As it steps up its investment in financial technology businesses in the area, Amazon Inc. has been boosting its fintech strategy in India, one of its largest markets after the United States. Smallcase, a fintech focusing on capital markets, announced on Tuesday that it has secured $40 million in a Series C round led by Faering Capital, valuing the company at about $200 million. As new investors in the firm, Amazon joined Premji Invest. Blume Ventures, Beenext, Sequoia Capital India, Arkam Ventures, and DSP Group are some of the existing investors on the table.
Amazon invested in its newly formed $250 million Smbhav Venture Fund, which the company disclosed in April.
Amazon has put $10 million into M1 Exchange, an invoice-based finance platform for small and medium businesses (SMEs).
“The deal has been explored from a pure funding perspective at present. On aspects of partnering for commercial distribution (of our products) through Amazon’s platform are future opportunities and a separate conversation. Nothing has been decided yet,” said Vasanth Kamath, founder, and chief executive officer.
Individuals familiar with the conversation told Mint that Amazon had invested close to $5 million in this fundraising.
Smallcase has now secured over $60 million in total funding, with Faering Capital’s Shroff joining the board of directors.
According to the firm, the cash obtained will be utilized to continue expanding the platform and diversification into other financial products such as mutual funds, bonds, and global stocks.
Smallcases is a six-year-old company that works with capital market participants (such brokerages, advisors, and digital wealth platforms) to offer easy and transparent investing solutions. Registered financial advisers, both persons, and companies build and manage model (or ready-made) portfolios of equities and exchange-traded funds (ETFs).
Kamath said, “At present, smallcase witnesses close to ₹1500 crore, being invested in stocks and ETFs through the platform on a monthly basis. We are now looking to offer a diversified portfolio to our users, while simultaneously working on integrations to launch mutual funds, bonds and global equities. Our mutual fund product should be ready for launch by the end of this year.”
Smallcase has quadrupled its user base to 3 million after raising $14 million in a Series B round in September 2020. The company is also establishing an offline distribution network, with a network of 150 on-the-ground direct agents.
Smallcase now collaborates with over 130 financial advisers to produce these’smallcases.’
It also collaborates with 12 brokerages to conduct trades and over 250 distribution partners to distribute smallcases.
“Globally, we have seen a trend of increased retail participation in equity markets and in India, smallcase is pioneering digital access for retail investors through their innovative products and channel partnerships. We are excited to lead the Series C round and partner with the entire smallcase team for their next phase of growth,” said Shroff, co-founder and managing director, Faering Capital.
“For large e-commerce majors, reach is important, and they continue expanding by following a partnership model. For fintech, it is e-commerce’s large reach which is lucrative. By nature, fintech commands the regulatory oversight of several regulators, which large e-commerce firms may try to avoid, and choose to either partner or invest in this category, rather than building these verticals out” said Asim Parashar, partner, PwC in India.
In India, Amazon has been spending heavily in its payments division, Amazon Pay. Since its debut in 2016, Amazon Pay has raised more than 5,280 crores in the financing, according to Mint. Amazon has invested almost Rs 2280 crore in Amazon Pay through three financing tranches since January 2020.
Shashank Verma, manager, Kearney, a management consultancy.
“Fintech is hard to ignore (for e-commerce majors) considering 29% of first-time Indian borrowers are coming through these channels. Almost 50% of all digital payments in India is driven by UPI and other wallet-like digital instruments,”