Kaspi.kz: The Kazakh Super-App - [Business Breakdowns, EP.203]
55:42 Share

Finley is a debt capital management software that I wish I had during my private credit days. Finley is also today's sponsor of Business Breakdowns, and it's a company that's solving a pain point near and dear to my heart.

In my credit days, we spent way too much time coordinating diligence trackers, the internal versions, the external versions, the banker versions. And our borrower management operations always felt like they were the same as they probably were in 1996. And I know it wasn't specific to us. Regardless of what other funds we were working with on these projects, it was always the same.

Just ask around and you'll find that nearly every operator or investor has experienced the operational nightmare of managing debt capital.

The reason, most corporate loans come with hundreds, if not thousands of pages of reporting requirements and gotchas. And historically, there's been no way to avoid the tedious back and forth of lender-borrower interactions. Finley translates these unstructured credit agreements into code. It puts every party on the same page, and then it streamlines the credit management lifecycle themselves.

So you can think about covenant reporting, interest and fee tracking, portfolio analysis. If you have a revolving credit facility, the ability to borrow, all of this is sped up.

Borrowers like Ramp and Innova rely on Finley to track and automate reporting requirements for hundreds of millions of dollars in debt capital. And then you have lenders like Trinity Capital, Valley Bank using Finley as a command center for debt capital data, workflows, and analysis across all their transactions. So that's going to include fund finance, securities-based lending, syndicated loans, the full gamut.

So if you are on either side of the table here, you can learn more and request your demo today at finleycms.com. This is Business Breakdowns. Business Breakdowns is a series of conversations with investors and operators diving deep into a single business. For each business, we explore its history, its business model, its competitive advantages, and what makes it tick.

We believe every business has lessons and secrets that investors and operators can learn from, and we are here to bring them to you. To find more episodes of Breakdowns, check out joincolossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts, podcast guests, their employers, or affiliates may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

I'm Zach Fuss, and today we are breaking down Caspi, a leading financial technology company based in Kazakhstan, best known for its super app.

Kaspi plays a central role in the lives of millions of Kazakh citizens by offering a seamless ecosystem that combines payments and digital wallets, e-commerce and financial services. Its success is often attributed to its ability to solve pain points specific to the Kazakh market, such as low financial inclusion and limited access to traditional banking infrastructure.

This approach has made Caspi not just a technology company, but an integral part of the country's economic fabric. To truly appreciate the story of Caspi, you must also learn the story of Kazakhstan, a country of 20 million people with a GDP of $260 billion.

The country is rich in natural resources as one of the world's largest producers of uranium and a significant producer of oil as a member of OPEC+. It also notably shares a border with both China and Russia. To break down Caspi, I'm joined by the company's CEO and co-founder, Mikhail Lamsadik.

Over the past 23 years, Mihail helped to transform Caspi from a small traditional retail bank to the dominant platform it is today. He ultimately brought Caspi public on the London Stock Exchange in 2020, and more recently listed the business on the Nasdaq Exchange in the US. In this conversation, we will explore how Caspi achieved its dominant market position, its innovative approach to combining e-commerce, digital payments, and financial services, and the critical role it plays in the region.

We'll also discuss the unique challenges of building a super app in an emerging market, how Caspian differentiates itself from the global tech giants, and the company's ambitions to expand its footprint beyond its current borders. Despite its somewhat unsung existence as a public company, Caspian is a business today facilitating nearly $80 billion in payment volumes,

with 13.4 million monthly active users, an e-commerce marketplace with $10 billion in GMV, and a financial services business originating $20 billion in financing volumes. It notably does this all profitably with a bottom line growing at a 20% clip. We hope you enjoy this conversation.

So I'm so happy today to be joined by Mikhail, who is the co-founder and CEO of what is probably the largest company that many North American investors may have never heard of, despite its most recent listing. It's a $20 billion market cap fintech super app business called Caspi.

I thought to kick things off, Mikhail, it'd be very helpful to just learn more about you and your history with the business that you've now been involved with since 2007. So we'll kick things off there and I appreciate you coming on.

Thank you for having me. I'm a CEO and co-founder of Gatsby KZ, which is one of the largest fintech companies listed on Nasdaq. So we're about 20 billion market cap and quite a lot of people throw around this super app terminology, but actually Gatsby itself, it's one of the most unique mobile apps

in the world with an extremely wide range of different services from e-commerce and grocery to the travel and the government services and the payments, fintech, financial services, but actually also how the whole business model has been validated and developed over the course of the years. So we've started from financial services. We, back in 2007, 2008, and for a couple of years, we've been building up really fast

probably the best financial services in Kazakhstan, and then went into the payments,

Then we went into e-commerce. Then we went into travel, into grocery, into B2B payments, government services, and everything is in the app. Kazakhstan is about 20 million people country. Monthly active users of our app is probably about a bit over 14 million. So 20 million people country, 40 million monthly users. And out of our monthly users,

67% of those are visiting our app daily, which makes Gaspi KZ probably the second most engaged app in the world after WeChat.

