Smallcase raises $40 Mn in Series C from Faering Capital, Amazon and others

Wealth management company Smallcase has raised $40 million in its Series C round led by Faering Capital with participation from new investors, Amazon and Premji Invest. Existing backers including Sequoia Capital, Blume Ventures, Beenext, DSP Group, Arkam Ventures, WEH Ventures and HDFC Bank also participated in the round.

The fresh fundraise has come within a year for the Bengaluru-based startup which picked up a $12 million Series B in September last year. 

Valuation and fund use

According to the company, it has raised the fresh funds at a valuation of $200 million. The startup was valued at around $52 million after a small tranche by HDFC Bank in December 2020.   

Smallcase will utilise the fresh proceeds to expand its investment products, grow its technology platform and further build its distribution network, said the company in a statement. The funding also indicates the interest investors have in the  Indian market for financial products, as overall penetration of products like mutual funds and stocks etc remains extremely low. The presence of so many firms, and their ability to draw in investments, indicates hopes of a long runway for the market to grow and evolve.  

Smallcase model - frenemies and coopetition

The five-year-old startup founded by Vasanth Kamath, Anugrah Shrivastava, and Rohan Gupta, lets retail investors choose from a number of themed portfolios having stocks and exchange-traded funds (ETFs) in a proportion that creates the highest return on investment.

Smallcase claims that over three million users transact $2.5 billion worth of stocks annually and works with around a dozen broking partners including AxisDirect, Zerodha, HDFC Securities, 5Paisa, and Edelweiss.

Notably, Zerodha's Rainmatter is an investor in Smallcase.

The company counts WealthBasket as its direct competition while it remotely competes with INDmoney and Cube Wealth. The overlap between partners and competition simply points to the huge churn underway in the BFSI sector driven by fintechs. 

Amazon’s investments in India

The investment also marks Amazon’s entry into the wealth management space in India. Over the past three years, it has increased its investments in startups in the country. The e-commerce giant, which has backed bus aggregator Shuttl, insurance startup Acko, fintech lender Capital Float and digital payments startup ToneTag in 2018, has also invested in D2C beauty brand MyGlamm, and acquired retail tech startup Perpule in 2021.

In April, it announced $250 million worth Amazon Smbhav Venture Fund for Indian startups and made its first investment in Gurugram-based MSME-focused fintech startup M1xchange.

Previously, Amazon had invested in home service startup Housejoy, BankBazaar in 2015 and gift card company QwikCilver in 2014.

Update: The story has been updated to reflect the direct and indirect competitors of Smallcase and its valuation.