With SoftBank investment, Zeta becomes a unicorn

Two days after signing a $250 million deal with SoftBank, the 41-year-old Bhavin Turakhia is busy planning his expansion moves, sitting in Dubai. The investment by Japanese private equity behemoth has more than tripled the valuation of his banking technology startup firm Zeta and made it a unicorn, the 14th in India so far in 2021.

“We are truly excited,” Turakhia, CEO and co-founder, tells Fortune India.

Turakhia, a serial entrepreneur from Mumbai who made his fortune through exits, is excited about the journey because he has never raised any kind of venture capital, angel investment, growth fund, or private investment in the past, for any of the four companies he founded. “This is the first time ever in my lifetime that I have gone for institutionalised fundraising. And it is the one of the largest single funding raises by a banking tech start-up globally,” he says.

The man who co-founded Resellerclub, Logicboxes and BigRock in 1998, had exited them in a $160 million transaction in 2014. Subsequently, he founded Radix in 2012, Flock in 2014, and Zeta in 2015.

“SoftBank is a globally respected company. We can meaningfully connect with their portfolio companies, and the partnerships and relationships they have, to further expand Zeta’s offerings to various new markets,” says Turakhia on a video call from Dubai.

On May 24, Zeta announced that it raised $250 million in a Series-C funding round from SoftBank Vision Fund 2, at a valuation of $1.45 billion. Sodexo, a France-headquartered food service company, also participated as an additional minority investor in the round.

For Zeta, it has been an exciting journey over the last few years. Conceptualised in 2014 and founded in 2015 by Turakhia and Ramki Gaddipati, it has become a unicorn in less than six years. Bootstrapped for four years, Zeta secured its first external funding from Sodexo Benefits and Rewards (BRS Global), at a valuation of $300 million, in 2019.

Zeta is a modern banking tech company providing an Omni Stack comprising modern credit and debit processing, core banking, and mobile experiences, among other services. The company counts two dozen fintech companies and 10 banks, including HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, RBL Bank, and Axis Bank, among its clients.

Post the stake sale, what will be the stake holding pattern? “Between the employees and partners, we hold around 70%. Softbank owns around 17%,” says Turakhia. Sodexo will hold a little less than 10%.

The Mumbai-based Avendus Capital acted as their exclusive financial advisor.

According to Turakhia, Zeta is looking at leveraging the capital in two buckets. “The bulk of the capital—around 70%-75%—will go to expanding operations in North America, the U.K., the rest of Europe, Latin America, and SouthEast Asia. My goal is to expand our current sales/marketing teams to more than 5x to almost 200-250 people across the globe. The remaining 25% of the capital will go for product portfolio expansion. We are enhancing our product portfolio, expanding into commercial banking, wealth management, investments, and many other areas in the future.”

“We are currently present in North America, Latin America, the U.K., India, Vietnam, and Philippines,” he says. Today, Zeta is a 750-strong team globally.

What are your focus markets going to be? “In terms of expansions, North America is going to be a focus, going forward. Of course, India will continue to be a big market as well. We are already working with eight-nine banks in India offering them various products and services on our platform. India is certainly going to be a big market for us,” says Turakhia.

“There are relatively fewer players in banking tech. This is one of the last frontiers in tech adoption,” he says, adding that Zeta can disrupt the stagnant landscape of banking tech with the help of SoftBank.

He says most banks are using decades-old software built when Mainframes and Cobol were in vogue. “They have been slow to innovate and provide poor user experiences. With Zeta, financial institutions can leverage a modern, cloud native platform and improve speed to market, agility, cost to income ratio and user experiences,” says Turakhia.

Zeta’s Omni Stack provides all the functionality that banks need to launch new products relevant to consumers today. It comprises Zeta Tachyon (credit, debit and prepaid processing with card controls and personal finance management capabilities), Zeta Tachyon Loans (a modern Bub-now-pay-later and personal loan management platform), Zeta Tachyon Deposits (a modern core for DDA, checking accounts, savings accounts and deposits) and Zeta Tachyon Mobile (a ready-made, white labeled, customizable mobile app for credit cards, savings accounts, prepaid, loans, etc.)

“It is a fully modern cloud-based technology that operates in a cloud-agnostic manner. It is infinitely scalable. We actually did a demo in January where we ran more volume on our platform than the entire transaction volume of the entire world in front of several banks, with 100% success rate,” Turakhia says.

It is meant for micro-transactions, infinite scalability and elasticity. If one were to look at the traditional disaster recovery and business continuity, Zeta operates in a fully active manner across multiple regions that even if one region goes down, we would never see a downtime. This is how new technologies are deployed today, unlike many other legacy banking platforms and banking technology stacks,” he says.

As the world moves to real time payments and digital financial services, the number of transactions per day between banks and customers are expected to grow exponentially, says Gaddipati, CTO & co-founder, Zeta. “The increasingly digital world represents evolving security, privacy and data protection challenges to banks. The industry needs systems reinvented with security, privacy, scalability and reliability as the core foundations. Zeta's Omni Stack answers that need,” says Gaddipati.

Munish Varma, managing partner, SoftBank Investment Advisers, believes the banking software is a $300-billion industry globally. “Most banks still employ technology which is significantly older than their customers, impacting user experience and engagement. Zeta’s modern Omni Stack will drive banking software upgrades catering to the digital consumer, and innovations in financial services globally,” says Varma.

Shuttling between New York, London and the Middle East, Turakhia currently splits his time for the three companies he currently owns.

What next? “I spend most of my time with Zeta and Nova (parent company for Flock and Titan), and a little bit of time on Radix. I want to create a legacy through these companies over the next one decade. That is my goal,” he adds.