Pretty much the whole life of our users is in our app, and we're extremely proud with the quality of the services we are providing both to the merchants and to the consumers. And importantly, as you mentioned, we listed on NASDAQ in January of this year, and yeah, we're targeting net income in excess of $2 billion in this year, the growth rate about 25%.

Later in the conversation, we'll go into your decision to list in the US, but I'm curious to learn more. I mean, you grew up in a country of less than 4 million people, and now you're running what is one of the most financially successful fintech super app type businesses in the world. How did you kind of go from Georgia to running and owning this business?

I myself am from Georgia, which is not the U.S. Georgia, it's the country in the Caucasus. I've built there the consulting and auditing company. When I was a student in the business college, left for HBS in 2000, my company became part of the, of Ernst & Young. Now it's a leading auditing firm in the country and the region.

And after HBS, I couldn't really imagine myself working in a big corporate setting or consulting or investment banking. Really wanted to run the business and build something truly exceptional. As a result, I've decided to go for venture capital private equity, which it's the closest industry can get to

actually running your business. So even though you're not running this on a daily basis, but you are building the business together with the entrepreneurs and the management teams of your university companies. I went to the former Soviet Union region in a private equity firm, Bering Vostok Private Equity, which is the largest private equity firm in the region and behind some of the most exciting companies, including tech. I made a portrait briefly after joining the firm.

And then we made an investment in Kazakhstan, which was one of the, just the traditional bank, pretty much top 10, 15 at that time. And then in 2007, the crisis came and the banking sector had its own really significant challenges, like

Across the region, pretty much the third of the banking sector actually went bust because it depended very much on the wholesale funding for capital markets. And though this funding really dried up,

because it was the biggest investment of the fund. At that time, I decided to step in together with my partner today and co-founder of Caspi and with the support of a managing partner and the founder of Barry Worshtog, my colleague, Slov Kim, who is a co-founder of Caspi. We decided, go ahead, step in. And this is how we started to build up Caspi pretty much from those times on.

I feel like for our audience, it's impossible to really appreciate the breadth and depth of your services and the strength of your economic model without understanding the country which it operates. So perhaps you can just kind of set the stage. I think you had told us that there's 20 million people. I think you have monthly actives of 14. And so what is it that drives the economy? How big is it? Where is the growth factors?

Well, Kazakhstan is a very dynamic country. So about 20 million people, as we discussed. So GDP about 260 plus billion, about 14,000 GDP per capita.

On the one hand, it's one of the resource-rich countries in the world. So you have some of the largest deposits of oil and gas and uranium and copper and so on and so forth. So it's really, really impressive table of all the natural resources that country has. On the other hand, it's a huge as a territory. It's the one country size of several European countries combined together. So it's really vast.

Tokayev, the president of the country, and he is very much focused on promoting and building the modern Kazakhstan and digital and innovations agenda has been very important. And as a result, when you are talking about digital reforms and innovations and all those innovations really touching every part of the citizen's life, transformation in Kazakhstan for

from cash economy to cashless had been mind-blowing, really. We have been driving this transformation. If you take perspective from 2016, plus minus a year, sort of the penetration of the cashless transactions was maybe around 10, 15%. So basically 85, 90% was cash. And now it's totally opposite. So now 90% of all the transactions are cashless. And

People rarely carry cash in their pockets and the transactions are flowing through the mobile applications and Gatsby has been driving this change and this change has been a remarkable achievement.

Government services we probably will touch a bit later, but that I think is just an incredible transformation. I mean, the consumers from the screen of their mobile phone, they can issue driving licenses, they can file marriage application, they can get birth certificates for kids. They have all the digital documents, passport, driving license in the mobile application. They can register business.

They can register, move car ownership. I can basically sell you a car in Kazakhstan over having coffee with you in the evening. We changed the ownership straight in the mobile application. And clearly this has been a success. On the one hand, the government being innovation focused and believer in the technology and enabler for companies like Caspi to work together with the government to make those services accessible.

accessible to the population, to the regular citizens. And actually it has no shortages for the mobile applications. And so, unfortunately, when I talk about Caspi, it's a big company, at least in the North, 20 billion market cap and then around 2 billion net income. So we believe we still deserve a bigger valuation, but this advantage we have compared to many other companies is you are using Apple products.

You are using, you are ordering on Amazon yourself. And that is an incredible advantage because you can actually experience the products in the companies which you invest. And Caspi is companies in Kazakhstan. Most of our investors have not really been using our products. And that's a disadvantage which we have, but we're working hard to explain our business model and the business in general to our investors.

Absolutely. I mean, I know we'll talk about it later, but the decision to list in the U.S. and broaden the audience to understand and appreciate what you've built, hopefully will drive that story home. Now that we have a sense of where you came from and the country you're operating in, obviously, 2007, the business was a middling bank. Today, it has a breadth and range of services that are pretty much incomparable on a global scale. How did you kind of evolve from a financial institution to a technology company?

and introduce all the services that you now offer to your customers today.

