327. The Second-Time Fintech Founder Who Raised a $5m Seed w/ Ritesh Singhania | Zango

0:00My name is Ritesh and I'm the CEO and co-founder of Zango AI. For the last couple of years, we've been training AI models how to read and interpret regulation. So helping financial services demonstrate to the regulator and their board that they're compliant. How's it been going so far? Yeah, it's been pretty interesting. I mean, if you think about it, when you think about compliance, when you think about regulation, it's something that banks and financial services have always relied on consultants for. So to be able to come in and start building that trust with the banks that you can use or AI agents to go to the regulator and say you are compliant is quite an interesting journey because you're not just building the product, but you're also building the trust.

0:43and as an early stage business, being able to do that is very, very rewarding. Are you able to name any of your clients at the moment? Yeah, of course, of course. So in the US, we work with Ripple. In the UK, we work with Alika Bank. On the insurance side, we work with Agon. So there are a few names that we work with, but initially we started off on the banking side, but very quickly realized as we were building the technology, we could essentially serve the entire financial services spectrum.

1:13Amardeep Parmar:And like you said, it's all built on trust, right? So get those kind of brand names. You can't just go in there with like a mocked up thing. It's got to be like something very solid. How did you get that first customer or first client? Yeah, so it's a lot about, first of all, when I say trust, it takes time to build trust. And the only way you can get your early clients is based on the trust that you've probably built in the past. so with people you worked with in the past and they say look I trust Ritesh I'm going to trust the business that he's building I'm going to give him a chance what also always happens I mean you've started off I've started off and a lot of people start off we all need a little bit of help and from people who have trusted us and that is what happened to me as well one of my earlier clients were people I've worked with in the past and they gave us the mandate at the back of a ppt and then you deliver and then you keep on building from that.

2:09I sort of heard this concept which has stayed with me quite a bit is the concept of tent. So what's extremely important is whether it's clients, investors, advisors or employees, it's incredibly important that you choose the right people you bring inside your tent because if you choose the right people and you do a good job, they are the people who help you to essentially grow the business.

2:29Amardeep Parmar:And obviously that trust comes from your background, right? And before you did this, you also did a previous company too. Can you tell us a bit about that, like what you were doing before Zango? Of course, yeah. So I was building another fintech in the space of compliance, and we were serving asset managers and pension funds. That business was backed by Aon, the large global insurer, and also like Star and Outward. So being a founder before, I ran that business for five years, it's still being run by two of my other co-founders. But you make a few mistakes along the way. you learn from them. And the entire principle is you don't repeat them.

3:05Amardeep Parmar:And what made you then split off to try to start Zango rather than continuing the other company? Absolutely. More with the spark. Yeah, absolutely. So Clearglass as a business is doing well, but ended up becoming more of a lifestyle business. Whereas my other founders are happy carrying along and building the business and finding the right home. I wanted to leave and figure out what else can I build? I'm still I'm going to be 41 soon and figuring out that how far can I go and with the risk appetite that I've got what is it that I can build so I didn't want to be absorbed by an Aon or a large insurer but I wanted to venture out again by myself and see what can I build my co-founder Shashank he built a fraud monitoring business that he exited as well a few years ago so both of us are I think one thing which I talk about quite a bit is It's extremely important between the two co-founders what kind of an outcome you're looking to get from the business.

4:05And if someone is looking for an exit and the other person is trying to build a business as big as he can, it always leads to friction in every decision you made, whether you're hiring someone or not.

4:15Amardeep Parmar:And that transitional period must have been really hard, right? Was there a break between them or did you start having the idea for Zango and almost go straight into it? Yeah, no, I didn't go straight into it. And to answer your question, it was extremely hard. And the reason for that is I was running Clearglass for five years. My identity was Clearglass. Like everyone I knew, it was Clearglass first and then Ritesh second. And I'm originally not from the UK. I've been here for 10 years. So after I finished my university, a big part of my life in the UK was Clearglass. So everyone I knew or most people I knew was at the back of Clearglass.

