Sector cheers as investors pump Rs 1,245 crore into wealth management, lending, credit-services platforms and other allied services so far this year
After foodtech, it’s fintech that has now come to the focus of investors looking to back startups. Investments in financial technology firms, according to data from research firm VCCEdge, are at an all-time high. So far in 2016, investors have pumped in $186 million (1,245 crore) through two dozen deals in the segment, largely into wealth management, lending and credit-services platforms.
The frenzy with fintech is different from what it was for the food-tech segment last year when companies were taking barely a few months to go from Series-A to Series-B funding. Fund raising is not top priority for fintech companies -building business fundamental is -although inbound investor interest is huge. The trend cuts across both early stage fintech firms as well as those that have scaled up.
“Three investors have approached us but we are not looking for funds aggressively,” said Himanshu Kumar, founder of Angle Paisa, an online investment and fund-raising platform for startups. “We are focusing on developing our USP and strengthening internal systems and processes. Once I get funds, I will divert from my focus. We are not in a hurry and don’t want to face any sort of pressure to demonstrate growth.”
The 20-member team, which has helped two startups raise funds, is working on eight more deals.
“Global funds like Amadeus Capital and Ribbit Capital, which are particularly keen on fintech investments, are looking at more fintech opportunities in India,” said Devendra Agrawal, chief executive at boutique investment bank Dexter Capital, which has screened more than 60 fintech companies over the past year and half. “Investors’ understanding of different business models within fintech has improved significantly and people are convinced that fintech will be a large opportunity to pursue. However, there is a sense of caution within investors too, since very few companies, the likes of PolicyBazaar, have yet demonstrated scale in this segment.”
Anish Williams, CEO at digital payments startup TranServ , said he doesn’t want to be distracted by fund raising. “We are getting a lot of interest from investors across the world, in the profile of large private equity funds and venture capital firms with interest in fintech,” he said. “What we raised in April will last at least for the next two years and will be largely deployed across technology and people.”
TranServ had raised around $15 million from Micromax Informatics and IDFC Asset Management.
Fintech startups say most investors interested in them are those who understand this space, not the typical investor who chases ecommerce as the two segments are structurally very different. Also, while size of the target market and scaling up potential are the usual questions asked by investors, unit economics and operating profits are important aspects now. “Payments internationally is a very established business model and what is important is that investors interested in this segment are those who have had enough exposure in investing in financial services companies, banks and NBFCs, etc,” said Williams.
Source : The Economic Times (Delhi)