Kaun Banega Unicorn? 🤩🦄 (Part II)
You're going to love this if you're a Big B fan - Bachchan & Billion Dollars, both.
Hey there, fintech nerds! There are another two weeks until November but we've got a new piece for you already. 🥳
Like we promised, here's part II on India's fintech unicorns where we play -
With Part I of this blog we covered the journeys of India's existing fintech unicorns and saw what helped them earn the billion-dollar stamp. (Check it out here if you missed it!)
They say fintech years are like dog years and we couldn't agree more. The magnitude of new things happening in the industry every day is sometimes overwhelming yet equally exciting to keep up with. Given the tremendous growth, there's a lot of speculation around the future entrants of the unicorn club and how soon they'll get there.
With that view in mind, we set out to cherry-pick the soon-to-be-unicorns or 'soonicorns' of Indian fintech.
We began with some pretty simple screening rules in mind -
(a) The most funded fintechs in the country (above $100 million)
(b) Valuation multiple relative to funding
To then further establish the potential we looked at various qualitative characteristics of these fintechs in terms of performance, founding team & investors, growth trajectory and future plans. All in all, we'd say we narrowed down to a pretty strong team of contenders.
So, without further ado…
First up on the hot seat we have -
Navi Technologies - *ping* Add to Unicorn Cart
You probably won't be surprised to find that 7 of the 15 that made this soonicorns list were from the lending segment. The fact we quickly realised was that though lending fintechs have managed to get considerable funding it does not reflect as much in their valuations. Confusing, no? What we think this can be attributed to is the fact that most of these fintechs have equity as well as debt sources of capital. Hence, while their total funding amounts may be in impressive millions, the valuations are marginally higher or even lower in some cases.
Navi emerged as the new cool kid on the block with some big connections and bigger pockets. The fintech which was established in 2018 has raised a whopping $582 million and is already entering the ranks of the leading consumer lenders.
Here are our top 4 reasons why Navi is high up on this waitlist for India's unicorn club:
Strong Founding Team & Investor Backing
The first thing that created the buzz around Navi Technologies was one of its superstar founders - Sachin Bansal. Previously of Flipkart fame, Bansal took an exit off the Flipkart highway as Walmart zoomed in with its monster truck 77% stake in 2018. By selling off his 5.5% stake for $1 billion, he got the means to build the next unicorn in the pocket already, eh?
Why e-commerce to fintech, though? 🤔
Bansal's vision was to build Flipkart into the first $100 billion digital company, but sadly things didn't play out as planned. Post exit, shifting that digital big billion vision to the financial services space at a time when digital payments and lending was booming, seemed like a natural transition. The potential of 'Bharat' coupled with the underserved nature of financial services in this segment was like a straight-up out-of-boundary sixer from Sachin (literally & figuratively).
Out of the $582 million, Navi has raised in funding, almost 90% is from Sachin Bansal himself - talk about putting money where your mouth is. Other investors include the International Finance Corporation, Gaja Capital and HNIs from the financial services space. It's pretty evident that funding is something the startup will never have to worry about.
Now while it may already have all the fame and money before kickstarting, it can't be missed that you need some idea of how to operate a financial services company to start a new one. That's where the finance brains of the team steps in - co-founder Ankit Agarwal. Agarwal brings to the table over 10 years of experience in the field at stalwarts like Deutsche Bank & Bank of America. And remember those HNI investors we mentioned? Well, they also act in an advisory capacity to the fintech, acting as tailwinds to Bansal's aim of becoming a new generation HDFC Bank of India.
Potential of Target Market
'Bharat' or 'the next one billion' target market segment seems to be the pitch of every new startup these days - and rightly so. This market segment is widely lucrative and underserviced in most aspects. The smartphone and mobile data revolution brought on by the telecom segment has highlighted the opportunity that awaits. The only hurdle and a big one at that remains designing the right product and understanding the needs and habits of this market.
Due to Covid-19, the target market has shown a lot of credit demand from low-income groups due to layoffs and wealth erosion. Securing customer trust at such a time when most lenders had paused lending, is a strong plus point for the company. Building on this trust and understanding can very well lead the fintech on its own billion-dollar journey very soon.
