RationalFX a success story
The Bob Pritchard Column
Paresh Davdra cofounded RationalFX with Rajesh Agrawal 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 $2 billion.
When he cofounded RationalFX and Xendpay, he was 24 years old, a recent university graduate with student loans to pay off. He kept thinking “ I’m just increasing my debt and who knows what’s going to happen.” Setting up RationalFX was a huge gamble. But, now 12 years later, RationalFX is turning over $2 billion and processing $10 billion in payments.
The first problem they encountered when setting up RationalFX, a foreign exchange business, in 2005, was funding. They had no money, he’d only graduated from university the year before, I had university debt.
They went to the bank to get a loan to start the business but the bank rejected them. They went back to the bank the next day and got a personal loan “for a car”, which was double the amount they were asking for in the first place.
They began RationalFX, Brighton, with just $50,000 between them. They used that for a year and a half along with credit cards. To drum up business, the pair pounded pavements and pressed the flesh. They travelled to London three or four times a week to attend events. Any events. They would attend every single thing just to get our name out there, meet people, network. That’s how word of mouth grew quite fast.”
By this stage, they were making a small amount of money but were still not paying themselves. They plowed any spare cash generated from the business into hiring more staff. They stayed with Davdra’s father, saving on rent.
Davdra and Agrawal began paying themselves minimally 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? Because they didn’t understand it. Today, RationalFX is approached by venture capitalists and private equity investors all the time. But we’re still in a big growth curve for our company and it would be premature to sell it.
The financial crisis was a major bump in their progress. As the company got bigger they employed more and more people you have to manage these people. Ensuring their interests and the company’s interests are aligned is not easy.
They launched Xendpay 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 became operationally profitable in 4 years.