Sequoia India's investment in Groww
Indians save about 30% of their disposable income, with annual savings totalling to >$450B. However, much of this has traditionally been invested in physical assets like real estate or gold, in low yielding bank FDs or, even worse, sits as cash, where savings are eaten away by deflation. Financial markets globally have offered the most efficient way for middle class investors to compound their savings over the decades, but in India, retail investors shied away in the past. Retail investor participation in Indian equities is <3% today. This is significantly lower than US (at ~55%) and even China (at ~7%).
Over the past few years, we have seen a refreshing trend reversal. The growth in size and earnings of the middle class has created a larger investor base. The attractiveness of the traditional asset classes has gone down. And SEBI's reforms, such as efforts made to drive the growth of new investors and reduce commissions and expense ratios for investment products have provided further tailwinds. As a consequence, mutual fund SIPs have replaced fixed deposits as the preferred investment for first time investors. In the last three years alone, >6M new mutual fund investors (~30M new folios) and >3M new stock market investors (~8M new demat accounts) started to put their money into Indian financial markets.
But as these new investors began wading into the markets, they aspired for a better investing experience. They found many of the existing investment platforms to be too expensive (high commission), too reliant on old-school offline agent-led models and with online interfaces that were too clunky and hard to use. Today's tech-savvy investors want to manage their investments on their smartphones, and want products that are intuitive and simple to use. They want fair pricing, and expect the benefits of cheaper transaction processing and service to be passed to them.
It is against this backdrop that Sequoia India has invested in Groww, an online platform that aspires to make investing as easy as online shopping for the country's millennials.
Groww was started by Lalit Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal, who shared the experience of working together at Flipkart. The team started by offering mutual funds in a zero commission model and plans to add other investment products, including stocks, derivatives, insurance etc. on the Groww platform over time. The founding team's product DNA and laser-like focus on serving the millennial investor stood out for us. Delivering a seamless experience to the retail investor requires understanding and fixing the 'plumbing' of financial markets (such as payments, transaction processing and settlement), and we are impressed by the Groww team's willingness to undertake this task. The company has a fast-growing investor base, and is now one of the top 10 platforms in the country driving new investor addition.
Today, only 18% of Indian publicly traded companies are owned by retail investors (vs 40% in the US and 75% in China). Efficient 'pipes', such as the one Groww is building, will help channel household savings into a wider suite of asset classes. Sequoia India is excited to witness the transformation that new investment platforms like Groww are driving in India's financial markets, and to partner with the founding team as they help millennials to better grow their wealth.