The foundation of our business is really the mission which we have formulated, which is to improve people's lives by developing world-class mobile services. When we were developing initially, everybody at that time was talking how the banks will be challenged by the tech companies and the banks will die and so on and so forth. And I'm not the banker myself. All our guys on the team are not the bankers actually. So we're

We were always intrigued by building the great company which improves people's lives and not the great bank or whatever. So in our mission, even if you notice, we don't have any industry, we don't have any specific service mentioned because we are going into every vertical where we feel like we can make a difference, improve people's lives by making those services

faster, cheaper, more convenient with the world class user experience and design and the data behind it. So we said, okay, we are in the financial services because that's where we started. But why we cannot become a tech company? Why we cannot launch mobile services? And therefore, we started our first business

The platform which we've built was the payments, and the payment has a huge range of different services from QR payments and P2P like Venmo and Cash App to B2B payments for merchants and so on and so forth. And then we went into e-commerce. We started e-commerce with electronics predominantly, but now we have pretty much everything. We're like Amazon of Kazakhstan in a sense that we have a wide range of the services, different verticals we deliver across the country.

and we're growing really fast. Then we entered travel. So it's almost like booking. Our consumers can buy airline tickets, railway tickets. By the way, every business we entered, we had no experience. And so that was our competitive advantage because we were looking to doing things completely differently. And we didn't have a weight of experience on our shoulders where we're coming up with different ways of building those businesses and user experience specifically. Then we have entered another big vertical, which is

e-grocery. And now we are the largest e-grocery on the market growing fast, almost 100% year over year. Also made profitable, which is quite unique by global standards. In just 12 months in this business, it was already net income positive for our company. And on top of it, apart from developing the consumer-driven front-end services through the mobile application, we also developed

and mobile app for merchants. And if you ask me what was one of the most important decisions apart from the mission and really focusing on the quality of services is and desire to become more than just financial service in the tech is actually a super app.

At the time when we were developing the super app idea, most of the companies around the world actually were strong believers in the single purpose mobile applications. And we basically said that our consumers don't need to download multiple mobile apps.

consumers would enjoy to have a single login. Gives them the seamless access to all the services and it can be actually one application. And it can be also one brand, by the way, because it's Caspi. And everybody was saying, we're crazy because people are not going to do savings account and kitchen accessories through the same brand. Also, technology-wise, it had its own challenges, how you basically develop the single mobile application. And at that time, we said our mission is to improve people's life

Our mission is to make the user's life easier, not our life easier. And we have to crack this. We have to develop super app because that's the best way for consumers to access our services. And I think that was really probably the most important business model related decision, which we have taken. And so you now have these three pillars of your business, payments, marketplace, fintech, and I guess government services is kind of an adjacency and maybe a quasi fourth pillar.

You highlighted a really wide range of services. And I guess the pushback would be, well, how do you do everything in such an exceptional manner? And so I'm curious when you think about kind of the makeup of your team and how you implement all these incredible services, how are you guys able to effectively develop and launch all these different products? I mean, our foundation for our success, probably the most important is really

the culture that we have developed. And it starts from our mission statement. For most of the companies, they would make the statements, but that statement is usually in the office on the wall and it's not taken into actually everyday work in the company. In case of Caspi, we're guided by this principle. So

On the one hand, the mission is to improve people's lives, but actually we measure. So we measure every aspect of our business and we wanted to measure how successfully we implement our mission. And one of the measurements which we decided to use in our daily work is a net promoter score. Basically, we wanted to measure, okay, our mission is to improve people's lives because it's a super business model.

One service relates to another, you know, it's like building blocks, they support each other. So as a result, we had to measure happiness of our consumers. And that's why we decided to use the Net Promoter Score. Net Promoter Score basically gives us ability to measure whether the life of our consumers with our products is better than without our products. So we ask simple question.

whether you would recommend the service to your friends or family, and then we get evaluated. But most importantly, we took this to another extreme. So the companies would measure Net Promoter Score and also would use it as a marketing statement rather than actually being guided by it. In our case, we are organized around the products. We're a product company pretty much. And every product has directly disposable individual, directly disposable team,

And we would be researching or asking the question roughly to half a million consumers every month. Those consumers will give us a feedback why they love the product or why they don't like the product and they would like us to improve. And if we get feedback that consumer is looking for improvements, we would record this call, we'll call consumer back, ask can they explain in their own words what they would like us to improve, and then our product teams

would listen to those calls and they will come up with the improvements, what we call product release, which means to be a limited number of simple features, which improves the product based on the consumer feedback. And those are actual calls of the consumers, their own simple words. It's not like a smart business terminology, but because we're organized around the products and directed as possible individuals and the teams, those teams have a full responsibility for the product

the product to actually excite the consumer. And this is how we're achieving, I mean, some of our products have unimaginable net promoter score, like some of our e-commerce services, for example, have net promoter score of 90. If the net promoter score is negative, which by the way, happened only once in our history, when the net promoter score is negative, that means we're not improving consumers' life and therefore we're

We either have to drastically change or we kill the product. And the best example of in a real life how we made this decision is over 10 years ago, we had a credit card. And the credit card had a negative net promoter score. Actually, in most of the markets, credit card doesn't have extraordinary net promoter score. And that was about a third of our business, a couple hundred million dollar contribution to our net income. And we sort of decided to kill that product because

Because we believed what we call this was a bad money. We didn't improve the life of our consumers. And this product didn't have a chance for us to turn it into the Net Promoter positive product. So this is just an example of how we make those decisions by actually being guided by the mission and by the quality of our products. And yeah, if you would come in the environment of Caspi and you sit on those product meetings and you meet the guys there,

you will realize to what extreme we have taken the consumer feedback. And this is fueling our never-ending waves of innovation. Every year, we end up two or three new businesses, basically.

