Interview with Sarthak Goel @ Invoid (YC W'21)

Interview with the founder of Invoid, a Y Combinator startup from the W’21 batch. Invoid streamlined and automated individual onboarding and identity verification operations. The company's platform provided back-end services such as video, digital KYC, and document verification, enabling clients to onboard and detect fraudulent information, scale faster, and cut down on operations as well as expenses.

Sarthak, one of the founders of Invoid, walked us through all the early days up to the exit phase of Invoid.

Invoid was a company that started with an initial investment of $10,000 and sustained on their revenue, essentially bootstrapping until the first round of investments from YC and other VCs. At their peak, they were making $200,000 MRR. It was an opportunity for them to exit, and they took that opportunity.

??Invoid was acquired by Bureau ID in 2023.??

Enjoy!

Originally Posted Here :

Could you please introduce yourself and your startup?

My name is Sarthak. I co-founded a company called Invoid, where we help companies automate their KYC processes and create identity-based workflows in their onboarding journey.

Compliance and KYC are fundamental for many companies. Some companies find it mandatory, while others use it for fraud checks and prevention on their platforms. We served companies across these domains.

We were probably the fastest-growing in the country, being the only developer-friendly KYC product available. Other products had become incumbent, requiring more integration time and not offering a full suite of services. Our competitive advantage was that we were full-stack and end-to-end in many cases, plus we were developer-friendly, which allowed us to serve various industries. This included fintech, banking, gaming, crypto, wealth tech, dating, and social networking. In most of these domains, KYC wasn't mandatory, but our service was easy to use and comparatively budget-friendly, which helped companies reduce fraud.

We also had a couple of proprietary AI models that we developed in-house, giving us a competitive edge. That's what Invoid did. We ran it for about 3 to 4 years before it was acquired by Bureau ID, a larger company in the same domain, funded by Octa and several VCs from India and Southeast Asia. They are expanding into a broader product scope within KYC, like number-based fraud detection and prevention. That's how our product fit into their existing customer base.

Can you tell us more about your background before your startup? Did you and your co-founder have what's called the founder-market fit?

Sure. My background is in Computer Science Engineering, which I studied in Delhi, India's capital. After that, I worked in an online travel-based startup. Although we had about 2 million daily active users, my work wasn't closely related to finance, B2B, or pure B2C. My co-founder and I didn't have backgrounds in KYC, compliance, Fintech, banking, or finance.

I started Invoid about 5-6 months after graduating from college, when I decided to quit my job. Initially, we were building computer vision models for retail spaces. We helped them capture insights using their CCTV systems, providing machine learning models to recognize customers, offer seamless experiences, and make product recommendations based on their preferences. We also analyzed customer demographics and behavior in the store.

However, while the value of our service was recognized, it didn't significantly impact the top-line revenue of our retail partners. The challenge was transforming the analytics and data into meaningful, monetizable information, which proved difficult.

Our background in computer vision came from my college projects, but we had no experience in retail or finance. This initial venture taught us a lot, even though it was outside our domain of expertise.

When our initial venture wasn't successful, we were simultaneously engaging with numerous companies. Usually, it becomes apparent within six months whether a project is working or not. Initially, there's traction in terms of interest from potential clients, but not in revenue. We had enterprise-level clients like Adidas and Benetton participating in pilots, but we realized the financial return didn’t justify the effort and resources we were investing.

This sector, focusing on CCTV-based video analytics, often leads to acquisitions or different business models. We recognized early that our technology was valuable and could be applied to various other problems. So, while realizing our current path might not work out, we started exploring different industries, including supply chain and logistics, applying the same technology.

So, fundamentally, you were a technology-first company, aiming to apply your technology in a meaningful way?

I wouldn't say that I had a solution and then I found a problem, but the problem that we were chasing first wasn’t worthy enough. So now that your tech is built, you know, you want to use it for other meaningful problems.

And it's in 2018, right? In India, AI hasn't even taken a step. A few select companies were working on computer vision, and NLP is something which happened very late. We were experimenting a lot and then KYC was one place which struck it because we were able to give that kind of a black box to these players.

The Fintech boom from 2018 to 2022 provided the perfect opportunity for us. So that's how we had a solution built for another problem. We modified it. We tweaked it to fit into another case. And then, once that problem was identified and an MVP was there, then we’ve built the whole layer to serve the industry, and then, again the use cases and the market expansion took place. That's how B2B companies expand revenue by expanding the market.

How did you initially approach enterprise-level customers? What was your strategy for pitching to them and identifying key decision-makers?