4:50And so after leaving Clearglass and when I'm sat at home, I didn't have that identity. So just to figure out who I am and how do I introduce myself to people was in itself, wait, hang on. So yeah, so it was difficult to figure that journey out in terms of my identity, what's next. And there was a transition phase of six to nine months. But then you slowly start to figure out what do you want to do next? What does the next 10, 15 years look like? And once you've got clarity in terms of what does it look like, then you find your way towards that. answer. What do you think you did differently right at the very beginning of Zango based on

5:30Amardeep Parmar:the stuff you knew from before? Was there anything you'd like, okay, this time around I'm going to do this right from the start? Yeah, that's a very, very good question because you often think about the mistakes that you make and like I said, you don't want to repeat them. One was for me found, I would never start a business by myself. I always enjoy starting with someone because you have more bad days than the good days and you need someone where you can be completely honest and transparent with which you can't be with most people when you're building. So building a business with a founder is extremely important.

6:06So for me, finding a founder, a co-founder was extremely important. Trust was extremely important. As I tend to grow old, I become stubborn in certain things I can change and cannot change. And having someone I've known from before is extremely helpful. That's one. Second is, like I was saying, is someone on the same journey as I am in terms of what we are looking to achieve from the business? And the third is complementary skill set. I mean, I sell and I wanted to work with someone who is a builder. So fortunately, I started working with Shashank, who I have known through my wife. So our wives were childhood friends, and that's how I've known him.

6:45And we started working together. So to come back to your question first is founder second is when is the culture of the business goes back to the team that we are building like I mentioned we have five days a week in the office I was very mindful of that that as you're building a business and growing a business you need that agency you need to create that that missionary approach towards a business and that can only happen when people are in the office working together so that was the second thing which both Swashanka and I 100 % aligned on that, the agency cannot happen when people are not together.

7:19And sort of the third thing was around distribution and sale. As we are in this world of AI where you can build something like this, but how do you sell to a large bank? And for us, we wanted to own our distribution. We wanted to be as close to the clients as we can because in Malaz Business and Clearglass, all our distribution happened through Aon. so I would not I would not be seeing my clients using my product which meant that I wasn't building the best product in the world I wasn't really I wasn't sure what problem I was solving so for me and for us to be as close to our clients was was non-negotiable so those were sort of the broader principles that we had and then about identifying a problem a large enough problem

8:06Amardeep Parmar:space and then executing and you said with the team now so they're coming in five days a week That's right. How big is that team going to? Yeah, so right now we've got about 25 people in the business. And did you structure that differently compared to last time as well? About who you're hiring first and where you're going to expand to and what you're looking for? Yeah, so it was more about, I think, who we were hiring first. We weren't very different in terms of what we did in the last business, but what we were looking for when we were hiring was very different. So from our perspective, there are sort of the three questions that we answer in our head.

8:42The first one, which probably most people would not like the answer to, which is that, is someone really willing to work hard? Like it's a five days a week in the office and unpopular opinion within the business is that you do not have a work-life balance and are you happy to sacrifice that? So that's number one. Second is, are you willing to take ownership? Are you willing to take mistakes? Are you going to shoot for the moon? So is someone happy to do that? And at the same time, you will make mistakes and sort of you learn from it or not. And the third is, how much are you willing to hustle?

9:19Like selling a product in the early days is really hard. Like people are not going to buy. But how far are you willing to go to make it happen? Those were the three things that we would look for, which is that is someone playing by the playbook or is someone like, look, I'm going to find different angles. I'm going to solve.

9:36Amardeep Parmar:Yeah, I think that's really interesting. As you see right now in LinkedIn, right? LinkedIn is very pro-remote work. Yeah. Because the people who are pro-working in the office won't post about it because they know they're going to get those hate messages, right? Yeah. But you look at most founders, and a lot of founders do kind of like having people in the office, even if they don't talk about it that much. And I think one of the things that's really interesting, too, is that I think it's like your company. You run it how you want to run it. And sometimes I think there can be that friction in the market.