I'd love to spend a little bit of time on each of the verticals just to effectively educate our audience on what exactly it means. So your payments business, as an example, can you illustrate to the audience how your consumer and the businesses are interacting with your app in facilitating payments?

The foundation of our payments business is basically payment network, also P2P payments, bill payments, and the B2B payments. So P2P payments, this is something which is very similar to Cash App or Venmo.

in the US, actually. So we've built this incredible functionality where consumers can wire money to friends and family commission-free, and money hits accounts instantly. So this has been a driver of the mobile payments in the country and digitalization and actually transition from cash to cashless society. The second foundational product or the service we have is actually Payments Network. So the Payments Network is...

Simple. It's like Apple Pay, for example. So our consumers would go to the store or restaurant or anywhere with the merchant. From our mobile app, you scan the QR code and you make the payment. The biggest difference from many other payment services is actually that we are the closed loop. We control the entire value experience from the merchant to the consumer or from consumer to merchant.

And both are our customers and they have accounts and money moves within our system. So when we built this business, we have priced it at the cheapest rates on the market and with this intermediated payment networks like Visa and MasterCard. And yeah, so we are the leading payment network now on the market. B2B payments was a service which we developed with the convenience stores in mind. So basically Coca-Cola or others,

would bring their goods to the convenience store and the person in the convenience store that can be a cashier or a manager can settle invoices seamlessly for these deliveries. Now we're launching the range of B2B services of this functionality. To simplify it basically, we're Cash App, Venmo, Visa, MasterCard, QR payments, invoice settlement platforms for both merchants and consumers. And now we're targeted to move money freely with minimum barriers.

between consumers and merchants.

If you kind of think about building your stack of commerce, you start with payments, you facilitate peer-to-peer payments, the ability to buy in physical locations, and then you introduce on top of that the marketplace business, which I believe is largely third-party, a lot like perhaps Amazon in the U.S. or Alibaba in China. It's 8 million monthly actives. It's, I believe, the fastest growing of the platforms. You introduce tons of new innovative products like e-commerce,

eat grocery and travel. And I believe you do automobiles as well. How do you go from effectively a small parcel business to doing all these different services? And then I love to kind of double click on grocery just because historically that's such a difficult industry and you guys seem to have cracked the code there.

We launched the e-commerce back in 2014. So that's the foundation of our marketplace. This is, as you mentioned, this is Alibaba, Amazon, Coupang in Korea type of marketplace when basically the sellers sell and buyers buy. And obviously we deliver through our logistic platform. The idea of the marketplace actually was quite simple. I was trying to buy a computer once.

And I went to the store and I selected the model, but then the salesperson told me that they're opening another store tomorrow and I can get the discount at a good price if I go tomorrow to the opening. So I went to another store for the opening next day. Unfortunately, they didn't have that model. I had to go back to the initial store. In the initial store, they said they don't have a new, but they can take it one which was new.

on the display, which I said, no, I would like to have a new. So they've sent me to the third store and then I would have to buy a printer. They didn't have a printer. So I basically navigated for like three or four days, navigated between the stores, trying to buy the printer and the computer, which I selected for myself. And then on top of it, I

I wasn't really sure what type of model I could actually buy and I didn't have reviews and so on and so forth. We sort of decided why not we put together a single location where you not only buy actually the items and select them, but you can actually compare the prices from different merchants. So our marketplace is a combination, it's structuring around the product, it's a combination of different sellers presenting their items, but also their multiple offers

per item from different sellers. And that was a super convenient way for consumers to select and buy items at the good prices. Then this is how we started. We started from electronics, actually, but now we have expanded into every single vertical. We have in excess of 8 million SKUs on our platform. The biggest difference, actually,

compared to many others, we're not competing with the retailers. We are actually helping them. Most of our retail partners are not just pure online stores. Actually, they are offline retailers and we give them technology. We give them platform. They can trade across the country through our logistics. They can advertise through our advertising services. They can get working capitalists

capital finance from our fintech unit. They can get payment services from our payments platform. So we are actually helping retail to be more efficient, but also grow and trade across the country. Probably the biggest difference maybe of Gatsby to players like Amazon, for example. We're not competing with retail. We're helping them. And we are also making sure that we're pricing our products very fairly so that we're successful only if our merchants are successful.

