Episode 18 – Fintech – What happened in Q3 CY21 and YTD21 fund raising, some ideas on path ahead for the sector
Indian Fintech startup scene is truly flying! Never a better time to raise funds. Here, in this episode, we take a look at what happened in 3rd Quarter of CY21 as well as CY21 for fintech raises.
Cred raising $251 mn at a valuation of $4.0 is talk of the town! Cred was valued at $2.2 billion just six months ago, when it raised $215 million in April, and $800 million less than a year ago, when it raised $80 million in November 2020.
Indian Fintech startup scene is truly flying! Never a better time to raise funds. Here, in this episode, we take a look at what happened in 3rd Quarter of CY21 as well as CY21 in terms of fintech raises. Interestingly, there are 1,084 funded fintechs in India, out of which, 250 have raised Series A and beyond, 139 have raised Series B and beyond, 74 have raised funds for Series C and beyond, while 37+ have raised funds at Series D and beyond.
Note – In case you are a fintech founder, looking to raise funds, I might be able to help. Reach out to abhishek@indiafintech.in. In case you are looking to invest in Indian Fintech, reach out. Would be happy to help. There are some amazing fintech players creating ecosystem plays and closing their rounds, with small allocations left. Great time to get in before they open up for larger, institutional rounds.
Indian FinTech investments and deals
Almost every investor I am meeting are taking a keen look at India to ensure their presence in the country’s rapidly growing consumer economy which is supported by enabling regulations that are geared towards ease of doing business and boosting investments. Within the macro India view, FinTech is not only a standalone sector that is lucrative considering the opportunity for ‘financialisation’ in India, but also addresses the larger issue of consumer internet platforms, which are digitising and formalising a fragmented and unorganised economy.
FinTech investments in India in 2021 have grown at a break neck pace. Till OCt 15th YDT21, investments worth $ 5.3 billion were recorded in the FinTech space, an increase of approximately >300% from USD 1.6 billion in 2020. Investments worth USD 2.4 billion for 53 closed deals were recorded in Q3 CY21 alone across various stages of investment.
In Q3 CY21, 28 firms raised early stage funds at an average fund raise size of $5.92 mn. Interestingly, growth rounds average value was at $8.2mn. PE stage growth rounds saw massive deals at average deal size $85 mn.
Source : Tracxn, Abhishek Kumar
Bangalore and NCR continues to remain the hotbed of startup and funding activites, with Bangalore and ~780 deals.
Interestingly, over the years, late stage funding, as seen below, has really taken off. CY21 will surpass CY20 and probably all other years, both in terms of overall fund raise as well as volume of fund raise in the Fintech industry. The average fund raise szes has icnerased both at early as well as late stage, indicating increased number of funds as well as ability and willingness to back big early on. Interesting times for the founders to think big early on.
The median seed round size has increased to $1.8M in 2021 YTD, compared to ~0.6Mn in the earlier years. For late stage, that has increased t ~$95mn from ~50mn!
Source: Tracxn
The most active investors in the seed stage are – Blume Ventures, Beenext, Matrix Partners, Brand Capital, Accion, 3one4 Capital, EMVC, Kae Capital, Traxcn Labs, Arkam Ventures.
The most active investors across growth stage are – Sequoia, Accel, Tiger, Elevation, Omidiyar, Inflexor, Chiratae, Flourish, Kalaari, Ribbit Capital, Lightspeed among others.
Some key happenings in the Fintech Fund space
InsurTech as an area saw increasing investor interest as the pandemic pushed up the demand for both health and life insurance policies and products. Several InsurTechs raised mid-sized VC or PE funding rounds, including Digit Insurance (approximately USD 217 million led by IIFL VC, Faering Capital, TVS Capital and Sequoia Capital India, among others), Onsurity (USD 16 million led by Whiteboard Capital, Quona Capital, Nexus Venture Partners and others) and RenewBuy (USD 10 million led by Evolvence).
Another key theme in Q3 CY21 was SME enablement and allied accounting products and services. In growth-stage deals, Khatabook raised USD 100 million (round led by Moore Strategic Ventures, Tribe Capital, B Capital, RTP Global, Sequoia Capital India and others) and FloBiz raised USD 31 million (round led by Whiteboard Capital, Think Investments, Sequoia Capital India, Elevation cap, among others). In early-stage deals, Chqbook raised USD 5.4 million (round led by Earlsfield Capital and Aavishkaar).
