Bessemer Venture Partners, which backs Innoviti and Rupifi, has shifted its 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 are incredibly eager to support entrepreneurs who want to change the status quo. We believe that every loan decision, every customer interaction and every insurance guarantee and claim comes to 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
Furthermore, Vishal Gupta, partner in Bessemer Venture Partners, told business line that lending is not attractive as a venture-financed business. While the firm has made money investing in lending businesses in the first phase of the fintech roadmap, it later realized that they are mixing businesses with capital as raw material.
“Lending is an eternal dilution business. E-commerce businesses are also diluted, but once they achieve profitability, there is no further dilution. But in lending, you have to keep diluting in order to initially raise money as equity, so that you get more debt for growth. This is the characteristic of the lending business. That is why I call it a perpetual dilution business,” he added.
Bessemer believes that the cost of capital and regulations will ultimately favor large banks, NBFCs and insurance companies. “Software companies must have an ability to play across all banks, non-banks, new time lenders and insurers via a game and a strong winner-take-all dynamic, which can lead to big outcomes,” Firm noted.
Infrastructure innovation
The firm also expects infrastructure innovation to catalyze growth, with technology enabling any financial process. While the government led most of the current efforts with finance stack, in the coming years Bessemer envisions more private sector leadership in building newer API-led infrastructure and data platforms on top of today’s rails, increasing adoption and improving usability across different segments of the financial industry.
Bessemer also estimated that by 2030, domestic credit will double to 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.