So we have built this business, which is now the largest e-commerce platform and with a very wide range of delivery services, which are pretty much free. And most of the items delivered same day or next day.

I think you have a pretty interesting value prop in the lockers that you guys use, as well as your decision to go into grocery. I'd love to kind of hear about how those aspects of the e-commerce business work and what motivated you to launch some of these more challenging aspects of consumer retail. Well, our business is not just only about the innovation. So we have incredible management team, which

It has these incredible qualities of execution. So the grocery business is very large. So we're talking about 16, 17 billion size of the market, which is largely fragmented. So we decided to go into grocery because the market is very attractive. The one thing which I have not mentioned, we never had the luxury to have abundance of money around. We always...

who had access to limited financial resources. So therefore, everything we've done, we have always done with the final goal of exciting consumers, but also generating and building the profitable business. So we went into grocery because market is really large. One of the few verticals which we haven't actually entered at that time, we focused on building the business, which has about 10,000 SKUs. So if you think about Hippo market, which is the largest force, usually they would have 20,000, 25,000 SKUs.

But all this data-driven selection of SKUs, which we deliver for free, most of our orders, we can deliver within three hours. So it's a very fast delivery. And when we entered this business, we actually made it profitable within the first 12 months. So within the first 12 months, our net income margin on that business was about 6%, 7%.

which is by work standards, attractive net income margin. And this is in the environment where we're still growing two times. We're still investing into building the dark stores, which will operate the delivery. So we have become profitable at the moment, which we're still investing and we're still growing, which is very unusual. And the reason behind this is because we've built a business for weekly purchases. The average ticket size is about $30, which is basically a weekly purchase.

It's not a quick commerce. And as you know, the larger is the size of the ticket, the better are the economics of any e-commerce business. And we have been able to achieve that within the 12 months, which is really testament to our management team. And now Grocery is about 5% of our total marketplace GMV, which becoming very meaningful for us and the fastest growing.

And so the last pillar of your business being FinTech in some ways complements the payments and e-commerce business and providing buy now, pay later services as well as other financing to small and medium sized businesses. I'd love to hear how the FinTech business works with the other verticals and then the competitive advantages that you guys bring to market in providing those services.

Competitive advantages that we have are, I think they're the same really across all our businesses, which means quality of the services has to be extraordinarily high. So if the quality of the service is not of a required standard, we will kill that service.

So the fintech side of things, we're developing products which are fully online and fully digital. For example, on our buy now, pay later products, we are making 99.9% of decisions in a second. On our cost of risk is less than 2%.

To the listeners, understanding the fintech and the financial services, this is like world-class cost of risk, which means basically that the decisions we're making, we're making them fast, but actually because it's data-driven, because it's fully mobile and online digital, therefore we're making the right decision in terms of the amounts, what type of product, how much money at what price, when, etc.

consumers can receive from us. And very importantly, consumers don't like banks, basically. In our case, we enjoy a very high net promoter score. It's around 50, 60 on our financial products, but also that actually says that we are improving people's lives by providing the financial services which they can access fully digitally. The combination of marketplace and the fintech, I think, is an incredibly powerful combination.

Many other companies across the world are now using that combination as well, because you are, by providing BNPL products, you are increasing the wallet size of your consumers, and therefore consumers can buy more. You have to make sure you're responsible in terms of managing the in-depthness of your consumers, and that has to be reflected in a cost of risk.

being low but it actually fuels the growth of the marketplaces fuels gmv this is why you know in recent years you could see like apple experimenting with by the now pay later products mercato libre is running it starting as a third party than now but now running its fintech financing offering

through its own platforms. And then if you extend the financial products from your consumers to your merchants, then you have this huge network effects. So for example, you can provide the working capital to your merchants and working capital means your merchants can buy more items and they are selling more items with you. So they are growing, their sales are growing, therefore your GMV is growing. So combined together from consumer side, you increase the

size of the wallet from the merchant side, you actually decrease their stock and inventory. And then you can provide some other products along the way, which basically drives their business sales and therefore contributes to the market as well.

And so you have a business that's still growing very quickly, but you kind of face the economic reality that of the 20 million people in Kazakhstan, 15 or so, approaching 15 use the app on a monthly basis, 20 billion or $80 billion plus is moving through your payments network. And so penetration is increasingly high. Where are the opportunities to grow, I guess, within Kazakhstan first? And then how do you kind of evaluate

opportunities to expand beyond the borders of your host country. You should think about us as number of users or number of merchants is almost like the foundation of our growth. Over 14 million users and over 7,000 merchants that we have

This is actually our asset. It's not a limitation of our growth. This is why we're growing very fast. Our revenue, for example, of our marketplace, we're guiding to grow 65% this year. We have 14 million happy consumers. We have merchants which are happy with our services. And now we are innovating on back of this. We're going after services and the retail. So the services

Retail is when you can deliver items to your consumers, so it's basically a retail industry. And then the services, it's the travel or barber shops. You can go as small as plumbers and electricians. So the service industry and retail industry are those two big industries, which is our target. Then we're just going vertical after vertical. We've started from electronics, expanded into different verticals. We went into travel, went into grocery,

And now we're going into other verticals deeper. The bull are forecasted to grow about 14% annually during the next five years.

