Wealthtech startups: VCs drive wealthtech investments as stock market surge ignites HNI boom

The expansion of the stock markets and the generation of wealth in the country are opening up new opportunities for companies focused on the sector. wealth tech startups. AND venture capital firms They are investing millions of dollars to support these nascent businesses.

Data from market intelligence platform Tracxn shows that investors have collectively poured around $228 million into Indian wealthtech startups over the past two years. So far in 2024, the sector has already attracted investments worth around $70 million.

The opportunity is huge, industry experts said, citing the growing number of high-net-worth individuals (HNI) in the country.

“Currently, there are around 10 lakh people with a net worth of more than Rs 10 crore. By 2035, this number should reach one crore, and you will need a few lakh relationship managers to cater to this base, which will be very difficult. Only technology “We can solve this,” said Nitin Jain, CEO of Neo Group, a Mumbai-based financial services and asset management platform.

Unlike traditional wealth management services offered by banks, wealth technology companies use data analytics and the latest technologies to deliver personalized services. Investment strategies at a fraction of the cost.

There are two groups of wealth technology startups: those pursuing the premium wealth management opportunity, such as Neo Group, Centricity, Angel One Wealth and Dezerv; and those that are building Fixed income products and platforms for alternatives asset classessuch as Wint Wealth, Stable Money and Grip Invest.

Both are aimed primarily at the new class of wealthy Indians.

Centricity is developing a technology solution for the ultra-high net worth individual segment. Currently, this segment is served entirely through physical channels, but in the future, 70-80% of services will be delivered through digital channels, said Manu Awasthy, CEO of the Gurgaon-based company.

“Banks, which were catering to this segment, have mostly scaled back their operations due to declining margins and labor costs… This space will be filled by wealth technology startups,” Awasthy said.

Centricity is close to closing a $15 million funding round as Neo Group recently raised around $47 million in a new round of equity financing led by Japanese lender MUFG Bank and others.

Fixed income platforms

Fixed-income founders believe that as consumers chase the futures and options (F&O) market and end up reporting losses, many will move into fixed-income assets and that is also a big opportunity.

“In the last five to seven years, many investors, especially first-time investors, have entered the equity and mutual fund market as the market was growing at that time. But in the last few years, people have also realised that it is not always an upward path as you go through multiple cycles for these investments and you cannot have 100% exposure to equity and mutual funds,” said Saurabh Jain, Co-founder, Stable Money.

Jain said regulators are also highlighting the risks and losses faced by investors amid rising investments in the futures and options (F&O) market. This, he believes, will drive a shift towards more thoughtful portfolio allocation.

Investors become active

“The pace of new wealth creation happening in the country is exciting, and the pace of old wealth creation that has been going on so far and is under the advisory umbrella in one form or another is unprecedented,” said Shuvi Shrivastava, partner at venture capital firm Lightspeed India Partners, which has invested in stable money. “When the entire category is growing so fast, I think it is a strong indication that there was a lot of white space and latent demand which is now gaining momentum.”

Shrivastava said that in light of the growing demand for different asset classes and greater sophistication of investments in general, companies can leverage more diverse monetization models to build healthier businesses. As these companies mature, larger funding rounds will follow, he added.

Similarly, Vaas Bhaskar, director of Elevation Capital, which has invested in Dezerv along with Premji Invest, Z47 and AccelerateHe said he expects the wealth technology sector to be a revenue source of more than $50 billion by 2030, as most business models have significant snowballing and operating leverage characteristics that make them attractive.

“Startups have performed well in capturing significant shares of brokerage and distribution revenues. Secondly, in the advisory space, start-ups will also play a significant role in creating a fairly nascent retail market, aided by multiple favourable factors such as changing consumer behaviour and regulatory pressure,” he said.

Bhaskar further noted that the manufacturing and product management group remains the largest revenue pool in this segment, where more and more new-generation companies, particularly those with experience and brand name in the wealth space, will start to play and gain significant share from the incumbents.