This is an edited transcript of a conversation I had with Rajan Bajaj, over a couple of years ago, as part of my research into the Product Market Fit Playbook that I am presently writing. Since our conversation, which we had via Zoom on 12 November 2022, slice has evolved from a fintech to a bank, following its merger with North East Small Finance Bank, on the back of an approval from India’s central bank.
A twitter exchange reminded Rajan and me of this conversation, and we decided to publish this transcript I had created following our conversation. In our chat, Rajan speaks about his definition of Product Market Fit (PMF) as product love measured by disappointment that customers feel if the product doesn’t exist from tomorrow. In addition we cover the pivot from Buddy to slice, and the BNPL product that spurred slice’s spectacular growth.
Please enjoy this conversation with Rajan Bajaj, founder and CEO of slice.
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Sajith: Rajan, slice has had a journey rich with pivots and transitions. It started with Mesh to Buddy, and now slice. Please take me through this journey, especially how you iterated on Product Market Fit (PMF) at each stage. And I’ll go by whatever definition of PMF you have and double-click into that aspect.
Rajan: PMF, for me, is when customers are asked how disappointed they will be on a scale of 1 to 10 if a particular product or service doesn’t exist from tomorrow. If they rate the disappointment at a minimum of 8 on 10, you have found your PMF. Needless to say, we have gone through multiple cycles of these.
Sajith: So now, when you go into each product, do you actually do some kind of a rating? How does this work itself out? Like how do you know it’s an 8 on 10? Do you carry out a survey?
Rajan: So we first build products for ourselves. India is such a heterogeneous market that if we can build something that works for people at slice, we’re already building for millions. We are the demographic we serve: 25-35-year-olds from various backgrounds. So we build products we love and would miss if they disappeared tomorrow. We ask ourselves internally whether we’d be disappointed at an 8 or 9 out of 10 if this product vanished. If yes, we proceed. If not, we keep working on it or move to the next project.
Sajith: When you moved from Buddy to slice, what were the real reasons for the pivot? Did you fundamentally see growth slowing down? What are the reasons for each of those pivots? I would love for you to deep dive into it.
Rajan: We started with a sharing economy rental product for furniture, cars and motorbikes. We quickly realized demand wasn’t strong enough. At one point, in 2015, we were Bengaluru’s second-largest car rental company after ZoomCar. We had scaled well, but car rental posed numerous challenges. We wanted to provide black plate cars, but customers preferred white plate cars because of the lower rental cost. White plate cars weren’t legally compliant for commercial use, so we had to stop. We didn’t want to get into the inventory-based car model either. It was too costly, and we didn’t see ourselves managing or refurbishing vehicles.
We went through three pivots during that period, including furniture and bicycle rentals. The realization was the same: demand or PMF wasn’t strong enough to justify solving the supply side. The furniture rental space became essentially a refurbishing business with weak demand. We executed these pivots quickly, within two to three months, and learned how to pivot efficiently. These quick pivots led us to our next product, Buddy.
Buddy was our brand name for the first six to eight months, but we changed it because SBI had an app with the same name. Buddy was a BNPL product, which we renamed SlicePay. It remained a BNPL product for nearly three years.
BNPL didn’t exist in India then. No merchants wanted to partner with us, so we partnered with them through gift cards and prepaid vouchers instead. We sold these vouchers through our app and customers didn’t have to pay immediately. This product worked well for many customers. We offered no-cost EMI and additional features. But the experience wasn’t great, and we knew it.
We always felt we were building for some “other customer” and somehow convinced ourselves we understood this person. Then we had a collective epiphany (if I may put it that way) that we should build for ourselves because there’s nobody we understand better and we were naive to have overlooked this.
Sajith: So this transition from BNPL to what became the credit-backed slice super card is what created the rocket ship? Would you consider this shift as what took you to a Unicorn status?
Rajan: The card pivot happened around May 2019, and it took us a couple of years to get the product right. Our initial strategy was unconventional. Most firms attracted customers to their cards via rewards. We decided that we’d do something different. We decided to differentiate ourselves by promising the best experience with no hassles and no hidden terms and conditions – but we did not give any rewards to customers. Many people valued that proposition, especially young customers who didn’t have credit cards yet.
Some existing credit card users also came to us, though they were a smaller proportion. Getting the experience right took time, and then COVID hit. We lost nearly nine to ten months focusing on protecting our NPAs rather than product development. About a year and a half later, in December 2020, we started achieving real product-market fit. Customers found value in using our card even without rewards. When we launched rewards and offers in April or May 2021, backed by that great product experience, growth skyrocketed. We grew 20 to 25% month-on-month for almost a year after that.