And with our technology and with our brand, I believe we'll be growing faster than the industries growing themselves. Those industries are underpenetrated, so therefore they will grow at 14% annually for the next five years. And we'll grow higher than that. So that's our whole market strategy. And we'll just continue going vertical by vertical. We shouldn't forget, by the way, to talk about the government services because this is really cool. And I think Kazakhstan is stand out on that.

The international side of things, about a month ago, we have announced that we've signed an agreement to buy 65% from the founders of one of the largest marketplaces in Turkey. Turkey is 85 million plus country. There is a lot of similarities between Kazakhstan and Turkey.

We're very excited just to take our market to 100 million people through that acquisition. And Hepsi is a great company for us, which has fit both culturally, just because they're driving, they're focused on the quality of the services, but also the fact that they know e-commerce, but also have inspirations to launch other services. And Caspi can bring a lot of expertise. You bring up a great point in government services in that providing things that in much of the developed world are actually still done

manually, whether it's getting a marriage license or reapplying for a motor vehicle license. You guys have figured out a way to accelerate the digitization of those services, further entrenching yourself in your core customer base. I'd love to learn more about how that came to be.

Well, I mean, when you're driven by the mission of improving people's lives, you're really looking for what you can do better, what you can improve in the consumers. And I think that was something which roughly about three years ago, on the one hand, the

President Tokayev communicating the digital agenda and strong belief that technology improves people's lives. And at the same time, the government agencies and the departments that were basically very keen to distribute as many of the government services as possible to the citizens. And then in our case, we started working together with the different government agencies, digitalizing, launching the services, and

access to the services throughout the mobile application. And today, this is just mind-blowing, really. I mean, I think this is very unique to Kazakhstan, and Kazakhstan doesn't get enough credit for what has been done. You can register car ownership. You can issue driving license fully online in the mobile app. You take your photo straight from the screen of the mobile app. Usually, you hate your first photo. You usually hate your signature, so you take it as many times as you want.

And then basically it sends online for validation approval to the government agencies. And then you will get your driving license basically in the mobile app. You have also digital documents. You can get married, the birth certificates. You can file tax reports. You can actually pay taxes. You can register your business. So there's a wide range of the government services which is now accessed.

We don't have any exclusivity around those services. So we work together with the government agencies, but the services can be launched actually through other mobile applications as well. It's just the way that our design user experience works. So convenient that most of the people use government services through our mobile application.

I know you speak a lot about the importance of your company's culture. I thought it'd be nice to learn about how you created that culture that you're so proud of and something that maybe embodies it and makes the team so excited to show up at Caspi and continue to iterate and come up with new products and drive them forward. What is it like to work at Caspi? The important piece of our success, and I think the way that you can develop in

in the company, what we're doing is extreme simplification. For example, we want to launch the product. If we want to launch a product, the beginning, we know that this product, it needs to have like four features.

Some companies, what they would do is they would launch the product with those four features from day one. In case of Gatsby, that's different. Extreme simplification means we'll really work really hard to understand which out of those four features is the most important feature. And then we will launch the product with this feature, which is important, but it's also simple and it's a minimum. And then during the next, let's say, three or four quarters, we'll

we will add the new feature every quarter. So in actual 12 months, you do have a product with those four features. But we start from extremely simple product. And what this gives to us is very simple positive effects. Number one, simple product means less people needed to launch the product. Simple product means that your support functions, people that are actually operate those for

products and run the operations, they also can start from a simple feature. Therefore, they need less people. On the consumer side, consumer gets the one feature. Therefore, they have easier time understanding the product, engaging into the product, using this product. They have fewer questions and we also need fewer education for the consumers because again, everything around digital, mobile, online, it still requires educating the consumers. As a result,

We start with a fewer people and our team becomes more experienced over the course of the 12 months. Consumers become educated over the course of 12 months and we continue being a lean organization. As a result, this also generates profitability because you need less people to serve, operate those products. So if you think about the product teams, we would have about 50 plus minus the 50 product teams across the company.

We've built this product by product, feature by feature, sort of team by team. From today's perspective, you have these 50 products. And if they are launching at least one feature every quarter, you have these 50 new features from the product teams, which basically shows you at a very high speed of the innovation. But actually, we started...

many years ago from first product and the first teaching. But now the 50 teams, they innovate at such a rate that it's really becoming a very strong competitive advantage over speed of innovation. Some of the services we launched, we started from financial services, but then we launched the payments and then we launched e-commerce. Then we launched travel. We launched government services. We launched the grocery.

And all those services individually constantly innovate. Just take a travel. So when we launched the travel, we had no experience in travel whatsoever, zero. And we launched during the COVID. So everybody was pulling out of the travel. And we said, this is a great time for us to invest and build up the capabilities. And the travel, we started with airline tickets. Then we added train tickets. A bit over a year ago, we added vacation packages. And now we have

pipeline of the new ideas around the travel. So just gives an example of how simplicity actually drives the efficiency, profitability and customer satisfaction.

