Thursday, June 20, 2024

Fintech Meetup to invest in 5-7 such startups annually; founder says fintechs must focus on sustainable, profitable business

Could you describe the path you have taken from the beginning until now?

Before resigning from my job at VISA, where I worked on driving financial inclusion, I had intended to embark on a road journey from Mumbai to London. However, circumstances led me to travel across India to meet with fintech startup founders in 2018. At that time, the fintech industry was rapidly emerging as a challenger, which fuelled my passion to explore the field further.

Now in 2023, The Fintech Meetup has enjoyed five years of tremendous success. Over this period, we have engaged with more than 1500 fintech startups, invested in 17, collaborated with over 20 financial institutions on innovation programmes, and organized multiple initiatives to promote digital financial literacy and raise awareness about digital payments, all through Fintech Yatra

Apart from facilitating funding, what other functions do you perform to assist startups?
Fintech startups seek our collaboration for three primary reasons. Firstly, our knowledge capital is unparalleled due to our vast experience interacting with numerous fintech startups and our background in financial services. We leverage this expertise to guide startups on matters related to their market, product, and business model.

Secondly, our network capital is invaluable. We work closely with various financial institutions such as banks, NBFCs, insurers, wealth management firms, and others. By understanding these institutions’ fintech requirements, we facilitate connectivity between startups and financial institutions based on their use cases and merit.

Lastly, our venture capital is a significant asset. Our YAN Angel Fund invests in fintech startups, and we collaborate with other venture investors who see us as a trusted originator. In addition to our knowledge and network capital, we offer startups additional value to help them achieve their objectives.

What is your primary source of revenue? 

We generate our main revenue through Fintech Yatra, a platform where prominent financial institutions and venture investors collaborate with us to advance their innovative initiatives. Our secondary revenue stream is through exits, but since we are still early in the cycle, we have only experienced one partial exit from our entire portfolio.

What is your process for evaluating a fintech startup?

At The Fintech Meetup, we utilize a multi-faceted approach when evaluating fintech startups. In the early-stage segment, we prioritize the founder’s experience and the team’s ability to execute their idea effectively. We seek out compelling ideas where we can be hands-on operators in the market, assist with business development, and help startups secure additional rounds of funding. If we believe that we cannot provide this level of support, we typically do not invest.

In addition to assessing the founding team, we also consider other essential factors such as market size, profit margins, and the potential for startups to help financial institutions expand their revenue streams. These factors are critical in determining a fintech startup’s long-term viability and success. Ultimately, our objective is to identify promising startups that align with our investment philosophy and provide value to our network of financial institutions and investors.

What are your plans for the future? 

The Fintech Meetup has a clear vision of leading the fintech revolution in India and contributing significantly to the industry’s growth and development. To achieve this goal, our future plans revolve around catalysing India’s fintech ecosystem and fostering innovation. We are committed to exploring new ideas and strategies that can benefit all stakeholders in the ecosystem.

Our top priority is to invest in and support promising fintech startups, and we plan to invest in 5-7 such startups annually. We will provide them with the necessary resources and guidance to succeed, focusing on innovative solutions that address critical challenges in the financial services industry such as building financial infrastructure, B2B fintechs with SaaS models, cross-border payments, among others.

In addition to investment activities, we will continue to leverage our vast network of financial institutions and venture investors to facilitate partnerships and collaborations between fintech startups and traditional financial institutions. We believe that such collaborations are vital to driving innovation and expanding the reach of fintech solutions.

What are the challenges faced by fintech startups? 

Fintech startups encounter various challenges, including the search for suitable co-founders, hiring skilled tech and growth teams, navigating macroeconomic uncertainties, and adapting to changing regulatory requirements. Many of these challenges are not unique to fintech, but are common to all types of businesses and entrepreneurs.

How can a fintech startup outlast the VC winter? 

To survive the VC winter, fintech startups need to focus on creating a sustainable and profitable business that can scale efficiently. This involves building a business model that generates revenue and prioritizes profitability. Since founders typically secure funding for a 12-18 month roadmap, those who haven’t raised successive rounds after securing funds in mid-2021 may face a limited runway. Therefore, it is crucial for startups to avoid spending too much money on customer acquisition and unnecessary expenses. Instead, they should focus on optimizing unit economics and being prudent with their initial spending. By taking these steps, startups can increase their chances of long-term success.

What is the adoption rate of fintech? What is the future of the Indian fintech ecosystem?
The fintech adoption rate in India has shown significant progress in recent years, particularly with the successful implementation of the Unified Payments Interface (UPI) system. This has had a significant impact on expanding the reach of banking services to segments of the population that were previously unbanked.

Because of this rapid adoption of digital payments, financial institutions have been able to gather transaction data, leading to improvements in underwriting processes and better lending decisions. This has helped to enhance financial inclusion by providing credit to segments of the population that were previously underserved.

Moreover, there has been a steady increase in the adoption of fintech solutions such as online lending platforms, insurance aggregators, and digital payments, among others. The speed, convenience, and cost-effectiveness of these services have been the main drivers of their popularity among consumers.

The outlook for the Indian fintech ecosystem appears bright, with a growing number of tech-savvy consumers, increasing smartphone penetration, and the expansion of digital public infrastructure. Financial institutions are also collaborating with fintech startups to leverage their innovative technologies and services, resulting in the creation of new business models and revenue streams.

How is Fintech Yatra performing this year amidst the challenges faced by fintechs?

Fintech Yatra remains positive about its prospects despite the challenges faced by fintechs. Although uncertainty remains about the duration of the funding winter, the early stage fintech sector is still flourishing with numerous innovative ideas. Fintech Yatra has recently engaged with more than 250 fintech startups in Mumbai, Pune, Bangalore, Chennai, Hyderabad & Delhi, and plans to have an additional 100+ discussions in different regions of the country.

Moreover, the Indian fintech ecosystem has seen an increase in micro-VCs with a focus on fintech in the last two years. This year, Fintech Yatra has the support of a higher number of financial institutions and venture investors, making it the biggest event to date. As in previous years, Fintech Yatra is conducting digital payment and financial literacy sessions for women micro-entrepreneurs.

In terms of segments, Fintech Yatra has observed promising startups building solutions in areas such as lending against securities, infrastructure for wealth management firms, fintech in the cyber-security arena, infrastructure for lending, and supply chain finance, among others.

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