A fund raising data has revealed that in the last five years, for the first time, the fintech startups have bagged more capital in 2019 than their consumer-facing counterparts.
According to data from Venture Intelligence, the B2B fintech platforms raises $657 million, surpassing the $617 million flowing into B2B fintech startups so far in 2019.
While, in 2018, B2B fintech companies got $1,168 million in investments, B2B firms were at $833 million, respectively.
“B2B fintech companies are more predictable than B2C firms,” said Anil Joshi, managing partner, Unicorn India Ventures, a tech-focused venture capital fund that has invested in neo-banking startup Open Financial Technologies.
“A B2C fintech model has higher scalability, but customers tend to switch platforms very quickly and, therefore, have to be attracted through discounts and freebies, which eventually makes it hard for these businesses to break-even,” Joshi added.
The factors that drive the B2B fintech companies more attractive include customer stickiness and better unit economics.
“SME customers tend to be stickier and offer opportunities for better unit economics,” said Vinay Bagri, co-founder and chief executive officer, NiYO, a digital banking startup that services both retail and SME customers.
“Servicing SME customers requires a lot of understanding of the segments in which they operate and their business processes, before lending or reaching a solution on their problems. It is, thus, a diverse group with varied needs and there is a lot of scope in terms of how their businesses can be streamlined with technology,” Bagri said.
“The last two years have been very tough for small businesses in the country, mainly because of the lack of digitization. B2B fintech firms are helping them become more efficient by digitizing their processes through simple and customer-friendly solutions,” said Anand Lunia, partner, India Quotient.
“Startups that can acquire a lot of SME customers and create a large database of their transaction information are most interesting to investors, such as payments-led or transaction-led SME platforms,” said Rajat Agarwal, director of VC fund Matrix Partners India.