You have these network effects and effectively a flywheel in place with your home country. You produce an excess of $2 billion in net income, which gives you the opportunity to redeploy capital. You have a modest balance sheet. So that means that you guys have a privilege to either acquire or buy. As you noted, you made the decision recently to

enter into Turkey, given some of the complementary nature of their economy and the opportunity there. I'd love to learn more how you guys kind of evaluate that decision, build versus buy, and how you think about capital allocation broadly. We have been looking for acquisition for the opportunities to grow outside of Kazakhstan for quite some time. Yeah, we looked at the numerous alternatives and opportunities, and then we are really happy and

and excited about the opportunity to acquire Capsiburata. The company has a lot of similarities with Caspi. Its founder led, focused on the quality of the products. Actually EBITDA positive, which is very unusual. So it's one of the largest e-commerce companies

but also it's not burning the money. So they're mindful of how they grow. They want to grow sustainably. It's a single brand company, which basically Hepsi Burata is the main brand. They care deeply about the merchants and about consumers and about their brand themselves. And then Turkey itself is a very exciting market because 85 billion people. And we believe that we can take Hepsi Burata to another level and we can introduce the services for merchants and for consumers in Turkey, which...

will be very innovative, but also create a lot of value. You guys have made the recent decision to move your listing from London to NASDAQ. I'm curious the motivation for that. And then also how you build your relationship with an investor base in the US or maybe in North America that perhaps doesn't have the ability to use the product, but understands kind of the strength of the business model. And I'd love to learn more about that decision and the value that it's created for your business.

We were listed on London Stock Exchange in 2020, and then

We decided to list on Nasdaq in 2024, January, and then we delisted from London Stock Exchange. What we went for is really the liquidity. So the thesis before was more theoretical in a sense that before us, there was no example of this being done. But from our data now, from today's perspective, you can see that this decision was right and successful. So the liquidity of our stock increased almost 20 times.

on NASDAQ compared to the London Stock Exchange. And we were actually the only company which were on both London Stock Exchange and NASDAQ. So you could almost see the difference, which now can be factual, not just theoretical, before we actually did it.

The U.S. is a very exciting market because the companies which are similar to us and our business model, most of them are really listed in the U.S. Take Mercatolibre, for example, and Coupang and others. They are listed in the U.S. Just an investor base, I think, is right for our business model.

We still need to educate the investors and tell about our business with them because it's quite unique. I think there are very few companies, if you combine together PayPal, Amazon, Affirm, whatever, Klarna, Square, Block, and it's in a single mobile application. So we're still educating the investor base, but we do have a long-term strategy, so we're not in a hurry.

So now that you've had the opportunity to interact with more North American investors, now you're under the magnifying glass of a U.S. listing. Have there been any lessons learned or things that have surprised you?

I mean, I wouldn't say it's lessons, but I think we are working on the two fronts. So on the one hand, we tell about our company and we tell our story and the business model and make sure we execute and deliver and create the value for shareholders. So that's something which is very important, but also actually equally important for us

is that we're telling story of Kazakhstan. And because we are the company which was developed in Kazakhstan, we are promoting the country and the investment climate and how dynamic is the country and its development. And we're working basically for both ends. That's very, very important.

In terms of risks, what does competition look like for your business? Are there lots of local competitors that are looking at your guys' markets in different ways? Are there global competitors with the success of businesses like WeChat who may be kind of encroaching upon your territory? You're going into new territories and facing new competition. It seems like obviously you guys started attacking an addressable market that was

super rich and there was a ton of opportunity. And I wonder, given your success, if it's attracted competition to your business.

Every business we have launched, there were competitors. When we started to build up our financial services, for example, I mean, there were 30 plus backs. Everybody had the CENIX account. Everybody had the consumer loan. Everybody had a prepaid card and there were transfer businesses. So we just built the products with the focus not on the financial metrics, but actually the one thing which I should have said, our product guys don't have financial metrics.

they don't have financial KPIs. And most of the people in the company don't have financial KPIs like profit or revenue. The most important KPI is the quality of the product. And this is what makes us stand out. So when we launched financial services, there were 30 plus banks. When we launched the payment network, there was a Visa and Mastercard. And when we launched e-commerce, we had

bunch of the e-commerce players. We had AliExpress of Alibaba, for example, or we had regional players. Today, we successfully compete with the Chinese marketplaces like Tamu as well. So every business we launched, there was a competition. Because we are focused so much on the quality of the product, we're having building blocks.