Sajith: So the card idea, was it like a natural evolution or an aha moment? I’m curious because you fundamentally re-imagined the BNPL as a card. So that was a masterstroke. A bad or not-so-good product became a good product due to ingenious product design. How did the idea evolve?
Rajan: So this is something people don’t know. We’d been talking about the card since 2017. I remember showing one of our investors a sketch on the whiteboard, explaining how simple it would be. We’d actually been considering this since late 2016. But it took time. Nobody else had done it. People told us we were foolish to think about launching a card outside of a bank, since banks acquire most card customers through their existing account holders. They said going to the open market for card users would be too expensive. Nobody had done it before, we were the first movers and it worked out well. There were many missing pieces like bank integrations, lending infrastructure, and figuring out scale. Over two years, these pieces fell into place and we were ready to launch.
Sajith: How do you think about metrics? And how did you prioritise metrics? What are the metrics you focus on at slice?
Rajan: We have primary metrics and secondary metrics. Primary metrics are the ones we communicate across the organization, like new customer numbers or GTV. Secondary metrics belong to specific departments, teams, or individuals who are accountable for them, such as onboarding funnel conversion or customer service response time. I would say we track 20 to 30 secondary metrics that directly impact our four or five primary metrics.
Sajith: Do you have a concept of a North Star metric or a key metric at slice, say that one hero metric by which you drive like prioritisation within the company? I’d like your thoughts on that.
Rajan: These primary metrics are essential for us. The number of new customers we’re adding, GTV, NPA, NPS, NPV, these 4-5 primary metrics and the rest of the metrics are secondary.
Sajith: So specifically around the concept of GTM, because there is an integral link between go-to-market and product market fit and so on, any thoughts specifically there? Any thoughts about what worked for you and any interesting ideas you tried?
Rajan: Referrals have been incredibly valuable for us, by miles. 75% of our customers come from existing customer referrals, organically. We realized that providing a great experience would make referrals work. With each iteration, we improved how referrals functioned. Working on one channel is better than spreading across five or six channels. Find that one channel, maximize it, then move to another.
Sajith: So, referral was one channel, but how did you drive a few things that worked for you? Did you have a specific team focused on referrals? Was it like a PM who focused extremely highly on that?
Rajan: We’ve been around for years and referrals didn’t work until 2020. When the product improved and people started loving it, referral volume increased. Our primary metric for this is NPS. When NPS rose, referrals grew automatically. We built a simple referral product, nothing fancy, just two-sided referrals. Initially, we didn’t even pay for referrals. We simply told customers their referred friends would have higher approval chances. It was all about getting the product right so when people experienced it, they felt their friends were missing out.
Sajith: Post PMF and scaling, are there specific thumb rules to take? Like, what happens post-PMF? Did you realign the organization around what was working? Did you hire certain people after that? Any thoughts about that?
Rajan: We never felt we were “post-PMF” at any point, to be very candid. It’s about growing while maintaining the right metrics. Your NPAs shouldn’t spike, and net present value should remain healthy. As long as these stay in line, grow as much as possible.
Sajith: Anything you want to add on this topic? Like anything more like one, two line thing, anything like that for founders?
Rajan: Just you know, solve customer problems, follow great accounts on Twitter, I’ve have learned a lot from Twitter.
Sajith: You’re one of the few founders who tweet about PMF, but many founders I reach out to say that growth and retention are what they worry about, traction and retention, and PMF is an outcome of that. According to them, predictable growth with good unit economics is effectively PMF. Would you agree with that? For most founders, PMF is a VC thing, not so much a founder thing. What do you think about that?
Rajan: Those metrics are more business-oriented. For me, it’s product first, then business. If customers love our product, measured by asking them that disappointment question I mentioned, that’s what matters. You should obviously optimize business metrics because without a viable business, you won’t survive. But if the product isn’t there, there’s no point in existing. The whole reason you started a company was to do something better for customers. Product metrics are more important than business metrics like growth, retention and unit economics.
Sajith: Fair, I can’t disagree. This point stood out to me, and I wondered what you think about it. When I talk to most founders, they struggle with the definition of PMF. Some say what you say about PMF as product love, some say growth is PMF, pull is PMF, etc. Yet the story is that founders think about product love, then growth and retention, and PMF is an outcome of achieving this. I thought I would share this with you. Thanks, Rajan, for your time.