In December 2019, I started Herecredit, envisioning a dream that would unfold over two years and ultimately result in its failure by 2022. In this honest account, I’ll analyze the missteps I took throughout this journey and share the valuable lessons that may strike a chord with fellow entrepreneurs. I’m not here to present a polished facade or gloss over my errors; instead, I’ll delve into the common, most stupid mistakes and pitfalls I encountered. Perhaps that will help someone else like me.
The Birth of an Idea (November 2019)
The journey began in November 2019, shortly after my attendance at the India Fintech Awards. On that evening, while at my friend Dustin’s place in Malad, Mumbai, I embarked on creating the initial prototype for what would eventually become Herecredit, though it went by a different name at the time.
Previously, I had been dedicated to establishing a traditional NBFC (Non-Banking Finance Company) since 2018. However, my RBI application faced rejection due to my lack of traditional banking experience. This setback prompted a pivot toward a tech-based solution.
As a non-technical founder, I reached out to several software development companies, ultimately selecting one that aligned with my vision. With a complex wireframe created using InVision Freehand, I shared my comprehensive vision with the development team. This marked the commencement of a journey that involved countless calls and video meetings. Interestingly, during the development process, I encountered three different product managers at the software company, each contributing to the product’s evolution. However, I can now see that I made some pivotal mistakes right from the beginning.
https://projects.invisionapp.com/freehand/document/Yq6Ws0hFB
The Challenges of a Vision
In the early stages, I faced substantial challenges. I lacked the necessary lending license, a legal entity, and a dedicated team. As a sole entrepreneur, I embarked on a journey into the heavily regulated landscape of fintech lending in India armed with nothing more than an idea, a vision, and boundless optimism.
My aspirations for the project were grand, encompassing personal loans, seamless bill payments on credit, “buy now, pay later” services, and even the issuance of credit cards. However, there were significant hurdles to overcome.
The initial investment in development amounted to 826,000 INR, equivalent to approximately $10,000. Operating without a legal entity, I encountered obstacles. Without the legal standing to partner directly with an NBFC (Non-Banking Financial Company), I sought collaboration with a lender holding a state government license.
Additionally, my pursuit of a payment gateway faced challenges, as I lacked either an NBFC license or a partnership with an entity possessing one. This roadblock initially prevented me from partnering with established services like Razorpay. Thankfully, another payment gateway company, QPay, proved to be a willing collaborator.
Innovative Credit Scoring
To circumvent the prohibitively high costs linked to conventional credit scoring systems like CIBIL, I adopted a groundbreaking approach. My focus was on tier 3 and 4 cities in India, where credit bureau data was scant. In response, we developed a pioneering system that hinged on the analysis of user messages. This system enabled us to identify banking transactions and virtually reconstruct users’ bank statements, allowing us to evaluate spending patterns and income—vital components for accurate underwriting decisions.
Building the Platform
As the development of the mobile app was in progress, I explored options with various companies that offered loan origination and management systems. After thorough consideration, I came to the realization that most of these platforms lacked the customizability required to meet my specific needs. Consequently, I made the pivotal decision to create our own system.
This marked the beginning of web application development, which would serve as the control center for our application. Acknowledging the distinctive demands of our platform, I entrusted the software development team with the task of crafting a custom ledger system. Over time, this system evolved into a comprehensive accounting solution.
Within this dynamic landscape, we allowed room for change and constant iteration. Conversations with industry experts and input from various stakeholders guided us in refining the platform. Sometimes, I’d conceive a feature, but by the time the tech team completed its development, the need for it had dissipated.
The landscape of fintech lending was in a state of constant flux due to regulatory changes, with the RBI regularly introducing new guidelines. During this period, I engaged with an NBFC player who was actively supporting numerous fintech ventures across the country. However, a significant turning point occurred when the CEO of this NBFC player was arrested for money laundering involving Fintech lending companies he had partnered with. Fortunately, I managed to steer clear of this unfortunate situation.
Personal Struggles
During this period, I encountered a myriad of challenges that weighed heavily on me. I became consumed by my work to the point where I found myself shedding tears at least once a week, haunted by the relentless concerns of things not working as planned. It felt like I was continually hitting dead ends in various aspects of Herecredit’s development.
Despite my family’s unwavering support for my entrepreneurial dream, I placed an immense amount of pressure on myself. My father would offer words of wisdom, saying that sometimes you have to lose a few battles to win the war. However, I couldn’t accept this perspective; I yearned for a resounding victory and felt a profound sense of guilt and shame for not achieving what seemed so obvious to others.
Even well-intentioned advice and unrelated comments from others began to feel like jabs at my unsuccessful venture. The weight of it all eventually took its toll. I began experiencing panic attacks in the middle of the night, my body trembling with anxiety. During these moments, my partner, lying next to me in bed, would wrap her arms around me, offering solace with soothing words, “Shhh. It’s alright. I’m here.”
A Surprising Turn of Events
In September of 2021, I took a bold step and submitted an application for the India Fintech Awards. At that time, my company had no significant marketing presence or a fully functional product; it was more like a puzzle with scattered pieces that would eventually form my final product. To my utter amazement, my application made it through the screening process, and I found myself shortlisted to showcase my product before a massive audience at the India Fintech Awards 2021.
Out of a staggering pool of 800 applications spanning 80 countries, I secured the 26th spot among the competing companies vying for the coveted Fintech Startup of the Year award. It was clear that I had my work cut out for me. To prepare, I hastily assembled a demo video and an introductory presentation. On the day of the event, my demo was projected in front of a crowd of 4,000 eager attendees. If they had requested a live demonstration, I would have been in quite a predicament because the product wasn’t fully operational at that stage.