The speed of innovation is mind-blowing. When you are the company with such an innovation pace, what is your most important competitive advantage? The reason why you succeed is because you have consumers that love your products. So if you have your first product, which consumers love,

and you have a very large scale, reasonable scale of the consumer engagement, then every new product you launch, consumers will use it because they already are really happy with your existing product. And every time we launch our services, we have incredible adoption rates. It took us two years to become the largest travel agency on the market. Now the same is happening with the grocery, where the biggest grocery

on the market in a city where we started, and we started just about a bit over a year ago. E-commerce, the same. Our consumers are doing job for us. So they're doing the marketing for us. They're telling to each other about the products. And this is the most important competitive advantage. We are the company which is in the 20 million people market. We have in excess of 14 million monthly users. Two-thirds of those users

visit our mobile application daily. So this basically tells you that we have the services which drive consumer engagement. The reason why we drive consumer engagement, because they're very high quality. In a 20 million people market, for your business to achieve the scale of Caspi, wouldn't be able to achieve it if we would have 1 million consumers which don't like our products.

simply would not be able to be where we are. We care about every consumer, we care about every merchant, and our dedication to quality is the number one priority and the strategic focus for the company. Our concluding question is generally one about lessons learned in building your own business and then lessons that can be applied to other businesses or prospective investments. But I thought

We do this one a little bit differently, just given we have the privilege of having a co-founder and CEO of a large and rapidly growing business. I guess my question for you is from new investors to the story that are just learning about Caspi, despite the fact that it's been a almost 20 year overnight success in the making, what is it that you want them to take away? What do you want people to kind of dig deeper on? What is the message for both the investor and operator universe in learning more about the Caspi story?

The most important ingredients of Gatsby's business model, the way we sort of operate, is actually our focus on the quality of our products. When we say that we are operating in 20 million people country and 14 million use our product,

and every product we launch is growing. We have a track record of innovation, so we will continue innovating. We have a strong pipeline of new ideas, but the foundation of our business is that we are incredibly focused on the consumer experience and the quality of the products. And I think that's the biggest asset and actually the biggest competitive advantage that we have. And another important point is the super-high business model. I wouldn't say it's undervalued, but I think it has so much potential.

I am blown away when I'm talking to different companies and leaders from different markets. And when I'm explaining the way that SuperApp operates, we are leading example how you can have everything in a one mobile application. People will order everything

eggs for our grocery in the same application, as well as they open the savings account and they pay taxes. They get consumer loan, car loan, and they make the payments for their electricity utility bill. So the super app itself is a very powerful business model. And I'm sure in the future, there'll be more and more realization that actually single applications with the multiple services

if executed correctly with a focus on customer service, will deliver a lot of value to both shareholders, but most importantly, consumers and users.

And just to ask one follow up on that, I guess I'm curious if you kind of look across the world, there are obviously examples of companies like yours that have been successful in trying to build a super app. But there also have been a lot of markets that have been more difficult for the super app model to take hold. What do you think it is that's unique about Kazakhstan and your current situation that has allowed the business to effectively introduce such a powerful business model into the economy?

again, is the focus of the quality of the services. Again, if you think about Super App, the network effects are very important. The one service promotes another, but actually they're also working the opposite way. So if your product quality is bad,

you will continue losing consumers. Consumers are not gonna use your product. So I think what has been in other markets where the super apps or the multiple services in the application have not been successful, have not been profitable is because there is no foundational products which consumers love. And if consumers don't love your products,

In 20 million people country, if 1 million consumers are not happy with our service, that's it. We're dead. People are not going to use our next one. We're just dead in 20 million. We had no other choice, but we had to produce the world-class high quality products, which our consumers love. And this is why it's in our DNA. And this is why we're focused on the quality so much because

It was life and death question. But when you are in a bigger market, let's say you have 300 million people in front of you, you're showing this growth of the users. You can lose 1 million here, you can use 1 million there, but you're showing the growth. But at some point when the growth stops, continue losing your users and you will be wasting your money on the marketing because if you lose consumer, it's 10 times more expensive to bring him back. And this is why in our case, quality of the service results

in the value and results in the profitability and healthy growth. And we cannot afford to have unhappy consumers in a 20 million people country. This is how we have succeeded. But in the bigger markets, people substitute. Basically, they just must, with a high growth, mask equality of the product.

I think that's the biggest difference why we were successful and now we would like to help to bring this type of culture and combine it together with Hepsi Burata in Turkey. But in other markets, this is why the companies were unsuccessful. I think people talk about quality of the services, but they don't follow the metrics. They are in love with their products. They are losing consumers. They are spending marketing dollars to bring those consumers back. And at some point when the growth stops on the consumer acquisition, all this

all the negatives of this type of negative network effects, what I call them, you start to see them as soon as they grow stops. Thank you so much for joining us to tell the story of Caspi.

Where we have the opportunity to do an interview of a co-founder and CEO of a large and growing and successful business. And we look forward to watching the success of the next 15, 20 years unfold. Hopefully just like the last 15 to 20 have. Well, thank you, Zach, for having me. And we're super excited about our business. And if anyone wants to learn even more, Harvard Business School wrote two cases about us, which I think really talk about our product development and corporate culture. Thank you for having me.

To find more episodes of Breakdowns ranging from Costco to Visa to Moderna, or to sign up for our weekly summary, check out JoinColossus.com. That's J-O-I-N-C-O-L-O-S-S-U-S dot com.