- Paresh Davdra cofounded RationalFX when he was 24 with just a personal loan and proceeds from sale of his car;
- Today the foreign exchange company has revenue of more than $A1.63 billion;
- Davdra shares his advice on how to build a business and the pitfalls to watch out for.
LONDON — Paresh Davdra, the cofounder of RationalFX and Xendpay, knows how terrifying starting a business can be.
“You think, ‘oh my God I’m just increasing my debt and who knows what’s going to happen,'” Davdra told Business Insider, recalling the early days of his businesses.
Davdra cofounded RationalFX in 2005 when he was just 24 years old, a recent university graduate with student loans to pay off.
His cofounder Rajesh Agrawal had arrived in the UK from India three years earlier and was a friend of Davdra’s father. Setting up RationalFX was a gamble for both.
But, 12 years after founding the business, RationalFX is turning over $A2.29 billion and processing $A12.62 billion in payments. Agrawal is now London’s Deputy Mayor for Business, working closely with Sadiq Khan and banging the drum for entrepreneurs in the capital.
Here’s how the pair did it:
‘There were a lot of times where you question yourself’
The first problem Davdra and Agrawal encountered when setting up RationalFX, a foreign exchange business, in 2005, was funding.
“Neither of us had any money,” Davdra, now 37, recalls. “Rajesh had only been in the country for about three years, he’d come from India, and I’d only graduated from university the year before, I had all this university debt.
“Rajesh went to the bank to get a loan to start the business. We’d done somewhat of a business plan, not having done one in our lives. The bank, unfortunately, rejected him.
“He came back, not disheartened, because he’s not the kind of guy that gets disheartened, and he said: ‘Don’t worry, don’t worry, we’ll get some money.’ He went back [to the bank] the next day and said, ‘Ah I’ve decided that’s a bad idea, I’m going to buy a car instead’, and they gave him a personal loan, which was double the amount he was asking for in the first place. It’s a bit messed up but that’s life.”
Davdra also sold his car to help fund the business and the pair began RationalFX, originally based in Brighton, with just $A55,000 between them.
“We used that for a year and a half — that and credit cards,” Davdra says. “During that time there were a lot of times where you question yourself.”
Davdra is thankful that he had Agrawal at his side during this time.
“I think it’s harder on your own but having someone that you trust and someone you’ve got a good relationship with can spur you on and that’s really what you need in the early days,” he recalls.
To drum up business, the pair pounded pavements and pressed the flesh.
“We were travelling to London three or four times a week to attend events. It could be the smallest networking function with a painter exhibiting their art to A Place in the Sun. We would attend every single thing just to get our name out there, meet people, network. That’s how word of mouth grew quite fast.”
‘Fintech didn’t exist then, iPhones didn’t exist then’
After six months in Brighton, the pair moved the business to London. By this time “we were making a small amount of money,” Davdra says, but adds: “We still weren’t paying ourselves.”
Instead of taking a salary, Davdra and Agrawal decided to plow any spare cash generated from the business into hiring more staff. Both the cofounders were living with Davdra’s father, saving on rent.
“I’m grateful he let me stay there for free,” Davdra says. “I wasn’t going out or anything because I didn’t have money to.”
We’re still in a big growth curve for our company and I think it would be premature to sell it
Davdra and Agrawal began paying themselves around eight months after moving the business to London. But they continued to put any spare cash right back into the business.
This method of growing a business is relatively unusual today — most entrepreneurs in finance and tech tend to go to venture capitalists to raise money for expansion. Why didn’t RationalFX?
“If I’m absolutely honest? We didn’t understand it,” Davdra says. “We understood how a business works — you start a business, you create a profit, and you use that profit to expand and build a business. We’re business people.”
He adds: “Fintech didn’t exist then, iPhones didn’t exist then.”
Today, RationalFX is approached by venture capitalists and private equity investors “all the time,” Davdra said. “We talk to them to understand what they’re about, what we’re about. But we’re still in a big growth curve for our company and I think it would be premature to sell it.”
‘We’ve weathered more than one storm’
RationalFX’s growth story hasn’t been a straight-line success, however.
“We were on this high, riding this wave for about three years and we thought we were unstoppable — I was 27 then,” Davdra. “I wasn’t saving any money it was just spend, spend, spend, have fun. Then the crash happened.
“We were predominantly helping people with overseas property transactions, helping people send money to Dubai, places like that. All of that just started to dry up. Luckily we had just started to focus on business clients so we just focused on that — businesses that were importing products, we started pitching them to use our products. It took a few years but then that started to grow.”
The financial crisis wasn’t the only bump along the way.
Davdra says: “We’ve weathered more than one storm, to be honest, but you get them in different forms in different ways. People for example. As the company gets bigger and you employ more and more people, you have to manage these people and ensure their interests and the company’s interests are both aligned. Sometimes that’s not necessarily easy.”
Today, however, RationalFX is on a strong footing — so strong in fact that Davdra and Agrawal launched Xendpay, a subsidiary of RationalFX, in 2012. Xendpay lets people send money overseas online and allows people to pay as much or as little as they like for the service. It is targeted at immigrant communities sending money to family overseas.
“It’s something we did to help people and a way of us giving back,” Davdra says. “At the same time, customers are supporting it.”
Incredibly, the business, that lets people pay what they want, became operationally profitable last month. “It’s a success story,” Davdra said.
- Credit Card Industry and Market
- Mobile Payment Technologies
- Mobile Payments Industry
- Mobile Payment Market, Trends and Adoption
- Credit Card Processing Industry
- List of Credit Card Processing Companies
- List of Credit Card Processing Networks
- List of Payment Gateway Providers
- M-Commerce: Mobile Shopping Trends
- E-Commerce Payment Technologies and Trends
NOW WATCH: Ideas videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.