Since we went live, we’ve focused on building our business the boring old school way, one relationship at a time. And in the process, we have simply ignored every other fad of the start-up world from digital marketing to SEO to SEM and what not! And yet our singular focus on our core proposition (kick-ass advisory and a powerful tech platform) has helped us cross an AUM (Asset under Management) of Rs. 30 crores within just 6 months of going live, and that too without raising a cent of external capital or spending a dime on marketing.
By Indranil Guha, Co-founder – Finpeg.com
It’s now been little over a year since Shubham and I quit our day jobs to start Finpeg in June 2016. Our third teammate Mayank came along a few months later. It took us about 7 months to build out our technology platform and we finally went live in Jan 2017, without any fanfare, hoopla or high voltage self-promotion on social media. It was a conscious call – we wanted to quietly and yet vigorously validate our technology and advisory proposition, away from the glare of peering competitors and curious investors. And what a ride it has been since we went live! Today on the auspicious occasion of Ganesh Chaturthi, as we complete 7 months since going live, I thought it would be an opportune moment to take a pause and to look back at our journey so far and all that we have managed to achieve during this short time.
Crossing Rs. 30 Crore AUM mark
Our most notable accomplishment so far has been to cross an AUM (Asset under Management) of Rs. 30 crores, which we did last month, just around the time we were commemorating 6 months of Finpeg going live. These are still very early days, but this was an important milestone for us nonetheless. To begin with, this is probably the shortest time taken by an investment advisory start-up anywhere in India to cross the Rs. 30 crore AUM mark. To put this in perspective, with our current scale, we are already about one-tenth the size of what is arguably the most well funded start-up in our space, which by the way took 5 years to get to where it is, and that too only after guzzling in an estimated $10+ million of venture money and then burning tons of what they raised on digital marketing. We got to where we are in just 6 months, and that too without raising a cent of external capital or spending a dime on marketing. Even at the cost of bragging a bit about ourselves, this is almost akin to a newbie e-commerce platform achieving annualized GMV of $400 million (one-tenth of Flipkart’s current estimated GMV) or a new cab aggregator clocking annualized sales of about Rs. 100 crores (one-tenth of OLA’s last reported annual revenues) within just 6 months of going live, and that too without raising any external capital or spending a cent on any high voltage marketing campaign.
The Core Proposition
Such strong business traction, and that too within just 6 months of going live is truly humbling. But this also serves as a very strong validation of our business model and differentiated advisory proposition. We believe this has been possible because we have steadfastly focused on just two things that matter to our customers – cutting edge advisory and a cutting edge technology platform to power their investments. Generic as this may sound, Finpeg’s advisory proposition is anything but. In fact it’s as tangible as it gets – if you still remember your high school stats (i.e. mean and standard deviation), we will be able to statistically prove to you that Finpeg’s algorithms can help you achieve long term returns of 18%+ with a probability of 78%, 17%+ with a probability of 87%, 16%+ with a probability of 93%, and 15%+ with a probability as staggeringly high as 97%, irrespective of prevailing market conditions. Now that’s something, isn’t it?
On the technology front, our focus has been to build a platform that may NOT necessarily score high on “jazz” but scores super high on design and functionality. The end result is a web application that is beautiful, minimalist and arguably the most functional in terms of enabling our customers to get a complete handle on every leg of their investment journey, spanning across planning, investing and finally monitoring.
Ignoring the Fad
However beyond these, we have simply ignored every other fad of the start-up world from digital marketing to SEO to SEM and what not! We don’t even have an Android or iphone app yet. Our social media presence is admittedly a joke; some would call it a disaster. At the last count, our Facebook page had an embarrassing count of 11 likes and followers! Yes 11, and I sincerely hope that goes up to slightly more respectable levels post this blog! And yet, our singular focus on our core proposition (kick-ass advisory and a powerful tech platform) has helped us surpass many an industry benchmarks, and by a margin. Consider this:
- The industry’s average SIP ticket size is about Rs. 3,500 per month! Now contrast this with our average SIP ticket size per customer of Rs.1.27 lakhs! That’s a staggering 36 times the industry average.
- In terms of size of our customer relationships, a 6-7 month old platform in our space is likely to have an average relationship size per customer of no more than Rs. 25,000 [assuming average SIP ticket size of Rs. 3,500 times 7 months]. Now contrast this with Finpeg’s median relationship size of Rs. 3.5 lakhs! Again, that’s more than 10 times the industry average!
Volume of Customer Acquisition versus Depth of Relationship
If there’s one takeaway from the above numbers then it is this – our clear focus is to build an advisory business based on the depth of each relationship, rather than one focused on just acquiring a large volume of customers – most of them with immaterial ticket size – through unsustainable spends on digital marketing, just to impress investors. We clearly don’t think that’s the way to build a sustainable advisory business, and that’s why we are building our business the boring old school way, one relationship at a time. This is borne out of a belief that for most people, choice of an investment adviser is an article of faith. And the only way to build such a relationship of faith and trust is by personally engaging with them. You can’t inspire faith and trust just by building a pretty looking website and app and then expect target customers to start trusting you based on all the jargons you put up on your platform. And hence at Finpeg, while robo-advisory and algorithms have a role of play when it comes to crunching numbers and executing our cutting edge investment strategies, our primary endeavour is to ensure our customers don’t end up having to talk to a “robo”. Instead they always have a friendly and “human” adviser at hand to handhold them through the initial on-boarding and the subsequent investing journey, while our cutting-edge technology works behind the scene to make their money work the hardest.
Getting the Balance Right
However focus on depth and quality of customer relationships admittedly has implications on the scalability of the business model. We can’t possibly go and engage personally with a customer investing Rs. 1,000 per month with us. Nor do we intend to build a niche wealth management business focused on serving only the HNIs (High Networth Individuals). There are enough and more of them already in town. Then how do you build an investment advisory business targeted at retail investors that strives to maximize personal engagement with clients and yet is scalable? The answer lies in innovative use of technology and innovation in distribution structure. Indeed the right technology coupled with the right distribution structure has the power to help strike that delicate balance between client engagement and scale. And our experience of last 7 months – and indeed that of our growing cohort of channel partners using our technology – bears testimony to how our technology can help establish deeply engaging customer relationships at a scale that has hitherto been impossible to achieve.
This raises important questions about which business model will eventually prevail in the investment advisory business. We for one believe that the eventual winners will neither be those who are simply focused on speed and volume of customer acquisition (because such a pursuit can succeed only at the cost of quality and depth of client engagement), nor will it be those who seek to focus only on building deeply rooted relationships with their customers (because that will mean limiting their business only to a small set of HNIs). Like everything else in life, the real answer we believe lies in the “middle path” – a path that optimizes the balance between customer engagement and scale. Of course striking that balance is easier said than done. But if our initial success is any indication, I guess we’ve probably started to the get the balance right.