Backer of Innoviti and Rupifi, Bessemer Venture Partners has shifted focus to fintech software companies as the firm’s investment roadmap evolves. 

“We believe we are still in the early days of a revolution in the fintech software ecosystem and we’re incredibly eager to support entrepreneurs looking to change the status quo. We believe that every lending decision, every customer interaction, and every single insurance underwriting and claim is going to be connected to cloud and data, and that all of this will be mediated by software,” the firm noted in a company blog. 

Lending business

Further Vishal Gupta, partner at Bessemer Venture Partners told businessline that lending is not attractive as a venture-funded businesses. While the firm has made money investing in lending businesses during the first phase of its fintech roadmap, it later realised that they are compounding businesses with capital as a raw material. 

“Lending is a perpetual dilution business. E-commerce businesses are also diluting but once they get to profitability, there is no more dilution. However, in lending business you have to keep diluting to basically raise money as equity, for one to get more debt for growth. That’s how the characteristic of lending business is. That’s why I call it a perpetual dilution business,” he added. 

Bessemer believes that the cost of capital and regulations would eventually favour large banks, NBFCs, and insurers. “Software businesses must have an ability to play across all banks, non-banks, new age lenders, and insurers via a pick-and-shovel play and a strong winner-take-all dynamic, which can lead to outsized outcomes,” the firm noted. 

Infrastructure innovation

The firm also expects infrastructure innovation to catalyse growth, with technology enabling every financial process. While the government led most of the current financial stack efforts, in the coming years Bessemer envision more private sector leadership in building newer API-led infrastructure and data platforms on top of current rails, driving more adoption and improving ease -of -use across different segments of the financial services industry.

Bessemer also estimated that by 2030, domestic credit will double and become a $5.5 trillion market; mutual fund assets under management (AUM) will grow 5x from $400 billion to $2 trillion; and insurance will grow from $100 billion to $500 billion.

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