years, past three years in fixing the company, transforming it, stabilizing it. It will be very foolish for us to rush that process, especially when we have the world's largest long-term investors and have zero pressure for an exit. I mean, you're still an investor. So have you ever called me and said, they don't give me money when I'm gonna get an exit. So you hardly get that sort of investors in your capital. IPO is gonna be a milestone, Utsav, rather than a capital raising activity for us, but it has turned profitable. The business is strong enough to keep going on the cash flows itself. So there is no rush on raising a capital, be it through an IPO or a primary or anything like that. It's just that it will be a kind of an achievement for us in the seven years time from a simple idea of a QR code. Are we ready to face the public as a business rather than an innovative company?

Utsav Somani: Amazing. Dhruv, any final questions for Bhavik?

Dhruv Sharma: What else are you spending your time on, Bhavik?

Bhavik Koladiya (OTPless, ex-BharatPe): I have become a father of twin daughters. So that is an amazing time in my life. I have two dogs. So spending time with family first time in my life, I'm experiencing work-life balance. So no work on weekend. That is a discipline route. Second thing, I've been reading a lot. I'm super, super excited with generative AI. I mean, this is kind of a moment. First time in 2005, I discovered Google. I was kind of amazed, like you can type something, you can get an answer, right? There was a Yahoo answer. Now there's real time. So that is something super exciting. So I keep building different things on the side. On the other side, I'm trying to understand that how this token prediction works and what can it lead to and what could be the practical use case and how we can. So these are the couple of things, reading, spending time with kids and family, trying to figure out how AI works. At the same time, making sure that we become more people. There's the entire nation soon. That's the goal.

Utsav Somani: Awesome. Thank you so much for tuning in. That's a positive note to close the segment out on. Bhavik, thank you so much. All the best.

Bhavik Koladiya (OTPless, ex-BharatPe): Thank you very much. Sorry, again, for unfortunately this hiccup and I joined it from the...

Utsav Somani: Thanks. Take care. Bye. All right, folks, we're tuning out. As a reminder, we're not streaming on Friday because my team tells me that most of you will fall sick and make it a long weekend for yourself. We'll see you on Monday at four o'clock. Have a good weekend. Bye-bye.