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Wealth management startup Groww, which started operations through WhatsApp groups five years ago, recently turned a unicorn, riding the growth in middle-class incomes and the large-scale shift to online investing.

The Bengaluru-based company now offers direct investments in mutual funds, stocks, initial public offerings, digital gold, and exchange traded funds. It is backed by fintech investor Ribbit Capital, YC Continuity Fund, and Propel Ventures, apart from Tiger Global and Sequoia. The company has raised more than $142 million from investors, of which $113 million came in the last six months. The startup was valued at $1.2 billion last month when it raised $83 million in a Series D funding round led by Tiger Global.

As online retail investments grow, private equity interest has grown as well, but the situation was different when former Flipkart executives Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal founded the company in 2016
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As online retail investments grow, private equity interest has grown as well, but the situation was different when former Flipkart executives Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal founded the company in 2016

Groww claims it has 15 million users, with 250,000 systematic investment plans opened every month on its platform. Between September 2020 and April 2021, it has signed up nearly 7 million users, with 60% of its users in Tier 2 cities and beyond, the company said.

“Our philosophy has been to create an internet finance company, based on best user experience, transparency, and simplicity, with the goal of offering every investment product out there for an Indian retail investor. Further, while we cannot advise a customer on what to buy or sell, we can definitely provide them with the right information through our educational initiatives," Keshre, chief executive and co-founder, said in an interview.

As online retail investments grow, private equity interest has grown as well, but the situation was different when former Flipkart executives Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal founded the company in 2016. It was a bleak year for startup funding, as investors chose caution after an episode of hyper-funding rounds and startup busts. In its first year, Groww’s initial team consulted peer groups on retail investments. It survived almost two years with early backing by former Flipkart and Myntra executives and co-founders of Curefit, Ankit Nagori and Mukesh Bansal, until it was selected for the winter batch of US-based startup accelerator, Y Combinator in 2018.

“Only 2% of India’s population invest in mutual funds and about 1% in equities, and we expect this market to grow significantly over the next 5 years. Hence, Groww’s emphasis on simplicity and frictionless investing makes it an attractive product for first-time investors today," said Anu Hariharan, partner at Y Combinator.

The company’s growth was significantly aided by rising interest in online investing. New demat account additions in India hit a record 10.7 million between April 2020 and January this year, against about 4.7 million in FY20 and 4 million in FY18 and FY19 each, according to regulatory data.

Between 2017 and 2019, several incumbents also spotted the opportunity in online wealth management and began offering digital investment platforms. Paytm forayed into direct mutual funds with Paytm Money in 2018, while Zerodha launched its mutual fund platform Coin in 2017.

However, Keshre claims that what may seem as ‘odds’ only accelerated the growth for Groww.

“In wealth management, when the ecosystem grows, the market expands and everyone grows along with it. Between 2018 and 2019, a lot of players entered the wealth management space, which provided industry tailwinds. For us what worked was that we continued to be customer-focused and kept innovating on the basis of the feedback we received from the Groww community set up during our early days," Keshre said in an interaction with Mint.

Groww, run by Nextbillion Technology Pvt. Ltd, launched its app in 2017 and moved to direct mutual funds by 2018, two years after starting up.

Keshre adds that the biggest challenge, however, was setting up stock market investments, which took almost two years to build and was launched in April 2020. “We didn’t realize the complications of the product and the efforts needed, at first. Many thought it was a stupid idea and we kept hitting a wall during the development. Nonetheless, customers received it well and we were struggling to prevent our servers from crashing after we introduced the product last year, in the midst of the pandemic," Keshre said.

Groww now aims to expand the market for digital investing with its new educational initiative Groww Academy and aims to introduce derivative investing, futures, and options trading. It also aims to help users invest in government bonds, securities, and US stocks. It plans to double its team size to almost 1,000 by April 2022.

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