There were two approaches. The first was not to directly target enterprises. The best way to go after enterprises is to not go after them, but to first collaborate with their growing competitors. Enterprises are scared of startups because startups take out their business for a cheaper amount, probably, and for a faster execution.

So we tried to tap into those plans. We got all of them and then the enterprises naturally wanted to have us, because they were like - “all the competitors have it, and it's becoming their competitive advantage against us”. So that's how enterprises started interacting with us and started taking our product.

One of those case studies is published on AWS, where we worked with a banking client we had pursued for 9 to 12 months. Initially, they weren't really acting upon it, but then they had an urgent requirement and wanted it implemented in 3 weeks. That's our case study featured on Amazon Web Services .

So, enterprises came on very late and startups were our primary focus.

And then an enterprise happened. If you start pitching to enterprises or hope for them to make deals with you, you have to remember that a startup's runway isn't very long. I mean, an average sales cycle for an enterprise would be somewhere around 7 to 12 months, right? So that's very critical for a startup. You have to optimize for time and not money. You start making revenue - whatever you can make, and make sure that you’re first sustaining yourself.

We didn't have a lot of funding initially, so we had to sustain ourselves through our revenue. We didn't want to waste time with enterprises, so we turned to startups, made money, built our reputation, and established credibility in the market. Then, enterprises followed.

How long did it take you to build your MVP?

For our MVP, the focus was on developing a video-based product. To be more specific about our product, we were primarily processing videos rather than images. Video processing, which involves going frame by frame, is a heavy and intensive process. Consequently, the MVP was slow, especially for any kind of verification, face match, liveness check, or data reading.

We then realized there were other, more efficient methods. Eventually, we developed a model that worked with images instead of videos. The MVP was essentially to demonstrate the concept that online verification, identity checks, and KYC could be simplified and expedited through APIs and frame integrations.

The MVP was essentially just us showing middleware. But that middleware had no checks on the time it was taking or the processing unit it was using. The final product, however, was very seamless, smooth, and highly efficient. Considering the amount customers were paying us, the ROI for us was huge. This is how we managed to increase our profits.

With the MVP, you start low in terms of investment versus revenue. Then, as your final product develops, it progresses. Your investment appears minimal compared to the revenue you're making. This is the essence of finding sales-market fit or product-market fit – generating more profit and revenue with the same level of investment in building the product. So that's the difference.

The reason I ask you about about how did approach your first customers is because in European countries the whole sales cycle of selling to enterprise customers is very long. There's lots of regulatory compliance involved. I guess in India there's a different situation.

No, I think it's the same. We have our own kind of regulations, our kind of compliance is very “India specific”. What matters is not if you can execute your vision. What matters is do they know you? Are you credible enough for them to trust you?

There's nothing I can bring to the table that a company 10 or 20 years old could, but at the same time, they need to see if they can trust me, if they can work with me. Can they rely on other people's testimonials? That's how we built credibility. We hired a couple of senior consultants from this space who could help us make a pitch. But first, we had to prove our credibility through awards and recognitions. We made sure to win the top awards in our category, like 'Best Regulatory Tech Company' and 'Best Fintech Info Provider', along with others for best emerging startups. We had to earn these awards before approaching enterprises, or before enterprises discovered us, which makes things easier in terms of regulations and such.

Fulfilling a bank's regulations, for example, was a one-month job for us. But getting into their system and getting their help to accomplish the task was more involved. It's a 50-50 job with an enterprise. It's not just plug-and-play or a dev tool kind of situation. You can't just ask them to check your documentation and integrate it themselves. Enterprises require sales, key account management, and proper development or customer support. This requires effort from their end and some level of participation.

Building this relationship only happens when you've spoken to them and made them realize that they can trust you for a ten-year journey. We're offering them a product that will solve their problems, reduce their costs, and increase their productivity. That's the kind of relationship you need to build with enterprises.

I think they're very helpful, but reaching the right person at the right time is critical. For instance, you might have approached them with AI in 2015, and they wouldn't bat an eye. But today, if you pitch AI to any company, they will be receptive. They’ll say, 'Yeah, sure, let's just have a chat,' even if they don't find the product immediately useful. They will never reject a company offering AI. That's the criticality of timing.

Did you fundraise from the very beginning, or did you bootstrap your initial MVP?

We did a friends-and-family round and used our savings. How much savings could I have after a 5-months-job, or a 6-months of job experience and an internship? Still, it was enough for us to buy our first GPU. We also received some from a government grant. In India, there are institutions that the government supports through funding - these are incubation centers.