Product Performance Since Launch
In May 2020, Navi started out with unsecured personal loans up to Rs. 5 Lakhs through a paperless process. Since then it has disbursed loans to 40000+ individuals with an average loan size between Rs 30000 to Rs 35000. This has led to the fintech becoming one of the top consumer lenders during the pandemic. A 130 crore loan book in 4 months is pretty impressive 🙌🏼
The startup is also testing out general insurance products which it plans to roll out at large soon. It also has its eyes set on the mutual funds segment and eventually full-stack banking in the future, which leads us to our next reason.
Expansion Strategy
Build or buy are the two extremes a company can strategize when it comes to growth. Navi clearly has gone the 'buy' way. It had a pretty diversified strategy from the get-go, with multiple acquisitions and investments up its sleeve -
#1 - Chaitanya Rural Intermediation Development Services (CRIDS) - the NBFC that was acquired to get started with Navi. Since Bansal was a fresh entrepreneur in the financial services space, he needed a pre-existing entity with a track record to aid in licensing plans.
#2 - DHFL General Insurance - for its insurance operations
#3 - Essel Mutual Funds - for its wealth management arm. This plan, however, has faced some hiccups, as the startup still hasn't gained regulatory approval to operate as an AMC. More on that here.
This acquisition spree has benefitted Navi with quite a boost in terms of establishing operations and getting licenses. And with all that cash in the pocket, why not put it to good use, right?
Navi's valuation currently stands at about $558 million, which came down from $660 million in Jan 2020. While that may be a concerning fact, the fintech is loaded with funds and a promising runway in front of it. With insurance and mutual funds operations to launch in the near future and the traction gained already, we'd bet it could be the unicorn club by 2022 at the latest.
CRED - There’s just no simple voice over like ‘CRED is almost a Unicorn’
Indian Fintechs are deeply in love with the idea of “The Next Billion”.
Every other fintech company wants to focus on capturing the uncaptured, serving the underserved, digitising the traditional and educating every single Indian to use the Digital Financial products.
Makes sense, right?
Who would not jump in this pool of market opportunity?
Well, Cred.
By now, there are hardly any Indians who have not heard of this name. But let’s see what Cred is.
Before we dig in, a small disclaimer: Everyone outside Cred is still just guessing their business model. 😏
We’re introducing you to the fintech startup who’s focusing on a niche community with honest and trustworthy individuals who pay credit bills at the stroke of 12 and have a credit score of 750+. That’s right. A community of people, who will probably be certified by the word “trust” once they get in!
When we were in kindergarten, our teacher used to give us a gold star every time we scored well in a test. That encouraged us to keep scoring well because we got rewarded.
This basic concept of life is what Cred is focusing on. Rewarding it’s customer for paying credit card bills on time, for encouraging them to keep doing so.
Simple drill, customers get reward points which they can use for claiming offers by Cred’s partner institutions. New offers every day attacked spot on, to the one weak point of every individual: Greed. It’s like you open Instagram every morning for new content.
Funny how basic life principles can drive the growth of a whole company.
In one of the interviews, Kunal Shah mentioned how he saw people walk out of a grocery store without any manual check, just by trusting them they’ll pay for what they owe. This trust is rare to find in India, but Mr Shah has surely started sailing the boat in the right direction.
Maybe we still can’t walk out of the grocery store, but what if Rolls Royce wants to find their potential clients? Cred just might be able to give them the perfect set of data.
Now that the ground’s well set, let’s talk some numbers.
Total Funding Received: $175.5 Million
Funding raised before launch (Yes, that’s a thing): $30 Million
Amount raised in just 365 days: $120Mn (This, when it was valued just around $500 Million)
It is a biggie.
Existing users: Around $3 Million
Growth strategy: Safely sponsored IPL, only to make it A HIT! Let’s accept it, none of us could get the tunes of Download Cred baby out of our heads!
But all said IPL traction is a recent one. What attracted the initial funds? Probably VC’s trust in the founder. What we wonder, isn’t it a little too much on the credibility?
Mo’ money, mo’ problems, eh?