10:04Amardeep Parmar:But if you're hiring for the kinds of people that you want to work with, that's at the end of the day the whole point, right? And when sometimes people have a problem with that, I think as long as the expectations are aligned, that's the main thing. And when you're kind of hiring, how are you trying to like suss out like all these people, the ones who want to do the same thing as you, right? They want to work hard. They want to take a risk. They want to come in and have that environment. Yeah, I think just the fact that having that filter of five days a week, what that does is that means that we're hiring from maybe 15-20 % of the job market.

10:36Like when we started working with recruiters and we said that's a hard line, a lot of recruiters said we can't work with you or we can't help you because most people would not do that. Especially if you think about someone in compliance, someone who's got experience of selling to large institution clients will come with a fair amount of number of years of experience. and they want that flexibility. And sure, you do get flexibility, which is that you want to go and see families, someone's not well, absolutely all that flexibility is there. But by default, you're five days a week. And I know like for us, that has made all the difference.

11:13Also, the second point is, like you said, as a founder, part of the joy of starting a business is you can choose the people you want to work with. And that also makes work enjoyable. So why not come to the office and enjoy that rather than being on a Zoom call with everyone. Yeah.

11:30Amardeep Parmar:It's also something like some founders like love having the freedom and they don't want to have an office because then they have to come into the office, right? Yeah. And it's just the whole thing for a team member. You just work for the kind of founders that want the same lifestyle you want. Yeah. And there's nothing wrong with that, I think. There's nothing wrong with a founder who wants to work fully remote and nothing wrong with a founder who wants to work fully in person. And as that team is growing out now, so like you said, we've cleared gas as well. like you said there's a different style of what you're looking for too and you're a co-founder you got the team when you're also then looking at let's say fundraising for example yeah how has that been different this time around and i guess an interesting point i had an interview a couple weeks ago there's somebody who'd been on they raised money previously they exited that company and they said that that wasn't as big an advantage as they thought it would be when it came to raising again what was your experience there so what you're saying is that they had built up business, they raised money, sold it.

12:25The fact that even though they had exited didn't really help them massively when they were raising money again. Yeah, they were surprised that they still had to go through the same. Yeah. One thing which I realized is that as you're raising money, a lot of it is people would go in the market and want to find out what do others think of you. It's as simple as that. As most popular investors, whether it's UK, Europe, or somewhere else in the world would have enough of a network where they would know someone else who's worked with you and a lot of it comes down to in the early days what people think of you do they do they will they back you or not i mean one of the angels asked me clearly is that look if i went to your previous investors and asked them uh what did they think would they back you again or not so so a lot of these things in the early days is as simple as that uh so so i don't know i think uh it's something which i hadn't appreciated when i was at clear glass that the reputation that you build and what people think of you is extremely important when you raise your early rounds because there's there's not enough data point surely as you go into cities a b then you build a business there's data and that proves and people can come in but uh so that's that's one second is what have I done differently I think it's it's about so for example my first round uh was led by uh South Park Common so they were the first investors and Dylan who led the round from South Park Commons was someone I've known for four years because he was also an investor in Clearglass through Founders Factory.

13:54So first of all, having people I've known, I've known them and them being my champions. Sorry, I'm just gathering my thought as well. But I think for me, the most important thing has been like, is someone investing in me? Is he or she going to be my champion or not? that's the most important thing that how excited are they to invest and build a business with me that has been sort of the factor like one of our investors uh who led the seed round anand from nexus he was on a holiday in france for three weeks and then the day before he was flying back he's like look i'm coming back tomorrow can we chat and can we start the fundraising process again so so the people who genuinely want to see you win and that's something which i look for as I am speaking to investors is that how big of a champion are you of the business?

14:46Amardeep Parmar:Hello, hello. I hope you've enjoyed the show so far. I'm Amadeep Palmer, co-founder of BayHQ and the host of this show. For those of you who don't know, BayHQ is the community for high growth Asian heritage founders and investors in the UK. Over 7 ,500 people have attended our events. 200 people have been for our impact programs. and obviously there's been over 250 episodes of this podcast. If you want to join us and take part in the programs and come to the events, go to vahihq.com forward slash join. We also just released our first ever book called Startups for Outsiders, which you can get on Amazon now and the link is in the bio.

