As the lockdown forced people to look for investments that could be done conveniently from home, entrepreneurs grabbed the opportunity to launch more investment tech start-ups in 2020.
According to Traxn, this increase in the number of new start-ups in the investment tech space is in contrast to the scenario in the fin-tech segment and the overall Indian tech start-up space, where the number of start-ups founded in 2020 was the lowest in the last six years.
Investment tech start-ups are a subset of fin-tech start-ups, include all companies that provide software tools and solutions to facilitate investing. They also include companies that provide financial data and related analytics.
Surge in new firms
In 2020, the pandemic and the subsequent lockdown created significant hurdles for entrepreneurs who were looking to start up. From regulatory approvals to running a physical office to meeting potential customers, all aspects of business got impacted. Plus, the initial months of last year saw a significant slowdown in funding. These sentiments reflected in the dip in the overall number of start-ups founded in the country last year.
However, in the investment tech space, 105 new start-ups were founded in 2020 in India as against 88 in 2019 and 103 in 2018, making it the highest figure in the last three years. Other sub-sectors such as remittance (includes companies that provide cross-border money transfer solutions to consumers and enterprises) saw six start-ups founded in 2020 as against five in 2019 and two in 2018.
The number of new forex tech start-ups (comprising companies that provide tech solutions, such as internet-first platforms and software for the forex market, including currency exchange and currency investments among others) also rose to six in 2020 as against five in 2019 and four in 2018, and internet first healthcare financing platforms (includes companies that provide the healthcare-focused financing option investment option, research platforms, etc) increased to two new start-ups last year as against one in 2019. But the surge in the number of new start-ups in 2020, as can be seen, was the highest in the investment tech segment.
Convenience takes precedence
Sandeep Mishra, Vice-President, Investments and Research, Zephyr Peacock India, said that Covid-19 has accelerated customer behaviour around alternative routes to convenient investment, leading to more and more dynamic entrepreneurs entering the field to offer new, innovative solutions in the investment tech area.
“As fin-tech disruptions penetrate deeper into the financial services industry, traditional wealth management/investment tech is emerging as the immediate opportunity for disruption. The pandemic, coupled with lowering interest rates, has propelled retail investors to look for better form, advice and solutions of investment, thus creating an uncatered opportunity for entrepreneurs to cash in,” Mishra added.
In the last six years, 2016 saw the highest number of investment tech start-ups founded in India (203). After a gradual decline in the last three years, 2020 again saw a surge in the number of new start-ups in the space. Among the investment tech start-ups founded last year are GrowFix (an investment platform for gold-backed debt assets and Siply (an app-based micro-savings and investment platform for individuals and enterprises) that raised funding last month.
“Though the last six years did see a significant number of start-ups being launched, the adoption has picked up considerably owing to the pandemic. Initially, the market was trying to understand what had happened, but with people staying at homes in 2020 and not being allowed to go out, they didn’t much have much choice either. They started experimenting with tech-oriented solutions for their financial and related requirements,” said Ankur Mittal, Co-founder, Inflection Point Ventures, adding that with newer start-ups being more prepared than the previous ones, investors have been experiencing better platforms from time to time.
“One such idea is virtual KYC documentation which doesn’t require the in-person signature of the customer anymore. This not only adds value to the entire process but saves a lot of time as well, making on-boarding customers extremely seamless,” Mittal noted.