It would be great if starting a great company would be easy, but truth be told, it’s not! Making it successful is even harder. Rohit Chokhani, MD, Easy Home Finance Limited, poured all his savings into his budding business, spent 1.5 years researching home finance in smaller cities, chased his first hire for eight months, and the list goes on. In this interesting article, we trace Rohit’s journey of founding Easy Home Finance – from navigating new terrains to jumping through a lot of hoops – and ultimately, finding success.
As an angel investor, Rohit Chokhani has made 33 early-stage investments in his personal capacity as well as through his single-family office investment firm White Unicorn Ventures, mostly in the technology space.
By 2018, just when he was taking active strides in the investing space including plans to go big by managing third party capital, he cut his four-year investing stint short to turn to entrepreneurship after the 29-year-old stumbled upon his start-up idea by witnessing his friend with no credit history struggling to get a home loan.
Following a 1.5 year-long market study, he floated Easy Home Finance Company, which aspires to use technology efficiently to reach the unbanked and provide them the customer service that is on par with their counterparts in the cities.
Although his investing career is anything but brief, Chokhani believes he has cut his teeth on the significance of storytelling and identifying the right talent as a basis for a successful business venture.
In a way, angel investors are also talent investors who bet on the individual rather than the company because many investee companies may not even have a proof of concept or a go-to-market strategy. Only this time, the tables have turned from being a funder managing a corpus of $20-30 million to being a founder.
Chokhani decided to bet all his money earned from his investments into the home finance segment, which is a crowded space that has close to 100 companies – some even backed by diversified conglomerates with financial muscle.
However, the company, two months back, wrapped up $15 million in Series A funding from marquee investors led by private equity firm Xponentia Capital Partners that believed in the growth potential of a largely untapped market and the ability of the company to attract the right talent that can take the venture to profitability.
In a detailed interaction, Chokhani explains how he chased his first joinee for eight months, and is creating an ownership culture among employees. He is also providing insights on the importance of a compelling story and the value that investors like Xponentia Capital bring in supporting human capital needs.
Chasing the First Joinee
In 2017, Easy Home Finance applied for the housing finance license from National Housing Bank. “I went whole and soul into it so I put $2mn that I made in the last 4-5 years into the venture. We raised our first investment from Japanese investor Harbourfront Capital in August 2019”, said Chokhani.
Early on, the mortgage lending company understood the need for grey-headed top management as banking & finance companies typically found themselves closely engaging with the regulators as well as interacting with other public and private banks for borrowing capital. Young entrepreneurs are generally easily dismissed by legacy bankers.
He was open to being a mentor and guide. I convinced him that if he is on board then he is invested in me. You have that sense of bonding. It took a couple of trips to Bengaluru. We three are the first directors who started the company because we need 3 minimum directors in a public limited, which is the basis for a best corporate governance structure’
He knew his early team needed to be industry stalwarts with years of experience in managing operations, compliance, and most importantly, an understanding of the reality in extending loans in Tier 2 & 3 markets with a similar service experience of borrowers in cities.
One such person is Debabrata Sarkar, who is part of the committees of RBI & NABARD and was previously the ex-Chairman of Union Bank of India.
“It took me eight months to convince Sarkar. He used to walk in a park in Khar, a suburb in Mumbai. I used to go to that park at 7 am and stand outside to get him on board. He was irritated out of his brains after a few months’’, says Chokhani jokingly. “At that time, it seemed it was the toughest job in my life. To tell you candidly, Sarkar told point blank on my lack of experience or background in the HFC. Nor did I have the backing of the corporate bigwigs. My capital was meagre. However, I spelled out all the real-world issues in availing home finance loans to him’’.
Two critical factors that worked in Chokhani’s favour in getting Sarkar on board was the state of affairs of customers in the unbanked segment who get treated unequally. The entire service aspect is missing for the labourers for their financial needs.
The second that really resonated with him was “Sir, we want to find houses for people with respect and dignity. If you see, I never said loan dena hai’’, added Chokhani.
The key experience that Sarkar brought was that he was a career banker who started as a credit manager and retired as a chairman. “That is the journey I wanted. His first posting was in a branch called Jhumri Telaiya in Jharkhand. This is the kind of experience I was seeking. Someone who understands my set of customers and takes me through the journey with the governance factor that he gained in later years of his career’’, he added.
Sarkar is currently the chairman of the company. In a similar fashion, after getting him on board for his banking and finance aspect, the company wanted to solve the regulatory aspect. It managed to get TV Rao as an independent director. “Rao was associated with NHB and Exim Bank, he was an expert on regulation with regard to housing finance. His story was completely different. He refused to come on board. While Sarkar never said a no and always gave me a reason. But Rao denied categorically as he was on the board of CanFin Homes and LIC Home Finance’’, he added.
Both CanFin Homes and LIC Home Finance are industry-leading players and are more than three decades old. Each has loan books running in several thousand crores. “Both Sarkar and Rao were on the board of LIC Housing Finance. To avoid conflict, they left LIC HF, which was the largest HF in India. Then they came to the 99th smallest HFC, which was us’’, he added.