The amount from these sources was relatively small, a couple of thousand, $10,000 dollars, probably. The next funding round came after about 2.5 to 3 years. By then, we had essentially bootstrapped the company. I wouldn’t strictly call it bootstrapping, as we were sustaining ourselves on our revenue.

At the peak of our operations, we achieved $200,000 in monthly recurring revenue (MRR), which was more than enough for us to sustain comfortably. So, we raised a small amount initially, and then later, we joined Y Combinator. In between, we survived solely on our revenue, focusing on making profits and increasing our margins. After Y Combinator, we attracted micro VCs, nano VCs, and angel investors from the US. That's when we decided it was a good time to exit, so we took an exit.

So, there was no VC money involved between the time you raised from friends and family, the government grant, and from Y Combinator?

Yes, during that period, no. There was no easy money. I think it would have been a disaster if we had taken it. This might be a bit controversial, but someone told me, and it resonated well with me - people who raise money are often those who are unable to generate it. So, if you're able to generate revenue and make profits and cash flow, hardly anyone wants to go and raise money. The exceptions are when they need to invest in new experiments, R&D, or expansion. But for sustenance, nobody really raises money.

So, the best advice generally would be to sustain yourself first, survive, and then try not to take VC money for as long as you can.

Yes, I don’t know. It’s a very common saying, but I'll repeat it here: The best time to raise money is when you don't need it. If you go out in desperation, raising investment becomes more of a pull job than a push job. If you keep reaching out to VCs and pushing them to review you, it becomes a hard sell. But as long as you're making some noise, generating enough revenue, investors will somehow reach out to you. That’s the best way to raise money.

Some founders have told us that if they were to start a new startup, they would only fundraise when growing so fast that they can't sustain themselves on their revenue. It's case-specific, but still…

Yeah, I think it very much depends on whether a company is B2B or B2C. In B2B, it's unit economically positive from day one. You have some margin, some potential for profit. So, you just have to burn some money to get the pipeline running. Once it's running, you focus on increasing margins and ensuring high upselling and cross-selling. It varies hugely between B2C and B2B.

Many new founders with startups think they should fundraise as soon as possible, believing it's the most important thing in a startup. They're often misled by this idea.

Yeah, I think, as a first-time founder, there are many things to consider. I was 22 when I started up, so there was a lot to take care of. You might wake up one day and decide you don't want to do your job anymore and instead start something of your own. I believe the younger you are, the more risks you can take in life.

Now, if I were to try building my second startup, I would want to raise money. Why? Because raising money is good for a number of reasons. It can help you avoid mistakes by providing guidance from credible investors or experienced people in the industry. Without this, we had to bump into everything first and learn the hard way, rather than preempting issues. So, there's no preemption. Money, or having credible investors on your cap table, brings connections. We had to build our credibility from scratch, acquiring each customer and winning awards by ourselves. But with credible investors, they can get you the right opportunities at the right time. That’s something money, or rather equity, can buy.

Yeah, but for first-time founders, unless you have incredible credentials, it’s pretty much impossible to raise money. You still have to start from scratch and prove your worth, doing things that don’t scale.

Your best tool initially is your equity. Many people worry about giving away their equity, but I think that's the only asset you have that you can expand upon to gain credibility. Play with the cards you have.

Why did you decide to apply to YC?

We had been applying to YC for a while and got into the Winter ’21 batch on our fourth attempt. The first time, we were very early, and I was only about 80% convinced by what I was pitching. How could I expect someone who looks at startups day in and day out to be convinced by that, right? The second attempt was still about building conviction, which wasn’t convincing enough, I think. The third time, again, it wasn’t a good enough journey. But by the fourth attempt, we thought it was a good place to be, and it would make expansion easier once we got into YC. Then Covid hit, and we couldn't move to the US, which changed things. But the original idea was to raise some money from the Valley and possibly expand in the US.

And again - credibility for B2B businesses - someone who understands YC and doesn't know your name will still do business with you because of YC. So those folks are irreplaceable by anything else.

What was your traction at the point you joined YC? Could you share some metrics before and after YC?

Yeah, I think when we got in, we were at $70k MRR. When we came out, we were between 150 to 200k.

In a span of 3 months, right?

Yes, 3 to 4 months. The program is 3 months from the date of acceptance.

I think YC really excels in B2B. Obviously, they're knowledgeable in other areas too, but B2B is really their forte. Having a partner with a lot of B2B sales experience was exactly what we needed. It was overall very beneficial.

Some B2B founders have told us that when they got into YC, they started selling to other YC companies. There's a network of companies there, and everyone supports each other.

