IT’S PROFITABILITY
The startup is a group of financial experts, engineers, and designers with a variety of backgrounds and skills, and their main office is in Bangalore.
Smallcase, an Amazon-backed wealth management startup, has expanded quickly over the last two fiscal years as its operating scale has increased by over 13 times. The company’s sales increased from Rs 2.15 crores in FY20 to over Rs 29 crores in the previous fiscal year.
According to the company’s consolidated financial records filed with the Registrar of Companies, Smallcase’s operating income increased 2.5X to Rs 29.17 crores in FY22 while its losses reached Rs 95 crores.
In August 2022, Smallcase secured a $40 million Series C investment. As a result, in FY22, its financial income, which is primarily interest on fixed deposits, increased 3.64X to Rs 7.03 crores.
Retail investors can select thematic portfolios from Smallcase that combine stocks and exchange-traded funds (ETFs) in a ratio that maximizes returns. It claims to have 5 million customers on the site and works with broking partners like AxisDirect, Zerodha, HDFC Securities, 5Paisa, and Edelweiss.
For the Vasant Kamath-led corporation, marketing and promotion costs accounted for 46.2% of total expenses, making them the largest cost area. In FY22, this expense increased 6.2X to Rs 60.9 crores.
BUSINESS MODEL
In order to increase its overall cost by 3.16X to Rs 131.7 crores in FY22 from Rs 41.6 crores in FY21, Smallcase spent Rs 11 crores on technology. Final results showed a 3.38X increase in losses from Rs 28.26 crores in FY21 to Rs 95.53 crores in FY22.
The ROCE and EBITDA margin both declined to -32.3% and -259.48%, respectively, in terms of ratios. Smallcase invested Rs. 4.51 per unit to generate one unit of operating revenue in FY22
Vasanth Kamath, Anugrah Shrivastava, and Rohan Gupta founded the business in 2016, and WealthBasket is its main direct rival. INDmoney and Cube Wealth are their secondary rivals. The company was previously valued at $200 million and has garnered about $62 million from investors such as Premji Invest, Sequoia Capital, and Blume Ventures. Notably, Rainmatter from Zerodha has invested in Smallcase as well.
The Smallcase business model is based on providing performance for its subscribers first (through its curated portfolios), then engaging them more deeply after that (or their money). With 5 million customers, the company, like many other capital market-related businesses, is projected to reach the investor universe’s boundaries shortly, especially at its current burn rate.
The company will soon be forced to confront the question that many companies in the industry face as the climb becomes more difficult because growth is expected to become more uphill. Is seeking independence preferable to being the star of a larger financial offering? We predict that the company will take a stand on this topic in 2023.