15:27Amardeep Parmar:Hope to see you soon at our event. Hope you enjoy the rest of the episode. And as you've gone through this process, why not, right? and you said you're going to swing big again right because sometimes sometimes raise VC for one company is like never again yeah and you've decided to go back down that route again yeah what was the kind of thinking behind that and was there any a question of you actually I want to do something a bit differently yeah so from our perspective it was about solving a problem building a big business that was non-negotiable and then the kind of business that we are building when you're selling to large financial institutions, you need to give them the comfort that you're going to be around for a while.

16:08And that means having a healthy balance sheet. And that means having money in the bank. And the only way that you can do that at this stage is to have the VC funding. So for us, inadvertently, VC route was the route that we had to take. So that was a means for us to build a big business rather than saying the goal is to raise as much money as we can.

16:29Amardeep Parmar:with the business training obviously as well right because of how fast it's moving and innovation when you're talking to investors when you're talking to customers how you showcase that you're going to stay ahead of the curve and you're going to keep iterating fast and innovating so if you think about i mean probably the question that you're asking in a different way is that what's your defensibility what's what's your mode why why are you going to win and i feel like in this world and the kind of business that we are building it's about being able to get in get your foot in the door with these large accounts with these enterprise clients because what happens is that the hardest thing is to get in but once you are in you're there forever and that gives you a path to go and and i mean one of these accounts that i've spoken about each of them over the next couple of years would be somewhere between five to ten million dollar accounts for us and that is what gives people the comfort that as a two-year two and a half year old business if you're able to work with a top five european bank or with ripple which is the top five private companies in the world then you can you can follow on from there and how did you kind of go about building that as well so obviously you said how you get your first customers but then also you want to maintain that advantage right you maintain that relationship as well and have you thought about that so kind of making sure you've got the customers happy you've got customers not churning how you making sure that retention is high i mean the the thing that i do all the time is that I go and I'm working with them.

17:51I'm in the bank. I remember our first client was Novo Banco, which is a Portuguese bank. I was there with them for three months and I was working inside from the bank. And what that does is that I understand what makes them them. What are their problems? How do they solve problems? How do I actually, it's not just about building. The hardest thing when you work with a large bank is that how do you deploy your agent inside? It's really easy to get something in a sandbox environment, giving you the accuracy, but how do you actually get through the security, the IT requirements and deploy something when they're sharing customer data with you?

18:24That's hard because they get to get the approval from the regulator and all the jazz that comes with it. And being inside the bank, it just helps you understand how do you navigate that? How do you solve the problem? How do you give them value? And then how do you find out what are the five other problems that they want to solve with you? Now, as we are expanding, So initially UK, Portugal, and now Spain. And we're doing POC with two of the largest banks there. And they're completely different. And the only way to find out is when you are actually in there with them. Like a DNA of a Santander is very different than a BBVA or a Kasia Bank.

19:02They've grown differently. And that's also part of the joy of building the business because I get to spend so much time with them. And I understand how these institutions have built and evolved over time. And there's that, in a way, it's like defensibility too, right?

19:16Amardeep Parmar:Because for somebody else to try to replace you, they have to spend that same amount of time with their business to understand all these little quirks and nuances too. But then I guess it also then makes it hard when you get new clients of like that onboarding. Like how do you kind of think about that of like once you've got, is it POC-based thing and then you convert? Or how do you convert people? So is your question that how do you get a move from a POC to production or how do you even get a POC? So I guess once you've got that POC, How do you then structure that or track it to make sure that it will then convert?