The ecosystem saw investments across the spectrum of business with investors showing renewed interest in companies operating in the segments of InsurTech, WealthTech, neobanks and financial technology enablers. Top FinTech investments (USD 100+ million rounds) of Q3 CY21 include Pine Labs’ USD 600 million, BharatPe’s USD 370 million, OfBusiness’s USD 207 and USD 160 million, Digit Insurance’s USD 217 million, Khatabook’s USD 100 million, and consumer internet group Prosus’s payment arm PayU’s acquisition of the Indian payment gateway service provider BillDesk for USD 4.7 billion.
Sequoia Capital, Tiger Global, Softbank, Falcon Edge, IIFL VC and 3one4 Capital were some of the active investors in late-/growth-stage investments (USD 30+ million rounds), and Blume Ventures, Elevation Capital and Matrix Partners India were most prominent in early-stage (<USD 30 million rounds) FinTech deal activity.
FinTech leaders in India are looking to seize new market opportunities, accelerate transformation and acquire capabilities to embrace both VC deals and mergers and acquisition (M&A). In one of the first marquee FinTech deals involving the acquiring of an incumbent, Groww, a full-stack wealth management service provider, acquired Indiabulls AMC in May 2021 for USD 23.3 million (approximately INR 175 crore).
Some key trends that I expect to see going forward
Fintech is here to stay and everyone involved in the ecosystem will grow. The India growth story has been decades in the making and some of the trends and development to watch out for would be:
With accelerated fund raise cycles, exits in India will increase, both in terms of IPOs and acquisitions. M&A activity is likely to grow considerably as corporates look to expand their capabilities and offerings and FinTechs look to scale up. Cross-border activity is also likely to be robust as FinTechs look to become global or regional leaders. I see bankers and PE firms making a killing in next 3-7 years time frame.
B2B services and capabilities for banking technology such as customer onboarding, credit evaluation, financial products issuance and distribution, and risk monitoring should become stronger. The impetus for both new-age consumer-technology platforms and incumbent service providers to make user experience seamless and ease the integration of financial services in user journeys and availability at point of sale (PoS) should prevail and adoption of embedded finance services is likely to gain traction.
Partnerships will be embraced by BigTechs and traditional banks will increase, as critical means of expanding their service offerings and leveraging their vast incumbent customer base. Recently, Amazon invested in Smallcase and Google entered into a partnership with Equitas Small Finance Bank for fixed deposit offerings
The unbanked and underbanked sections of society are significant areas of opportunity. For example, a number of FinTechs, including Neo Banks, BNPL players and others are working to become core players between individuals, micro, small and medium enterprises (MSMEs) and banking, insurance or wealth management offerings by innovating their customer acquisition strategies, enhancing last-mile reach and providing value-added banking services.
CredAvenue has started what I call the “Debt Revolution” in India and I see a lot of startups targeting sub segments here. Indian fixed income market is set to become large, which is desperately needed.
Hirings in Fintech Industry
Xpresslane is looking to hire a Sales and Marketing Head. Super interesting role with good equity on offer. Reach out to me on Abhishek@indiafintech.in and I will connect with the founders.
Antrepriz is looking to hire a Growth head. Reach out to me and will connect with the right person.
Finovate is looking for program managers in CEO’s office. Do reach out if you are interested
Kudos is hiring for a business analyst and a graphic designer. Reach out to either me or the founder, Pavitra here.
Latest news in the Fintech Industry
Policy Bazaar gets SEBI nod for Rs.6,000 Cr IPO
India's First AI Investment Advisory Startup Jarvis Invest Raises Over USD 1 Million in Pre-Series Funding by BNP Investments LLC
AuthBridge, India’s largest Authentication player has raised Series A investment from an Infinity Alternatives led investor group.
KreditBee, one of India’s leading digital lending platforms, announced that it has issued over 1,00,000 cards. Among the fintech players offering cards, KreditBee has become one of the fastest players in the country to cross the milestone, that is, within 60 days of its launch.
Do reach out for any feedback or suggestions or even general discussion on Fintech in India. Happy to hop on a quick call to discuss the same!