But, wait for it. Cred is looking to raise mo’ money, and ab aapke screen par 1 crore ka question: Kya karega Cred itni Dhan Rashi ka?
Cred Unicorn banega. 😎
Considering the fact that Cred’s google search is at an all-time high post IPL, we assume they’ve been stacking up new users with their marketing strategy. So, one more round of funding is probably all it will take for Cred to wear the Unicorn horn.
For Cred, the only one crore question is: What about the users who have lakhs of unused reward points and are constantly disappointed by the offers on the platform? Hopefully, they’ll find the solution soon.
The one crore question for FintechFemme: what’s the business model, again?
Razorpay: Whatta Playa!
We had 18 days between our article on unicorns and soonicorns. In this short period, one of our soonicorn has already made it to the Unicorn list (Told ya’ moment for us): Razorpay!
Founded in 2014 by two IIT Roorkee fresh graduates, Harshil Mathur & Shashank Kumar, this startup has managed to wear the $1 billion badge right in the middle of the pandemic.
The founders started Razorpay for easing out the process of business payments by making it fully digital, but they ended up becoming one of the most sensational growth stories of the Indian startup ecosystem. Let’s have a look at how Razorpay kept sharpening its blades over years.
Swaagat hai aapka Razorpay ke Vikas katha me:
Pehla Padhaav: Digital Payments for Businesses.
Back in 2015, digital payments weren't as easy as it is in 2020. For us, digital payment is ordering a fresh hot cheese burst pizza, (sorry for the cravings we just gave you. 🍕) and paying the money via your delivery app. For us to be able to do this in 2 seconds, a much more complex process is undertaken. Razorpay realized the torment of integrating a full-fledged payment system for businesses and decided on creating an easy to integrate API (something that sends information back & forth between Razorpay and businesses).
While building this, they had the vision to make Razorpay “the only payment gateway you ever need” and by 2018, they achieved it very well. Let’s have a look at their Payment acceptance products:
Payment Gateway - regular PG product with easy API integrations
Payment Pages - custom automated receipts
Payment Links - social media friendly shareable links
Subscription - for an automated recurring transaction
Smart Collect - Automated Reconciliation using virtual accounts
Route - Directly split payments for vendor payouts
A large part of these products was launched in “Razorpay 2.0”, in the year of 2018.
By the end of 2018, Razorpay’s merchant base grew from 40k to 100k+.
All 2.0 products showed a growth of more than 4x in a year.
They also officially entered into Neo Banking and Lending business by the end of 2018.
Now those numbers already gave us a rosy hope of Razorpay’s unicorn league.
Doosra Padhaav: But, first Acquisition.
In 2019, Razorpay took the first step in acquisitions by acquiring ThirdWatch, an AI company which aimed at reducing return-to-order frauds of the e-commerce industry. This made Razorpay fully compliant and fraud-free, all set to take over the B2B payment space.
The second acquisition came surprisingly early in the same year when they acquired OPFIN, an HR tech company for businesses to streamline payroll processes.
By the end of 2019, Razorpay had served 960k+ businesses, collected payments from 149+ countries, and had over $3 Billion worth of payout volumes processed. Brownie points in the rosy hope account.
Aakhri Padhaav: Expansion of New Product Lines:
We mentioned Razorpay marking their existence in Neo Banking and Lending spaces, they did this by launching new products called “RazorpayX” and “Razorpay Capital”, respectively.
They have over 800,000 merchants onboarded on their platform at this moment, and if you thought the product stack of 2018 was impressive, you need to rethink.
RazorpayX brings in every aspect of business banking including:
Current Account facilities
Vendor Payments
Corporate Credit cards
Payroll management
This, bundled with insightful reports for each merchant to help understand their customers better.
Not resting at just banking, they entered the money-making business of lending by offering working capital loans and cash advances to MSMEs.
As per news sources, by raising $100 Million in 2020, they plan on expanding these products by acquiring or investing in relevant startups.
They claim to have seen 300% growth over the last few months, partially led by the accelerated pace of digital acceptance due to COVID. Also, according to an article by The Ken, the difference between transactions made by Razorpay’s closest competitor was 12x, which has reduced to only 4x in a year’s span. *slow claps* 👏
All rosy hopes points were debited in October 2020 when Razorpay won the Kaun Banega Unicorn round.