Fintech is another interesting space where YC invests, and it was one of the key areas where we were looking for customers. A lot of potential customers came from our YC network, especially the Indian YC network. But of course, I was also talking to a lot of people from Latin America in the fintech space, which we heavily explored as a possible expansion area instead of the US. The US was a tougher market to enter, with many more established players. To really compete there, we would have had to move to the US to understand the customers better, as the KYC space is very region-specific. It would be foolish to try to build it for the US while sitting in India.

But Latin America, on the other hand, has an economy very similar to Southeast or South Asia, from what we've heard. We had good pilots with a couple of companies in the contact space associated with YC. Although it didn’t turn into a full-fledged partnership, it was much easier to enter those economies because of YC and the potential existing network.

Aside from the revenue boost and the new customer relationships, do you think your startup would have been any different without YC? Did it have any fundamental impact on you as a founder?

We were already making a lot of revenue. I could be wrong, but I think in our batch, we were among the top 5 revenue-generating companies when we joined YC and when we exited.

Honestly, we had learned a lot of things on our own, especially in terms of general startup dynamics, founder dynamics, sales, and investments. Raising funds was one area where we learned a lot at YC, something that you can't easily learn by just bumping your head against the wall in 2 or 3 years.

YC helped us understand the nuances of raising funds, the exit process, structuring the organization, building a lean company structure, and retaining employees. These key insights often come from the extensive experience and resources like Bookface and guides that YC provides to its founders. These are areas where things significantly improved for us at YC. We were clueless about many of these aspects before joining.

Additionally, the stories and struggles shared by other founders at YC are invaluable. In one of our first sessions, which I think is still a practice, we heard from the Airbnb founders. Their story was incredibly motivating. It teaches you that you need to commit to your startup for the long haul. It’s not a 2, 3, or 4-year endeavor. If you want to build a business as successful as theirs, you need to be prepared to stick it out for 5 to 10 years, facing noise and rejections. These kinds of stories and insights are key to YC's value. While you might find similar information on YouTube, it's not as concentrated or as tailored. YC is like a goldmine of startup knowledge.

Airbnb is the perfect example of the cockroaches or profitability with their Obama-O's Cereal moment.

I mean, it's a common story. I didn't know about it and I was blown. But they were baking cereals during election campaigns. And I was like - wow - that's the kind of effort that you need to put in to sustain yourself.

When you got acquired and exited, how did you transfer all the workflows, the knowledge, and technology?

Yeah, regarding the acquisition and exit, I think I'd be very limited in what I can share. I mean, I want to keep it low-key in terms of the acquisition. We never really talked about it much publicly. But again, yeah, I'd be happy to answer very specifically and conscientiously, yeah.

So, it's a process that initially seems like just a code-base transfer, but it's much more than that. It took us a year to do that. To be honest, the code-base transfer was the least hectic and the least of the headaches. The legal proceedings – and by proceedings, I mean the legal work involved – was more challenging. Structuring the transfer correctly, especially since it's a Delaware corp with main entities in India, finding solutions to ensure compliance and accurate reporting is crucial.

There's the handshake, share transfers, ensuring no faltering, and that the acquirer has enough confidence and has done their due diligence. Those checklists... if I had to actually think about them, it's like a thousand rows on Excel.

There's a lot of back and forth. The due diligence company would come back with their own questions about taxes, revenue, profits, customer stickiness, legal names, and everything. In B2B, your customers are also varied across different industries, so they want to check all of that. Due diligence is one part. Then, whatever taxes you filed, whatever reporting you've done, they need to audit that too. It's a two-way process, auditing both the Indian company, which is a subsidiary of the US corp, and the US company. Then it moves to the product we've built. Finally, it comes down to the code base, which is just a GitLab or GitHub credential exchange. They run the code to see if it's working. And again, one way to make it easier is by building a lot more documentation.

When you're building a company with an acquisition in mind, as we were, you do a lot of things differently. You build many aspects of the company in isolation, decoupled, and with their own identity. This approach makes it easier to hand over the company because it's less attached to you personally. For example, consider the domain you buy. It really depends on whether you buy it through a personal email ID, because the first thing you often do while trying to build a startup is buying a domain. You want to ensure that the domain transfer is easy. That's basic. And while you’re building a startup, it might seem trivial, but when you’re selling it, it’s a huge deal. Your website, API documentation, server hosting – all these should be least coupled with the CTO and more within the company’s purview.

