– Navya Menon
Fintech leaders believe that the investors are sitting on a ‘lot of cash’ that they would like to deploy for productive use. Investors who are doing deals in days or weeks will take months or years for the coming deals.
Kalaari Capital’s MD Raju Rajesh categorically mentioned that the evaluation of a company or a sector and the opportunities should be similar during the good as well as bad times.
“Fintech is a good opportunity and investors should be thinking of opportunities ahead, especially the early-stage investors, who should anticipate what’s going to happen five years from now and worry less about the chaos that’s unfolding in the sector as of now,” he said.
“At Kalaari, I tried to keep my funds away from lending for many many years”. Rajesh shared his insights that Indians are still not used to unsecured lending. One either needs to have a good credit score, which lets banks lend to these customers, or they can borrow from their neighbors or a local lender who can knock on their door and collect the money.
“Lending is the easiest business anybody can do,” claims Rajesh as the narrative has to shift from those companies or founders who emphasise on building a large loan book to those who talk about risk management.
Who are you lending to? Can you collect that money? should be the questions that need to be addressed according to the Kalaari chief. He added that learnings have come and the market is becoming better and more mature to fund the next set of entrepreneurs.
Where is the fintech industry heading?
“Faster, cheaper and better- if one can do all three, they have a great product,” he believes.
Rajesh adds a caveat on the aspect of making the product cheaper. He compares it with e-commerce, which has been losing billions of dollars as the Indian market is taking longer to get educated. However, it is different for the financial services industry as one cannot play with someone’s money.
“Money is flowing not just from our fund to an entrepreneur. They are co-lending, they are borrowing outside. It’s a different cycle when it comes to fintech as compared to other industries. So you need to be a lot more prudent and you should get into transactions that are profitable as customer acquisition costs are really high,” adds Rajesh.
Lastly he adds that entrepreneurs who think through risks, unit economics and are making money on every transaction, those companies will get funded.
These are the excerpts from the virtual live discussion attended by Kalaari Capital’s Managing Director, Rajesh Raju; CEO and ED at Coverstack Sanjib Jha; and Prasana Lohar, CEO at Block Stack, moderated by Amol Dethe, Editor, ETBFSI.
The session was a precursor to the upcoming event, ETBFSI FinNext Summit.
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