Digit Insurance - Dialing one billion *ring ring*
This one's definitely the very very sooooon soonicorn - as quick as the next funding round we'd wager.
Valued at $870 million, Digit is redesigning insurance for the digital generation.
This fintech was the idea of Kamesh Goyal, a veteran employee of Allianz Insurance since 1999. Strong founder - ✓ check.
With its launch in 2017, Digit quickly added up some remarkable achievements up its sleeve
It was one of the first online-only insurance providers and it was built fully on cloud ☁️💛
It started out with a capital base of Rs 350 crore, which was highest as per industry standards.🤑
It was a roadrunner in the insurance scape *beep beep* - by quickly launching products across 3 categories within a year of operations. 🏎
1.5 lakh customers in less than 4 months of operations. Hats off, Digit!
A quirky persona coupled with easy applications and an automated claims process has made Digit quite popular among the masses. In 3 years of operations, the insurtech has quickly surpassed the 7 million customers milestone in 2020. It also claims to have gained a 1.2% market share in the insurance segment of India, which may seem tiny but considering the sheer size of the segment, it definitely is not.
How Digit has managed to achieve all this in such a short timespan has a lot to with its partnership strategy. The fintech has a wide network of over 1500 partners, across various retail segments, through which it distributes its products. The multiplier effect at work leads to a big web of potential customers for Digit.
What also makes Digit a sure shot contender for the unicorn is its investors - the most prominent one being Canadian insurance incumbent Fairfax Financial Holdings. Chairman & CEO of Fairfax, Prem Watsa, took a 45% stake in the startup before it even launched! Later on, the company continued to invest in further funding rounds along with new investors like A91 Partners, Faering Capital and TVS Capital. At present Digit stands with $224 in its funding coffers with a 3.8x valuation.
We are pretty excited to see what headways the fintech makes in its next series. Rest assured we'll be cheering "U-ni-corn! U-ni-corn!" in the background. 🦄 🥳
Acko - From Bits to a Billion (eventually)
Another one from the Insurtech space, the first-ever digital insurer of India: Acko!
Everything about this company shouts out *SNAZZY*. Right from the UI, language and the ease of product use.
Let’s agree, the word insurance freaks us out largely because we fail to understand the industry terms. Most Indians largely depend on the LIC guy’s words for something as valuable as life. Where, for a fact, all we need to know is the premium amount, covered amount and when can we claim it. There is no need for extra chaos.
Acko came in as a digital-only insurance provider, one tap to insure, one tap to claim when things go wrong. Yep, that simple.
However, Acko is a General Insurance company and doesn’t insure your life yet.
They largely deal with 3 major categories as of now: Car Insurance, Bike Insurance and Health Insurance.
This sounds very vanilla for a fintech company, where’s the innovation?
For starters, Acko uses heavy technology for each of their processes, right from measuring the user monitoring time till the last end of providing them personalized insurance products as per their needs. In fact, the power of data and their technology is the secret sauce of their success.
Of the many fintechs who use voice-based assistants, only a few get a successful impact. Acko is from the few who hold Alexa traffic rank of 1173, in India.
They have successfully managed to issue over 650 million+ policies to over 60 million customers in just a span of 3 years.
Every time you book an OLA, you get an option to insure your ride for 1 rupee. That exactly is where we introduce you to the concept of contextual bit-sized Insurance policies, where Acko is the market leader. The small negligible amounts of premium you pay to insure something that’s short-lived or for one-time use.
If you choose to pay 1 rupee to OLA, your ride will be completely insured till the time you get out of your car. Smart, eh?
These low probability events being insured have many many more use cases. Acko partners with 20+ such companies including OLA, BookMyShow, Amazon, OYO, Zomato, Go Ibibo and many more.
Tip: Brag about this knowledge to your friends the next time you use these platforms 😉
For the road map, they plan on expanding their existing health insurance product post raising $60 Million, just a month back.
This is timed perfectly with the government's intense push for digitising India’s health care segment via “National Digital Health Mission”.
Acko is one of the companies who has decided to support this mission by volunteering to help with technology and product.
