wealthtech startups: VCs fire up wealthtech investments as stock market surge ignites HNI boom

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

The opportunity is huge, industry insiders said, citing the rapidly increasing number of high net-worth individuals (HNIs) in the country.

ETtech

“Currently, there are around 10 lakh people with 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 serve this base, which is going to be very difficult. Only technology can solve this,” said Nitin Jain, managing director of Neo Group, a Mumbai-based asset management and financial services platform.

Unlike the traditional wealth management services offered by banks, wealthtech firms use data analytics and latest technologies to provide personalised investment strategies at a fraction of the cost.

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There are two sets of wealthtech startups: those looking at the premium wealth management opportunity, such as Neo Group, Centricity, Angel One Wealth and Dezerv; and those building fixed income products and platforms for alternative asset classes, like Wint Wealth, Stable Money and Grip Invest.

Both are mainly targeting the new class of rich Indians.

Centricity is building a tech-first solution for the ultra-high-net-worth segment. At present, this segment is fully served through physical channels, but going forward, 70-80% of the services will be done via digital channels and Centricity wants to drive that change.

“Banks, which were catering to this segment, have mostly scaled down their operations because of shrinking margins and manpower cost… This space will be taken over by wealthtech startups,” said a senior executive at a wealthtech firm.

Centricity is about to close a $15-million funding round while Neo Group recently raised around $47 million in a fresh equity funding round 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 towards fixed income assets and that is a big opportunity too.

“In the last five to seven years, a lot of investors, especially first-time investors, have gotten into stocks and mutual funds because the market was growing at that point in time. But in the last few years, people have also realised that it’s not always the journey upwards as you will go through multiple cycles for these investments, and you cannot have 100% exposure to stocks and mutual funds,” said Saurabh Jain, cofounder of Stable Money.

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

Investors getting active

“The pace of new wealth creation that is happening in the country is exciting as well as the pace of old wealth that has existed so far coming under the advisory umbrella in some shape or form is something quite unprecedented,” said Shuvi Shrivastava, partner at venture capital firm Lightspeed India Partners, which has invested in Stable Money. “When the whole category is growing so fast, I think that is a strong indication that there were a lot of white spaces and latent demand that is now picking up.”

With a growing appetite for different asset classes and higher investing sophistication in general, companies can leverage more diverse monetisation models to build healthier businesses, Shrivastava said. As these companies mature, larger funding rounds will happen, she added.

Similarly, Vaas Bhaskar, principal at Elevation Capital, which has invested in Dezerv along with Premji Invest, Z47, and Accel, said he expects wealthtech sector to be a more than $50-billion revenue pool by 2030 as most business models have significant snowballing and operating leverage characteristics that make them attractive.

“Startups have done very well in capturing significant parts of brokerage and distribution revenue pools. Secondly, in advisory, startups will also play a significant role in creating a rather nascent retail market, aided by multiple tailwinds including changing consumer behaviour and regulatory push,” he said.

Further, Bhaskar noted that the product manufacturing and management pool remains the largest revenue pool in this segment, where increasingly new-age companies, particularly those with experience and brand in the wealth space, will start playing and gain a significant share from incumbents.