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Issue #11 - I Run A Fintech (23/09)
Groww, Acko and MarketPulse Funding
Today’s writing made me pause about two similar learnings that “Founders of Startups (FOS)” mentioned in their interviews and I want to share that with you here.
In an interview with Varun Dua (Founder, Coverfox and Acko Insurance)
As a young startup, look for consumer adoption for simpler products than trying to solve for complication product by using complex technology. Users build trust on your product, then start purchasing expensive and complicated products on your platform, a books equivalent to Amazon. You need to build trust building smaller products on your platform and make it frictionless before start providing complex product
In an interview with Harsh Jain (Founder & COO, Groww)
Fintech apps and digital platform should have some sort of advisory that will show to the customers which gives them more freedom to make a choice.
Moving on to last week’s updates!
Groww, a stock trading and mutual fund investment platform raises $30 million (Rs.225 cr)
$60 million (450 cr) raised in 1 year & months, Groww's growth story is nothing less than fascinating.
Groww raised $27.2 million last year for using the funds to launch new products, and build the platform's technology and to get top talent on board across engineering, product, and growth teams, Groww was looking to increase the team size to 200 plus soon. The company also aimed to use a significant portion of the capital to fortify tech capabilities and build super scalable infrastructure for investing.
Ever since they raised the amount last year via Series A and Series B, Groww launched Digital Gold, Stock broking platform, invested heavily in digital advertising, stabilized their product and grow their user base from 2 million (20 lacs) to 8 million (80 lacs).
With 8 million userbase, Groww is perhaps the largest platform by userbase today attracting a younger demographic from smaller cities.
Groww's round of $30 million (Rs.225 cr) is going to be used to further improve its technology, hire capable employees, and start an education initiative. The initiative will be regarding finance and will be imparted using videos.
Groww has four offerings on their platform today
Direct Mutual Fund investment
Direct stock market investment
Digital gold investment
US Stock investment
As per an interview with Harsh Jain recently, Groww banks on two major things
A platform for users to have a complete paperless and digital experience with respect to payments and transactions
A platform which provides complete transparency about the investment products to help users conduct their own research and make their own decisions
Groww's user-base average age is 29 and 65% of them are between 25 - 40 who are either new to investment or are moving from offline to online investing.
And with that Groww expects that this DIY experience that they provide to give independence to the consumers would stick them around and keep using the platform for various other products.
Market Pulse, an MCX and NSE intelligence provider raises $750k ( 5.62 Cr)
Market Pulse offers a mobile app for live, real-time, tick-by-tick MCX & NSE data. The app allows users to customized dashboard where users can view news, analysis, tips, charts, etc. Users can also create smart notification to get alerts about important news and events.
Why is this important?
MarketPulse has built an infrastructure to democratise high velocity trading. Not only have they built the infrastructure, but they are also offering their products as a service today.
The importance of high-velocity trading is to make sure you are able to quickly take actions basis the market movements and in these situations even a lag of 1 ms can compound into losses for large investments.
Acko raises $60 million from Munich Re
At $203 million fund raise till date (including this one), Acko & CoverFox founder and chief executive Varun Dua told TechCrunch in an interview that the startup has amassed over 60 million customers (i.e. 6 crs) and has issued over 650 million (i.e. 65 crs) policies to date.
Though Acko (& Coverfox) story looks like an overnight success, it actually started back in 2010 when Varun Dua at Glitterbug Technologies ventured into developing technology/softwares for the likes of Prudential, Aviva, AIG and HDFC. 2012 is where things started shaping up, when they were doing 10-12 crs / year, they realized the potential of the current company is limited to 50 to 100 cr only and they wanted to do something meaningful.
Let's take a pause here, within 3 years of the software development that Glitterbug was doing for Insurance companies, imagine the amount of knowledge Varun acquired.
During the time of PolicyBazaar's growth, where the entire model was dependent on online-to-offline (lead generation and tele-assisted), there seemed to be a potential for utilizing the software skills for building a technology backed aggregation platform. This is where CoverFox was born.
In Varun's interview with Accel Partners which is valid even today, he said that Insurance is a chore and is not something that someone wants to spend a lot of time with. Since the experience of purchasing insurance in early 2010s was broken, Coverfox was created to aggregate, simplify and bring seamless insurance purchases.
Coverfox was started to simplify the buying experience for the consumer with all the necessary information put upfront which means all the minute details of the insurance were categorized and displayed to the customer like which are the cashless hospitals near your place, how much sum insured do you have etc.
They launched health insurance and soon realised that health insurance is a far more complicated product and customer wanted a tele-assistance because there were complications in the product that were not covered in the simplified listing. E.g. would a customer be able to bundle his company group cover with the insurance purchased from Coverfox?
They also realised that health insurance is also a discretionary spend and not deadline driven. This realisation culminated into starting Auto Insurance. This is where the momentum picked up for them.
Soon after Coverfox was started, Varun realised that Coverfox did manage to solve the buying experience to a certain extent, but how do you solve the redemption experience. That piece was broken.
And this thought gave Acko the birth. Acko was born to solve problems that were very Indian specific
Not all customers have the appetite to purchase insurance products which were Rs.10,000+
Unlike the western markets where you can start a business and get into the depth, Indian markets aren't built for depth and you need operate at breadth which means rolling out more products into the market quickly
Online consumption had picked up rapidly which include electronic purchases, digital loans, rides using online apps and protection was required for each of these purchases
Branch-based insurance operated at a higher costs due to their fixed costs
The redemption experience was broken and it would take a customer 7-10 days to redeem their insurance
The solution was "sachet-sized digital bundled consumption insurance". The insurance is embedded right into your experience at fraction of your total cost ( 1% - 4%) which would barely hurt your pocket since they are almost invisible.
A Rs.10 insurance for a Rs.250 ride.
A Rs.100 insurance for a Rs.5000 flight
A Rs.50 insurance for a Rs.3500 stay
The idea is to bake the habit of having insurance for every experience (purchase, travel, stay) to protect yourself and not hurt your pockets.
Today Acko has partnered with 22 partners across 6 categories, which is beneficial for acko because some products are seasonal.
A lot of these product categories require a lot of influence to shift consumer behaviour for getting in the habit of taking insurance. The idea is to start small, get them into the habit for larger ticket size.
And their growth has been stupendous
The products are micro-products and will start as low as Rs.10/- and what would that cover?
Rahul’s very neatly articulates their business model on their growth strategy and details out their growth from inception, but before you jump into it, i shall try to give you a small primer.
Premiums are payments collected from customers
These premiums are invested in various investment options (funds, stocks, bonds etc)
To acquire a customer, insurance companies either pay commission to partners or DSAs
When insurance’s are claimed, those are settled and called as Losses
Management expenses are salaries, operating costs for running the business
Marketing & Overhead costs are other costs not covered in the above.
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