A slew of fintech startups offering investment options such as fixed deposits and gold are drawing steady venture capital funding buoyed by rising demand for safe-haven investment options by retail investors amid choppy market conditions.
Firms like Gullak and Stable Money are among those to have caught the eye of venture capitalists keen to back startups operating in the wider wealth management space.
While lack of regulatory clarity is a challenge for this sector, investors believe that a stable and scalable model will evolve and that these startups will benefit the most.
Gullak, which allows consumers to invest in digital gold, is in talks to secure a $5-6 million funding round, according to two people in the know.
Early-stage investment firm Chiratae Ventures is set to lead the round, they said. Lightspeed-backed Stable Money is closing a $20-25 million round led by the Nandan Nilekani-backed Fundamentum Partnership, according to one of the people quoted above. This follows on the fund raise in July 2024 raise, when the startup closed a $15 million round that was led by RTP Global.
The latest investment could push the valuation of Stable Money to around $130 million, the person said. Emailed queries to Gullak and Chiratae Ventures went unanswered. Stable Money did not want to comment on the story.
Challenges ahead
In a country where more than 15% of the household asset base of $10.7 trillion is in gold, startups believe a digital platform to help new-age Indians buy and save through this asset class will find traction. “Indian investors have a long-standing cultural affinity for gold and fixed deposits, viewing them as dependable assets. In times of market uncertainty, investors increase their allocation to these asset classes for capital preservation and financial security,” said Ashray Iyengar, principal, Elevation Capital.
One of the major challenges for digital gold is regulations. Since the Securities and Exchange Board of India (Sebi) asked registered platforms to not sell digital gold, there is a fear among industry insiders that there could be a regulatory crackdown in the space.
“There is no regulatory clarity around digital gold. There are issues around the chain of custody of the digital gold, and the audit trail of the actual gold that is being held in lockers,” said a senior industry executive on the condition of anonymity.
Joseph Sebastian of Blume Venture Advisors estimates that across multiple “alternative” investment platforms, the number of unique investors would be around 100,000, indicating that the market has limited penetration.
Also, startups need to figure out their economic models while offering low-margin products such as fixed deposits.
“The question here is what is the moat? Large fintechs with a bouquet of offerings are also “starting to provide” FDs as an investment option. So, what will help these startups with FD as the core product stand out,” Sebastian said.
Push and pull
While Indian consumers love safe investment options, financial institutions also want long-term deposits.
The industry executive quoted above pointed out that for banks trying to shore up deposits, fintechs are proving to be a good platform to acquire customers. Increasingly, banks are partnering with these startups to offer fixed deposits on their platforms.
“For digital gold the entry barrier is low because of lower KYC requirements, hence many consumers prefer it for small-ticket investments. The average investment in digital gold for the industry could be around Rs 500,” said the industry executive quoted above.
Also, products such as auto-investing a small amount of money every day into digital gold, which platforms such as Jar offer via UPI Auto Pay, is encouraging many consumers to save through this asset class.
Bengaluru-based Jar, which is the largest player in the digital gold space, was in talks with Prosus for a $50 million round but sources in the know said that the talks have fallen through.
Industry estimates suggest there could be around 20-25 million Indians who have invested in digital gold, with overall assets at around $300 million.
Overall, this is a new sector with the number of actively investing Indians growing steadily. While digital gold holdings are increasing 30% on-year in size, what remains to be seen is if these startups can create a niche, sticky user base.
Firms like Gullak and Stable Money are among those to have caught the eye of venture capitalists keen to back startups operating in the wider wealth management space.
While lack of regulatory clarity is a challenge for this sector, investors believe that a stable and scalable model will evolve and that these startups will benefit the most.
Gullak, which allows consumers to invest in digital gold, is in talks to secure a $5-6 million funding round, according to two people in the know.
Early-stage investment firm Chiratae Ventures is set to lead the round, they said. Lightspeed-backed Stable Money is closing a $20-25 million round led by the Nandan Nilekani-backed Fundamentum Partnership, according to one of the people quoted above. This follows on the fund raise in July 2024 raise, when the startup closed a $15 million round that was led by RTP Global.
The latest investment could push the valuation of Stable Money to around $130 million, the person said. Emailed queries to Gullak and Chiratae Ventures went unanswered. Stable Money did not want to comment on the story.
Challenges ahead
In a country where more than 15% of the household asset base of $10.7 trillion is in gold, startups believe a digital platform to help new-age Indians buy and save through this asset class will find traction. “Indian investors have a long-standing cultural affinity for gold and fixed deposits, viewing them as dependable assets. In times of market uncertainty, investors increase their allocation to these asset classes for capital preservation and financial security,” said Ashray Iyengar, principal, Elevation Capital.
One of the major challenges for digital gold is regulations. Since the Securities and Exchange Board of India (Sebi) asked registered platforms to not sell digital gold, there is a fear among industry insiders that there could be a regulatory crackdown in the space.
“There is no regulatory clarity around digital gold. There are issues around the chain of custody of the digital gold, and the audit trail of the actual gold that is being held in lockers,” said a senior industry executive on the condition of anonymity.
Joseph Sebastian of Blume Venture Advisors estimates that across multiple “alternative” investment platforms, the number of unique investors would be around 100,000, indicating that the market has limited penetration.
Also, startups need to figure out their economic models while offering low-margin products such as fixed deposits.
“The question here is what is the moat? Large fintechs with a bouquet of offerings are also “starting to provide” FDs as an investment option. So, what will help these startups with FD as the core product stand out,” Sebastian said.
Push and pull
While Indian consumers love safe investment options, financial institutions also want long-term deposits.
The industry executive quoted above pointed out that for banks trying to shore up deposits, fintechs are proving to be a good platform to acquire customers. Increasingly, banks are partnering with these startups to offer fixed deposits on their platforms.
“For digital gold the entry barrier is low because of lower KYC requirements, hence many consumers prefer it for small-ticket investments. The average investment in digital gold for the industry could be around Rs 500,” said the industry executive quoted above.
Also, products such as auto-investing a small amount of money every day into digital gold, which platforms such as Jar offer via UPI Auto Pay, is encouraging many consumers to save through this asset class.
Bengaluru-based Jar, which is the largest player in the digital gold space, was in talks with Prosus for a $50 million round but sources in the know said that the talks have fallen through.
Industry estimates suggest there could be around 20-25 million Indians who have invested in digital gold, with overall assets at around $300 million.
Overall, this is a new sector with the number of actively investing Indians growing steadily. While digital gold holdings are increasing 30% on-year in size, what remains to be seen is if these startups can create a niche, sticky user base.
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