Ground Realities
India’s growing urbanization and government initiatives like Pradhan Mantri Awas Yojana (PMAY) fuelled an unprecedented demand for affordable housing. At the same time, the lower-income group segment was always considered to be the hardest for financial institutions to reach out and provide a reasonably decent service offering.
Creating a value proposition while competing with big brands is always a challenge. We need to create a compelling story and value proposition that will interest some of the early joiners. It’s always a challenge.
This is where Chokhani saw an opportunity through technology that can bring operating efficiency in the segment and superior customer experience.
“Once I decided to venture into the housing finance space, I spent 1.5 years researching home finance by visiting smaller cities. I didn’t know city names like Surendranagar and Ratlam existed before my research’’, he said.
After studying the ground realities in these cities on the problems faced by customers in availing loans and inefficient use of technology, Chokhani realised that a Rs 5 lakh Maruti Suzuki car can be purchased in two hours in contrary to a home loan of Rs 10 lakh that takes about 40-50 days – even when the income criteria remained the same.
“Everyone was using a computer but all of them were using enterprise resource planning (ERP). No one was using technology to secure loans. Their reasoning is that buying a home is a one-time job, so why do you want to give it up fast? What is the point of giving it fast? This is how we started our journey’’, Chokhani said.
Hard Sell to Early Members
The Dewan Housing Finance Corporation disaster was a bad run and made it difficult for the existing housing finance companies because everyone was mistrusting the HFCs. “We could tide over that situation, only because of the techplay and talent we could attract’’, he observes. In fact, tech is also people.
As an entrepreneur, he believed in overcoming his limitations by getting experts who can fulfil those limitations and enable him to go faster.
“Never be shy of asking for help. The entire hiring process was interesting because every person that we got was very difficult to sell. After all, we are an unfunded company. It is a difficult sell even for your friends and family. For example, the first person I got in was Prerak Mehta who leads technology for the company. He was earlier working with Enova Financial with a half a million-dollar pay package as VP engineering giving payday loans since 2009. A Carnegie Mellon University alumni and an American dream guy. I have to go out of my way to convince him of how his parents are in India. I have to weave a story to even attract my school friend to join me. When you start, you need people who believe, trust in you’’, he said about his first employee.
The second critical person to be roped in was Rohan Shah, who went to college with Chokhani in the UK. “We lost connection for 10 years. He was a credit head at another housing finance company. When I pitched, even that was a hard sell because he had ESOPs which were running into crores at that company. At the time of selling the ESOPs, he had to take the risk of quitting that company, and joining us’’, Chokhani added. A lot of people made a lot of sacrifices throughout the entire journey.
Creating a Compelling Story
Why did the lead investor Xponentia Capital decide to back the company and what role did the early hiring play in the funding?
Prashant Karmalkar, Partner – HR, Xponentia takes through the entire process and the reason for holding several meetings with the team members of the company before investing in the company. Prashant has more than 25 years of experience in various HR and consulting roles. He has worked with Accenture, Deloitte, Al-Futtaim, and Tata Group in both Line HR and management consulting roles at the senior level.
Now, as an operating partner with the fund, he helps and advises deals on conducting due diligence from a talent perspective. Also, help investee companies in growth from a people perspective.
As part of the diligence, Karmalkar had to interview about one-fourth of the employees across the different seniority levels to check on the factors like transparency, leadership willingness and openness, shared vision among the employees, etc.
“Creating a value proposition while competing with big brands is always a challenge. We need to create a compelling story and value proposition that will interest some of the early joiners. It’s always a challenge. Scaling up is another challenge. In the case of a lender like Easy home, loan growth is linked to geographical presence. Then you need proper structure and proper performance management roles, structure, hierarchy, and a backbone to manage this. All start-ups go through this phase’’, he explains.
Initially, most start-ups have fluid processes. As they grow and scale, they need to put in a structure, process, and practices that will create an employee value proposition that everybody can consistently articulate. This means we need to train the core group of managers who are going to hire to make sure they give the right message. In the same way, Chokhani, for example, has to passionately articulate the vision of Easy Home Finance.
“This is not easy and we have to keep training our managers. My job is to help Rohit and his team to create this architecture for themselves so that they can grow at scale with the speed that they like too’’, he informs them on the objective of the role played by investors. The key is how they can be human, and keep that entrepreneurial spirit.
“How do we translate the entrepreneurial spirit that Rohit has into his team. The sense of ownership. The kind of ownership Rohit will show. As a start-up, you always look to hire somebody who is smarter than you. If you start to hire people who are less smart than you, you are never going to succeed’’, he added.
The start-ups also need to create a team which has complementary expertise.
You need to go out, engage and sell. I think selling to customers is easier than selling to talent. A value proposition is nebulous in the mind of people and you have to spell it out very clearly and specifically.
The key question for Chokhani as a start-up entrepreneur is how do you translate the sense of ownership and passion that you have to the next level. And check whether it has transferred to the next level or not.
“For the last mile employee in Rohit’s team, like somebody at a territory level or area level who is actually dealing with the customer – that person needs to have the same ownership about his customer and area as much as Rohit has for the entire organisation’’, he added.
