In 2014, a year after graduating from IIT Roorkee, life for Harshil Mathur and Shashank Kumar was all about taking the familiar course of working in large global corporations abroad. Mathur was working with Schlumberger in West Asia and Kumar got into Microsoft in the US.
The college friends were also using their weekends to build a crowdfunding platform. This passion side project, however, changed their life forever, as they set out resolving what they then perceived to be only a personal problem. The duo had to accept online payments for their work, but the entire process was a tedious exercise. Passionate techies that they were, this was unacceptable. And, they knew that tech could easily solve this.
To understand it further, they connected with Facebook groups of small tech entrepreneurs. “A lot of startups were launching and almost everyone needed payments, but we found out almost everyone struggled with it,” Mathur says.
The major issue was getting approvals, as most payment companies focused on large customers like telcos that did huge volumes. Nobody cared about startups or small businesses, which were giving them around 2% revenue.
This meant every startup had to fill out many long forms and submit too many documents. It took almost four months for approvals to come in. Additionally, the available technology was sub-par and the payment failure rate was very high.
The duo saw the opportunity in this problem faced by many.
“Most startups had to opt for cash on delivery because of the delays. This felt very odd to us as the whole point of technology is democratisation. Even a paanwala should be able to accept online payments, we thought,” he says.
While the objective was clear and both were confident about solving it using tech, there was a hitch – they both did not understand finance. To overcome this, they decided to do a lot of research and groundwork while staying in their jobs. That included spending a lot of time emailing banks in India and whenever Mathur flew down to his hometown Jaipur during holidays, he would do the groundwork.
“The guys would laugh at me because nobody walks into a bank and say they want to start this on the spot. So it took us a lot of time to get connected with the right people.”
Mathur, 22, at that time, and Kumar, 23, then had to submit their plans and go through the entire business relationship project process. But they were mostly dismissed as two starry-eyed young boys who didn’t understand the risks involved. Mathur personally met more than 100 bankers in Jaipur, Delhi and Mumbai, but no one agreed to help them.
However, this was a blessing in disguise, as the legwork gave him hands-on training in the finance ecosystem.
After almost six to eight months, they received in-principle approval from a person who was heading the payment gateway segment in HDFC. “He was relatively younger and understood what we were trying to do. But he also asked for about Rs 25 lakh of security deposit,” Mathur says.
The families stepped in. Mathur’s dad worked in SBI and his mom was a homemaker. But despite having stable jobs themselves, they supported Mathur from day one. “They had apprehensions because both of us were in high-paying jobs. But they were supportive. The only assurance my dad asked was that after trying for two years, if it didn’t work out, I should get a job again. I promised him that,” says Mathur. In Kumar’s case, his grandfather decided to lend from his life savings.
Six to eight months and multiple certifications and approvals later, Razorpay was launched and went live in March 2015. The response they got on day one was beyond their expectations; around 400-500 customers signed up. These were the start-ups and other small businesses Mathur and Kumar were in touch with while building the basics of Razorpay’s business model.
There has been no looking back since then. Within two months, Kumar also quit his high-paying job and came back to India. Both of them moved to Jaipur and started building further. Many juniors from their college, who were graduating in 2015, joined them on a part-time basis. This is when the founders also started meeting investors.
However, money was hard to come by. Fintech was a space not many understood, especially B2B fintech. “Most investors felt there was no need to build yet another payments company,” Mathur says. That’s when the co-founders applied to Y Combinator and got their first round of funding in 2015. “That was a good start,” Mathur recalls.
As the company grew in size, they decided to move to Bengaluru – first from a rented home office where the co-founder and a small team “woke up and worked almost non-stop”. The only break they allowed was to go down to grab an ice cream. But the “fun” lasted about 8-10 months as work kept piling up and they needed more employees and shifted to a much bigger space. A lot of mentors, such as Kunal Shah, Kunal Bahl and angel investors in YC guided them on hiring the right talent.
A lot of investors would often float the idea of Razorpay taking the B2C route, but the co-founders avoided it. “We were sure that if we spend X amount of money, we needed to recover it soon. And I think that thinking helped us continue in B2B,” Mathur says. The founders’ middle-class frugality helped them stay afloat. It was only in the third year of operation that they started taking salaries, which was just about enough to pay for their expenses. But the middle-class existence didn’t have to last long, with Razorpay becoming a unicorn.
In hindsight, Mathur feels it was not the idea of entrepreneurship that paved the way for success. “It was the passion to code, passion for tech and the will to solve a problem,” he says. That passion has paid off – big time. At 33, the co-founders have been named the youngest Indian billionaires on the Hurun Rich List 2024. Razorpay is today valued at over $7.5 billion and has over 3,000 employees. It has so far raised $741.5 million and is backed by marquee investors such as Peak XV Partners, Lone Pine Capital, TCV and GIC. It aims to achieve consolidated profitability across all business verticals soon and plans an initial public offering (IPO) after that. It is also in the middle of moving its parent company back to India from the US.
That’s quite a few milestones that Razorpay has achieved in just 10 years. But for the duo, the journey seems to have just begun. “A lot of companies become big unicorns, even go for an IPO, but very few companies become generational companies. We want that,” Mathur says.