Documentation is crucial. As a product and tech lead, I was very sure that everything we did, even the simplest tasks, needed thorough documentation. This was helpful not only for us but also for our customers, as we would share many Notion documents with them. We always preferred to give them documents to read rather than having calls. This approach proved beneficial during the acquisition because we were able to clearly share what we had pitched to the customer and what we had been doing. So internal product documentation, external product documentation, API documentation, internal tech documentation – all were very helpful. We maintained these on Trello, Whimsical, and Notion. We documented a lot of things and just had to hand it over by creating a checklist. If you want to access a particular element or information for a specific customer segment, you go to this link. So, it was a proper booklet that we gave to our acquirer. For them, it was easy. They sat with it for a month, had Zoom calls, raised doubts over email, and we answered them. That's how we went about it.

If you’re building with an exit in mind, you should document everything as well as you can from the very beginning?

Correct, it’s not just about acquisition. Employees in a startup often change, so it’s crucial that the context transfer is very smooth. If someone takes a long time to grasp what’s going on, it can lead to a loss of revenue or deteriorate customer service. That’s why it’s important that whoever is building any core component in the company during the initial years documents their work. This way, someone who joins later can access those documents to understand why and what we do.

This approach helps in two ways: it eases the transition for new joiners, addressing attrition problems, and also assists in the acquisition process.

What will be your next step after the acquisition? What are you doing now, and what is your vision for the future? Many founders don't want to be second-time founders. They just want to be consultants, often associating success in startups with randomness rather than effort. There are lots of challenges, like not being able to get a mortgage as a founder, while your employees can.

That's actually true. I was doing well but couldn’t get a credit card. Why? Because I was told that my company wasn’t very old and being self-employed was a problem. That’s when I realized there are a lot of perks to being an employee rather than an employer. But, of course, there are other perks to being an employer too.

For now, I’m working with a couple of startups, especially in India, which is a growing market. I'm consulting with them, devoting most of my time to a Fintech, because Fintech is booming, and I want to explore this space in India.

Starting up for the second time will happen soon, but the world is in such a transition phase that anything you build today might become obsolete in a few months, as we've seen with GPTs. It's a perfect example of this rapid change.

So I'm just waiting, exploring a lot of areas, particularly in B2B. I think B2B businesses are great, and now that my credibility is established, it becomes easier to raise money and pitch to customers. That should be a good area for me to start in, whether in a few months or years. I’m in no hurry. I'm biding my time.

Would you say that B2B is overlooked by founders as compared to B2C?

Yeah, I think it's a non-fancy place to be in, and there’s no ‘startup glory’ in B2B companies. I'm sure there are many B2B companies making a million dollars in revenue easily, but you never hear about them because they're not 'cool.' They don’t appear on app stores or play stores, right? So, they're overlooked because many founders don’t even realize that this business model can be a very good startup model. It's often less of a headache, with less customer service required. So yes, it is overlooked by many people.

It was really interesting to hear your story and all the steps you took to reach this point. Most people we’ve talked to with startups never reached the exit phase, so we didn’t really know what to expect from this phase.

It was great chatting with you. Looking back at the whole journey, you gain a lot more insights in hindsight. I’ve done a lot of podcasts and spoken to other people, but those insights were very limited and time-specific. What I shared with you guys today is a more expansive overview of everything that happened.

Learn More About the Founders:

Kunwar Raj Sethi

“I am a Co-Founder at NoApp, a startup that helps businesses to start, manage, and scale their products on WhatsApp using the official API. We have 100+ clients, mainly in the fintech, edtech, and health tech space, and we are growing fast. I am also a content creator and an investor, with a passion for finance, investing, productivity, and entrepreneurship. I have built a community of over 1 million people across various platforms, where I share my insights and tips on these topics. My videos have received more than 100 million views. Previously, I was the Co-Founder and CEO of Invoid, a leading KYC automation startup that was part of Y Combinator and raised funds from top seed investors. We automated more than 1 million verifications every month for over 40 enterprise customers in India. I have over 5 years of experience in building and scaling products, managing teams, and raising funds. I have a strong analytical, market research, and social media marketing skills, as well as a background in finance and leadership. I am always eager to learn new things, explore new opportunities, and collaborate with like-minded people. My goal is to create value and impact through my products, content, and investments.”

Sarthak Goel

“My journey began in college, where selling my first product to the Government of India fueled my confidence to build and innovate. I founded Invoid, a venture recognized by Y combinator, NASSCOM, Wharton, AWS, Microsoft, NVIDIA, and the Government of India, and collaborated with leading companies like Equitas, Coinswitch, Rapido, Bharatpe, and Capri Global etc. Post Invoid, I'm focusing on nurturing growth in SaaS and Fintech. With my current experience at Credenc and past at ixigo, I'm now leveraging my expertise in investments, engineering, and entrepreneurship to mentor emerging startups and explore new technological opportunities.”