A big brand is built this way and not through large-budget advertisements. A job for the entrepreneur is to ensure that he can cascade his passion, his ownership down to the next line.
Most entrepreneurs start their hiring with friends and family but very soon they are going to realise that their network wouldn’t suffice for the entire organisation.
“You need to go out, engage and sell. I think selling to customers is easier than selling to talent. A value proposition is nebulous in the mind of people and you have to spell it out very clearly and specifically. That is what we help Rohit and the team. That’s how the journey started for Xponentia with Easy Home’’, explained Karmalkar.
No matter how much you articulate, there are only certain people who can sell a dream. “Because we got the guidance from Karmalkar in the last six months, we have been trying to put the story to cadre till the last employee. What do we stand for? We stand for customer service, for us, a customer comes first, we stand for specialised loan servicing, and we stand for transparency. Why do people love Swiggy? It is because you know where your food is. And if you ask for a refund, you get it, no questions asked. That is what we wanted to achieve. I am not ashamed to say that I have learned from somebody. If I see their customer service is amazing, I want to create that customer service for my company’’, added Chokhani.
However, this service attitude needs to resonate with everyone in the field in order to make it a success. “This aspect was missing before I started getting this guidance from the investor. Only the top 4-5 people were selling the company. These aspects have to be part of the talent acquisition strategy. All this plays a very big role in everyone’s mind today”.
Today, the company believes that it has to offer the same service quality to its employees as well as the customers. “We have a service level matrix and escalation level in HR. At present, we are 150 people. If I inculcate these processes, it will follow through in the future. This will be the company foundation for tomorrow”, Chokhani said.
One of the ways that the company plans to achieve this is through frequent interaction with the management. “We have suggested to Rohit that fieldwork is an important aspect of managing our people like how pharma companies do where senior folks, even the President of the company does fieldwork with the representatives’’, added Karmalkar.
The same concept has also been explained to the company and how much time the management spends in the office is very crucial. “The less time you spend in the office, the more time you spend in the market with your people going around helping and coaching them on the ground. It will help you to translate the passion to the employees at the ground level. They need to see you, observe you, listen, and engage with you. Only then they will learn”, the investor added. After the COVID crisis is over, all its senior people need to be present with field staff helping, coaching, and grooming so that the translation happens. “These visits can be with minimum scheduling and without creating a chain of command. This way, the fieldworker also learns and gets a kick out (motivation) of working with the top bosses. We believe technology is a great leveller, however, in my opinion, dialogue is the greatest leveller”, Karmalkar added.
Keeping the Hiring Pipeline Warm
Capital and technology are relatively freely available. Talent is much harder to acquire and retain. If any position is vacant, then there will be a significant cost.
“I understand the cost of keeping a position vacant is important for entrepreneurs like Rohit. How do you use services that are already available to you to keep the talent pipeline warm so that you don’t keep a position vacant longer? Any position remaining vacant means our customer becomes an orphan. Orphan customers are the worst thing that can happen to a startup. If your value proposition is service, you can’t keep an orphan customer’’, points out Karmalkar.
The less time you spend in the office, the more time you spend in the market with your people going around helping and coaching them on the ground. It will help you to translate the passion to the employees at the ground level. They need to see you, observe you, listen, and engage with you. Only then they will learn.
Product Offering
The company caters to an average income group of Rs 2.5 lakh a year. Its average loan size is Rs 10 lakh with the range being Rs 5-35 lakh. About 60% of its customers are salaried, including police, reserve force, and railway. The remaining 40% are self-employed where the company’s forte lies. Those segments include small shop owners, auto-rickshaw drivers, and vegetable vendors.
“The interesting part we are doing here is that we are bundling insurance with loans so if anything happens – health issues, loss of livelihood or income, the customer is fully covered on the loan front. This way we measure the impact, in terms of the financial shock impact and how much financial shock they can measure. So, at least, the house becomes free and the customer’s family never needs to pay an EMI ever again. While the insurance penetration is low in the country, our typical customer base doesn’t have access to insurance by themselves’’, he added.
Key Suggestion for Easy Home by the Investor
1) Don’t have many managers. Our span of control is also limited so it is restricted that one person can only manage 5-6 people. That is optimal utilisation of that person’s capabilities.
2) For recruitment, use a crack team. The interview panel has folks from various departments. For example, a tech person is part of a sales interview because he understands the process of the company through the digital journey of the borrower.
3) We also keep the hiring pipeline warm. Even after filling the vacancy, we don’t take down the vacancy post. That way we are keeping the pipeline open. The biggest mistake startups make is hiring super-fast and firing superfast.
4) Introducing variable pay on every level. Even the finance, admin – got the variable pay concept.
5) Establish key performance areas management and star rating. It is still in an evolving stage.
6) Standardisation of policy and procedure.
7) Hand holding and training, inculcating the vision to even the territory level sales employees. The company has explainer videos, Zoom training schedule. Between 1 & 12 of every month, it has an entire travelling plan system where the top 10 people in the head office should not be present in the head office.
The information and the aspect were just wonderful. I think that your viewpoint is deep, it’s just well thought out and truly incredible to see someone who knows how to put these thoughts so well. Good job!