Lightspeed, Accel’s search for a fintech fit leads them to an unlikely bet

Indian fintech may have lost its sheen for venture capitalists. But a few investors seem to know where to find it.

Lightspeed Venture Partners and Sorin Investments
made


made

The Arc
Lightspeed, Sorin to back Shivalik Small Finance Bank
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made


The Arc
Lightspeed, Sorin to back Shivalik Small Finance Bank


 a US$11.5 million investment in three-year-old Shivalik Small Finance Bank, valuing it at about US$100 million, in May. This is one of this year’s top fintech deals. Its Series-A investors, Accel and Quona Capital, too, increased their stake in the Noida-based bank after their initial investment in 2022.

Having invested in edgy fintechs—including buy-now-pay-later startups, neobanks, edtech lenders, and challenger credit cards—venture capitalists are looking to play safe.

Fintech funding has fallen since the highs of 2022. So far, only US$400 million has been invested in fintechs like b2b fintech software firm Perfios and offline payments company Mswipe, according to data from market-research firm Venture Intelligence.

Earlier, venture capitalists invested in fintechs hoping to unlock disproportionate returns from their unfettered growth. But that logic didn’t hold after successive Reserve Bank of India (RBI) regulations
kneecapped


kneecapped

Business Standard
Reserve Bank bolsters oversight of fintech firms with more inspections
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kneecapped


Business Standard
Reserve Bank bolsters oversight of fintech firms with more inspections


the growth of lending and neobank startups.

Small finance banks, thanks to how the regulator shaped its structure, come inbuilt with growth constraints. These banks can do everything a full-fledged bank does but with regulatory restrictions. Like ensuring three-fourths of all its loans go to the
priority


priority

priority
Sectors which the Indian government and the RBI consider as important for the development of the economy and are to be given priority over other sectors





priority


priority
Sectors which the Indian government and the RBI consider as important for the development of the economy and are to be given priority over other sectors


sector.

While venture capitalists would like everything they touch to turn into a unicorn, small finance banks may be impervious to such charms.