White Venture Capital

In India's fintech ecosystem, there is a saying that all roads lead to lending. There are at least 3,085 recognised startups operating in India fintech. You cannot charge customers in payments, and are limited in how much you can charge merchants. In wealth or PFM, only few people are willing to pay subscription fees for services, other than for transaction based services (brokers etc.). Fintechs eventually need to find revenues through lending. India is credit starved, and there is never ending loan demand where people will pay for taking loans. So if all fintechs eventually become lenders, how do we differentiate them? There are many types of loans. Corporate vs SMB vs retail loans. Secured vs unsecured loans. But there is somewhat the same construct in all these. There are: Interest charged Cost of capital (and availability and source of capital) Net interest margins Non-performing assets Operating costs relative to loans (CAC, cost of origination, collection, overheads etc.) Tenure Ticket size Take rates The revenue of the fintech will be a function of the take rates and AUM of the loan book. The take rate is a function of the other construct of the loan. Hence the first thing investors see is the AUM and take rates, followed by the other constructs, to see whether it is consistent and improving. These fintechs typically have their core business in other segments, and loans become a revenue driver. Hence we will need to understand the advantages that the core business can provide in terms of pushing the eventual loan product. I.e. what is their unfair advantage These are the general questions that I ask myself whenever I meet a fintech aspiring to lend: What is the CAC of the fintech? How sticky are their customers? (How do they own their customers) What is their quality of their customers? What is their current MAU?  In terms of interface, how smoothly can they integrate loans in? How do they think about their product roadmap such that customers will have a higher propensity to take loans? (what is their core product, would their customers actually look towards them to take loans?) Do they have additional data points that can help in credit scoring? Do they have any leverage on their customers to ensure repayment of loans? Have they done gradual KYC for their core product, such that loan onboarding is fast and seamless? How does providing loans tie into their overall vision?  (Is offering loans a way to make revenue such that they can continue building towards a non-lending or composite vision? Or is lending their ultimate goal?) To stand out against all other fintechs, especially in loans, the core product a fintech need to have is the ability to acquire customers cheaply, very interesting proposition that keeps customer coming back onto the app, have a seamless interface to add on loan products and have a clear understanding of their customers to structure the most compelling loan products that fit their needs. #india #fintech

The Founders Mindset Recently an Asian Bank had a full day tech outage. You wonder how could that be happening in todays time. The reality is that banks which have been around for some time have legacy technology. And then you ask, why wouldn't they change it? Comes down to the "founders mindset". When its your company you want to fix it perfect and also for the long term. However, when you re doing a job, you tend to kick the can down the road. Why would you take up the massive job of over hauling the architecture when you could apply band-aid and keep the lights on? The thinking is always short term if you don't have the founder mindset in the company. Many startups end up giving titles to people as "Founders" (although they aren't). What they really should be saying is that this person has the "founders mindset". These are the people who think that the company belongs to them and every action they take, reflects it. Find the people who have the founders mindset.

Many startup ideas are great stand alone businesses. They might not immediately attract high valuations (& hence funding). These businesses get derailed by thinking about valuations & funding ahead of revenues. Focus on the first 10 crores of organic revenue. Valuation will follow

It’s just dawning on Indian Fintech that maybe the bankers weren’t slow and rigid after all. They were just meticulous and meeting RBI’s regulations.

Attention fintech founders! Apply for the Global Fintech Festival investment pitches before the deadline tomorrow. Don't miss this chance to gain exposure and secure funding for your groundbreaking ideas!