19:46Yeah. I mean, what I've realized, especially in this day and age with an AI solution, and it's with large financial institutions, you've got to have someone in there. There's no other way to navigate because you need to get consensus from 50 different teams coming together to say, look, we are OK to deploy this AI agent because no one wants to take the blame of something going wrong. and you need to make sure that there is someone from Zango's side sitting inside these bank who's going to make sure that everyone is aligned all the documentation are aligned and you have got probably two or three moments within a week or a month that you can make this happen and you've got to make sure you don't do this and the only way to do that is you've got

20:26Amardeep Parmar:someone who's actually in there like there's no other way like I mean the entire concept of forward deployed engineers is not necessarily to have an engineer based in there it's about having someone who can speak the language gives everyone the comfort and can help build consensus. And of the journey so far, right, so with Zango, what have been some of the hardest moments, like when have you had some setbacks you've had to get through? Yeah, so I remember in the earlier days as we were building the product, a lot of our focus was that we had two big clients, two big banks, and there was a third one we were working with, which is a massive global fintech.

21:03I think they were active in what 38 40 different countries and our plan was that let's just focus on building the best product with these clients and let's not distract ourselves with a go-to-market motion and sales and then that third client all of a sudden after spending six months with them they decided to go with another vendor who was a more traditional vendor a safe pair of hands and the reason why they went with the vendor is because they had a regulatory audit coming in and the chief compliance officer felt that using that name is going to make them look good in front of the regulators.

21:35That was the only reason. And we had like, we had almost done the onboarding as well. So we were like, this is happening. And we hired a team and everything to go live. And they pulled out the last moment. And that shows you that when you are selling to large clients enterprise, a deal can pull out any moment. And you need to have multiple of these moving at the same time to make sure that even if four out of five drops off, you still have one where you can move forward with. So that's quite a learning that given the kind of clients and the size of clients we're selling, that we need to make sure there are enough deals moving forward in the pipeline.

22:13I think it's one of the things that I think we probably still make them as well,

22:16Amardeep Parmar:because we're kind of partnership-based, right? So we've got like HBC, NatWest, these kinds of partners, but the sales cycle is so long. And it's very easy, I think especially in the early days, we got super excited. Somebody likes us, they're going to give us the money and there's so many of those deals that drop through and we made dumb decisions about hiring or getting an office that was based on income that didn't come in yeah and like when you're kind of trying to i guess plan out expansion yeah when you have this model where each individual client is such a big deal to potential revenue yeah how do you then plan out or model it out and like make those longer term decisions for me you would uh even before i so if you think about like a santander or a barclays or an hsbc for me what's really important when I think about these accounts is that do I have a path to win these clients or not do I have a champion do I have a buyer do I have someone who's senior enough in the bank or the institution to put their neck on the line to say I want this is there a strong enough incentive for them to put their job on the line to get Zango over the line and what is the critical event why they would buy and not delay so all of the standard things so till the point I don't know the clear path to make this thing move forward, I would not pursue an enterprise deal.

23:33I would not speak to someone who's not seen enough in these institutions. So no matter how much they like you, they just can't do anything. So unless until you're not speaking to a C-suite, unless until you don't have a strong enough champion or a reason for them to buy and those things are not there, I would not pursue an enterprise deal. So for us, and the thing that has really made the difference is having a really strong champion to say, look, I'm senior enough in the business where I can influence the budget holder and I'm going to put my neck on the line to get Sango into the business. To the point I don't have some of these pieces in, I wouldn't.

24:10Like for us, what has been massively helpful is having a very strong advisory board. So you've got the previous board member at BBVA, global CEO, legal for Santander, founder of Monzo. And what that essentially helps us is to get a foot in the door with the right level. And then you figure out whether there's a path to get them over the line or not. No one knows whether it's going to happen or not, but at least you see a path. Without a path, there's no point. You mentioned your advisory board there. How did you attract them? Because I guess you probably got them before you got the big name.

24:42Amardeep Parmar:Yeah. I think initially, like I said, it's a lot about trust. It's like, does someone like you and they're willing to take a bet on you? Like, Like you need, like on day one, you need five people to say, I'm going to take a bet on Zango and Ritesh and Shashank that they're going to build something big. Do I trust them? Do I like them? It's a little bit of both. Do I trust them to build a big business? Do I like them? And can we have a beer together or not? Those are the very fundamental questions. And then someone takes a bet. And then you make sure that you deliver. And when you deliver, then they give you more, which is that, look, there are a few people I think you should speak to.