All this bundled up forms a glorious path for Acko to be a part of our soonicorn list.
By the way, we spotted two weird similarities between Acko and Cred:
Founders of both startups raised exactly $30 Million before the launch.
Both startups are sponsors in IPL 2020.
This next set of fintechs is what we initially termed as the 'wobbly ones' - unsure if they'd make it to the final cut, but also not completely convinced to rule them out
Capital Float(-ing in there)
A well oiled tech-based lending machine, Capital Float is one of the top SME oriented fintechs in the country. It was founded in 2013 by two Stanford graduates and is currently valued at somewhere around $500 million.
What makes it capable of a shot at a billion-dollar valuation though?
Well, it is one of the largest operation co-lending models in the country, which contributes to 40% of its overall operations. This allows the fintech healthy risk management.
A tech-driven end-to-end digital lending approach, built using robust & proprietary ML models. More automation > less resources spent > quicker turnaround.
A 500,000 strong customer base with a loan book of Rs 1300 crore and a monthly run rate of Rs 100 crore.
Expansion into consumer lending - Partnership with e-commerce giant Amazon for checkout financing & acquisition of Walnut Finance for personal loans in 2018.
The market opportunity for Capital Float is huge both in MSME lending as well as from consumer demands for personal loans.
Given these points, one might say Capital Float has a sure shot entry into the unicorn club, but peer comparison with lending fintechs doesn't paint much of a promising picture. Also, the fact that Indian fintech has yet to see a unicorn emerge from the lending segment given that it's the most active segment after payments is a bit of a speed bump.
It's still too early to call when, but lending fintechs will surely make it to unicorn status soon enough as the market matures. What will be interesting to see is which one of them makes it first.
Our take on the top three has to go to - Navi, Cred & Capital Float 🏆
Khatabook - Inka Time Aayega
We’ve been talking a lot about the efforts made by Fintechs to digitise finance spaces like payments, lending, insurance and personal finance. However, we often forget one of the most chaotic and messiest aspects of Finance: Accounting.
When you think about digital innovations in accounting, you think Khatabook.
To give you a brief, Khatabook lets you manage your business and personal ledger completely digital, and also gives payment reminders to your vendors.
This company is a little less than 2 years old, have a look at some numbers:
Total Recorded transactions: 5 Lakh Crore+
Businesses using Khatabook: 1 crore + (that’s 1/6th of the total Indian MSME’s, already)
Presence:10,000+ cities/towns in India
Recent Valuation: $300 million, already!
Total Funds Raised: ~$175 million
Not only this, Khatabook is backed by some serious investor names including YCombinator, Sequoia Capital, Hummingbird, GGV, Falcon Edge and the big man, Tencent.
Oh, also Angel Investors like Snapdeal’s Kunal Bahl and Rohit Bansal, Kunal Shah, Amrish Rau and the cricket star MSD himself.
Oh, boy!
You categorise it as wobbly, are you sure?
Wobbly lock kiya jaye, computer ji.
Khatabook surely is a big, big hit. It probably went viral faster than Corona by onboarding 26k merchants in just one month of launch. But, one important number we missed out on was revenue. Any guesses?
Slim to none, definitely less than $1Mn. Grab your tine violin. 🥺
Their app is completely free to download and use to its full extent. Why?
Mostly because MSME owners in India are newbies to tech products and would’ve never paid for something that handles the books that they worship in Diwali. What drove 1 crore merchants of Khatabook is the fact that mobile penetration boosted after Jio and to the kirana store, this free simple product was magic back then.
Their user base is what they can leverage for figuring out revenue streams. Ads and lending being two areas Khatabook is turning their face towards. They have applied for an NBFC license and that’s where we see a silver lining for Khatabook as a unicorn.
This article has left us with a thought, is lending the only major way to make revenue in the Fintech space?
That’s a wrap for Kaun Banega Unicorn. Although Razorpay won the game already, we believe in all of them. Hope you liked this little game of ours, make your friends have some fun too. Like and share the soonicorn list to have your own “told ya” moment 😉
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Also, write to us if you have some facts about your own soonicorn fintechs, we’re excited to hear more!