The event featured a panel of judges tasked with evaluating and ranking the participating startups. Being the last to present, I found myself on the hot seat for an extended period, answering a barrage of questions from the panelists. While I didn’t clinch the top prize (which was never expected), the exposure at the event significantly raised Herecredit’s profile within the fintech industry. An article highlighting the event was even published on MoneyControl, and it prominently featured the name “Herecredit.”
Demo Video:
Intro Video:
Achieving 10,000 Users
Following the India Fintech Awards, it took me approximately another six months to bring the Herecredit product to completion. Surprisingly, I hadn’t even formalized the company as of that point. My strategy was to launch the product first and then delve into the legal intricacies later. It was in June 2022 when I finally released the application on the Google Play Store.
What followed was astonishing. Despite having invested nothing in marketing at that point, the response was beyond my wildest expectations. Within just one month, I successfully onboarded a staggering 10,000 users from all corners of India. These users eagerly connected their bank accounts to enable auto-debit functionalities.
What truly amazed me was that individuals began independently recording their experiences with the app through screen recordings. They then took it upon themselves to share these videos on YouTube without any prompting from me. The level of enthusiasm and engagement from users was truly overwhelming, to say the least.
The Unforeseen Storm
Little did I know, a storm was brewing on the horizon. Initially, the lender I had partnered with had a plan to limit its services to a specific geographical area, which seemed like a reasonable approach. However, our well-laid plans were thrown into disarray when Google began to tighten its policies concerning fintech lending.
One significant blow came when Google removed support for SMS access, which played a critical role in our underwriting process. This sudden change left me in a vulnerable position, as our mechanism for assessing user creditworthiness was severely impacted. In response, I raced against time to develop an alternative solution—enabling users to upload their bank statements for manual reading and underwriting. While this workaround allowed us to continue, it was far from scalable, presenting a considerable challenge.
Soon thereafter, we faced another setback when Google delisted our app from the Play Store. Their demand was clear: I needed to obtain an NBFC (Non-Banking Financial Company) license for reinstatement. This development prompted urgent discussions and negotiations with NBFC players in the industry.
During this tumultuous period, our user base had grown to 20,000, with new sign-ups occurring every single day. Unfortunately, this growth was accompanied by a surge in negative reviews from users who were unable to use the application due to the lender’s restricted service area. The storm had indeed arrived, and I found myself navigating uncharted waters.
The Personal Storm Amid Business Turbulence
As if the challenges on the business front weren’t enough, my personal life was simultaneously hit by a storm. It was a period marked by profound crises that took a toll on me. On a fateful day when Herecredit’s user count had just hit 20,000, my world was rocked by a series of heart-wrenching events.
It all began when my grandmother had a terrible fall, leading to a ruptured blood vessel that carried blood to her brain. She was rushed to the hospital and placed in the ICU on the first floor. Coincidentally, in the same hospital, on the ground floor, my father was undergoing a CAT scan to identify lesions in his bones. Sadly, the results confirmed our fears—my father had been diagnosed with Multiple Myeloma, a type of cancer. The weight of this news was crushing. I felt devastated, numb, and overwhelmed by a flood of emotions. I couldn’t cry, couldn’t scream; it was as if I had lost the ability to respond.
As if this wasn’t enough, just five days later, my spouse and I reached a point in our lives where we decided to go our separate ways due to conflicting priorities. These emotional burdens took an immense toll on my mental well-being, ultimately leading me to seek therapy. But that’s a story for another day. Today, the focus is on the lessons learned from the journey of failures.
It took me months to regain my footing, let alone return to working on my startup. I could sense my dream slipping through my fingers, and regrettably, I allowed it to slip away.
Lessons from Mistakes
- Outsourcing Development: Initially, outsourcing development appeared to be a practical choice, but it came with its fair share of challenges. One of the major drawbacks was limited control and communication hurdles. I could only convey exactly what I needed, yet I wasn’t certain if what I envisioned was even feasible or practical. Lacking expertise in software development, I was unaware of what could be achieved using APIs (Application Programming Interfaces) and what couldn’t. Regrettably, the development team executed precisely what I had requested, without offering alternative solutions or guiding me toward a more straightforward path.
- Obsession with Perfection: Our relentless pursuit of perfection became a stumbling block on our path to progress. Rather than launching a Minimum Viable Product (MVP) and collecting valuable user feedback, I fixated on intricate details. For instance, I overly engineered features, such as the coupon system, which, in reality, could have been much simpler. The backend of something as seemingly basic as coupons became a labyrinth of complexity, with considerations like who could use them, on what products, and how many times. These nuances, while important, led to unnecessary complications.
- Building for Scale: Although we rapidly attracted a substantial user base, our scalability plans were misaligned. I designed the system to handle significant volumes right from the start, but I overlooked critical factors. Rather than utilizing APIs for certain functions, I had the development team construct custom systems. This decision proved to be inefficient and led to unnecessary complexities in our infrastructure.
To sum up, Herecredit’s expedition was replete with triumphs and setbacks, culminating in its unfortunate demise. Nonetheless, this journey bestowed upon me invaluable insights. The wisdom gained, encompassing the pitfalls of outsourcing, the perils of perfectionism, and the importance of scalability, now serves as my compass for future ventures. As entrepreneurs, it’s imperative to acknowledge that failure isn’t a terminus but rather a stepping stone toward our evolution and eventual triumph. I appreciate your company on this introspective voyage.
