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Sumit Jain, Partner at Kalaari Capital, On FinTech, GDP Growth And Investments in 2017

Fin tech has been one of the key innovation areas with a lot of investment interest from early stage investors.

Whether it has been innovation in bitcoin or inclusion of artificial intelligence in education, India has an undercurrent of disruption settling in. In 2016, nearly every industry was predicted to be a billion-dollar market, with EdTech and FinTech being the precedents.

One of the most premiere venture capital firms of the nation Kalaari Capital, played a pivotal role in funding early stage startups, ranging from education to eCommerce.

Sumit Jain, Partner at Kalaari Capital, has had portfolio companies like Industrybuying, Superprofs, Triphobo, Vakil Search, Snapdeal, Robosoft, Embibe, Simplilearn, Magzter and Haptik. An alumnus of IIT Kharagpur and IIM Calcutta, Jain also worked as an investment banker at HSBC before joining Kalaari Capital. In this exclusive series with BW Disrupt, Sumit Jain talks about investments in 2017, rise of FinTech, GDP growth in India and India as a cashless economy.

In 2016, approximately $ 3.5 Bn was invested around the year with an average of 13 Mn invested per month. How do you predict the rate of investment in 2017?

I’m not sure if deals in 2016 were higher than 2015. However, 2017 may see an uptick in investment activity after the relative slowdown in 2016.

Do you think FinTech innovations will become more visible to investors as the idea of a cashless economy is emerging in India?

Fin tech has been one of the key innovation areas with a lot of investment interest from early stage investors. With cashless economy, the focus on FinTech will be even higher as startups now have a much larger canvas to operate on and regulatory tailwinds providing an unprecedented push.

According to you, which are the most common or most important business models for FinTech companies?

Fin tech in India has spawned a plethora of business models and use cases – lead generation for banking and insurance products, automation and digitization of banking transactions and customer care operations, peer to peer lending platform, closed and semi-open wallets with a variety of merchant integrations, unconventional credit scoring platforms for unbanked population etc.

What have been the effects of demonetisation on the Indian startup ecosystem?

While FinTech startups have seen a spike in adoption due to a massive intervention from the government, various startups have seen a temporary drop in business owing to either lack of currency with buyers or postponement of purchase intent due to short term currency and sentiment worries. We expect both FinTech and other digital economy startups to be long term benefactors from demonetisation.

What are your thoughts of physical-digital coexistence of the wallet for every Indian citizen?

This co-existance is here to stay. India’s cash to GDP ratio of about 12% is likely to go down significantly and the difference will be largely accounted for by digital wallets and plastic money, or traditional instruments like cheques and demand drafts.

With the demonization of Rs.500 and Rs.1000, will an influx of VC money and consequentially, a surrounding marketing push will lead to a surge in the FinTech industry?

Fin tech is already a highly relevant space within the startup and investment ecosystem. Demonetisation has merely spurred on the potential and adoption rate for various new age models within the space and will help India leapfrog the broad payments problem much faster than anticipated earlier.

Mark Twain mentioned, “History doesn't repeat itself, but it often rhymes”. Do you the surge of investments in Indian startups is an economic bubble or will it further soar?

The Indian startup space is still nascent with a lot of potential for disrupting various markets and creating positive impact in what is a fundamentally unstructured market. However, as is the nature of entrepreneurship and early stage investing, many of the startups will fail but the ones that succeed will create massive impact in driving the new economy.

In the next one decade, can you foresee scalability and economics of digital banking eclipsing over traditional banking in India? Can India become a cashless economy?

While digital banking will become commonplace, it is hard to imagine India becoming completely cashless in a decade given the geo-diversity, demographics, income levels and also the available infrastructure.

What is opinion about peer-to-peer lending business models in India? Is there any specific startup which comes to your focus to exemplify this business model?

It is early days for peer-to-peer lending in India and while there are a number of startups that have good initial validation, there are multiple friction points at the moment – regulations, trust, seamless execution, populating the double-sided platforms etc that need to be resolved before this becomes a large phenomenon.


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