With a blend of product-oriented and service-oriented messages, Faering Capital-backed financial services platform, FundsIndia is all set to expand its customer reach across the country and plans to enhance its service offerings especially using mobile platforms.

After gaining considerable experience in the American financial services market, Srikanth Meenakshi and C.R. Chandrasekhar returned to their home ground, India, to kick start an entrepreneurial venture. While they were familiar with the financial services sector, they were also looking for fresh opportunities within the industry so that they could make a difference. “Policybazaar.com for insurance distribution and Bankbazaar.com for loans were present then.  There was sharekhan.com in the brokerage space but mutual funds space was new and untouched and hence, we decided to explore this space,” recalls Srikanth.

They set out on their journey in 2009 when they founded the financial services platform – FundsIndia (promoted by Chennai-based Wealth India Financial Services), focused on mutual funds for retail investors. “We had blind faith in the mutual funds industry. Given its performance and how it is a must-have product in every American household, we thought such a transition would be inevitable in India as well,” says Srikanth, who is also the COO of the organisation. Today, the company has moved beyond just offering mutual funds to offering a wide array of investment products such as equities, corporate deposits, 24-carat gold loans and insurance.

The journey

During the early days, the platform had just about a dozen fund houses on it. “We didn’t have HDFC or DSP Blackrock which were big MFs even then. But, we did have some good funds like Reliance, Sundaram, Birla and UTI,” recalls Srikanth.  The company also came out with only a handful of advertisements like a few displayed on valueresearchonline.com, a site that offers investment advice, analysis and information.  “Despite that, there were many people who trusted us enough and were extraordinarily generous,” adds Srikanth.  He proudly narrates an example. “We didn’t have HDFC MF on our platform when we launched in 2009. We were in talks to get them on board, and we communicated this to our prospective customers. One person from Pune sent us a cheque for Rs. 5 lakh with a signed application form and asked us to invest in HDFC MF (in his name) and asked us to move it online once we got the fund house on to our platform.”  This incident gave Srikanth the confidence that there is a segment of audience that would be willing to trust a platform as long as they maintain that track record of quality support and service, and deliver operational accuracy.

However, even today, the market for online platforms is yet to catch up, as online mutual fund investment is less than a quarter of the total transaction of a retailer. Having said that, it has progressed since its early days, when 95 per cent of the investors chose the offline route.

Advisory capability

The company used to provide adhoc advisory services during its early days. However, towards the end of 2012, it set up a centralised research guided advisory team. “As opposed to a national chain of advisory outlets where it is hard to track which advisor is doing what, a centralised team helps us offer guidance to them at regular intervals and at a personal level on a consistent basis,” says Srikanth. This team ensures consistency of quality and advisory outputs. The research team comes out with a list of select funds and portfolio, based on empirical criteria and this research outfit is what educates the advisors. “This was the middle path that we identified. The evolution of the advisory team has been critical in the business growth of the company, both in terms of conversion of account holders to investors and going deeper into an investor’s allocation of funds,” adds Srikanth.

Currently, the company ranks among the top 40 distributors in the country, including banks, which are the biggest distributors. Explaining further, he says that their USP lies in offering the best combination of a high quality platform for MF investment combined with high quality unbiased investor centric advisory service

“During our early days, we had to explain our business plan to everyone – to our landlord, to a customer wanting to open a current account and to every MF company that wanted to partner with us.”

The customer pull

In 2013, the company introduced FundsIndia Smart Solutions – an active mutual fund portfolio service with goals such as kids’ education, (their) marriage, and for retirement. So far, 2,500 customers have enrolled for this service, with around 4,000 portfolios.

Talking about a critical challenge, Srikanth says that the FundsIndia platform is an experiential product. “We don’t have a pricing advantage to offer as a differentiator,” says he. The company offers a platform that provides flexibility and convenience to investors. For example, if you start an SIP (Systematic Investment Plan) with a fund house, and if you want to stop or increase the SIP amount, it is normally done with paperwork; through fundsindia.com it can be changed by logging in.

So how does fundsindia.com attract customers on to the platform? About 40 per cent of its customers come through referrals and the remaining 60 per cent is approached through a blend of product-oriented and service-oriented messages. “Product-oriented is to understand the kind of returns mutual funds have given in the past. We piggy back on the success of the product itself (mutual funds). The service-oriented message is through projecting its advisory support,” says Srikanth. Recently, the company’s research team highlighted how its Select Funds had outdone certain benchmarks – beat Sensex by 9 percentage points in the last year when the markets were not good. “When the Sensex turned negative, the average return on our Select Equity fund was three per cent,” says Srikanth.

The company covers 80 per cent of the pin codes in the country. “We have healthy penetration but it is very scattered. Most people who come to us from tier 2 and 3 cities do so because we give them access to top notch products which they cannot get from their local branches,” says Srikanth.

Demographically, the average customer population is becoming younger as the days goes by. “If the average age was 35 around three to four years back, it is close to 30 now. Many of them are less tolerant of paper work. Hence, they are going paperless and transacting on mobile,” shares Srikanth.

The funding game

During the first 18 months, the co-founders ploughed in about Rs. 1.5 crore in the venture which the company used for niche online marketing or website marketing. Eventually, in 2010, Inventus invested Rs. 3 crore in the company and they were able to sustain operations for another year and a half. During that period, the company started offering equities and fixed deposits on its platform.  Post funding, it started getting serious with digital marketing and began expanding its scope. It moved to a bigger office and increased its employee count from 15 in 2009 to 50 in 2010. “We were very conservative with cash. Growth was also limited accordingly. We were growing in terms of asset size and customers,” says Srikanth.

It was in 2012, when the company received Rs. 20 crore from Silicon Valley-based Foundation Capital that it scaled up its digital marketing efforts and hired a lead. This led to significant growth in terms of customer traction.

The year 2013 was a difficult period. All three major asset classes – equities, debt and gold – fell. The company was also heaped with regulatory and compliance work such as KYC operational issues coming up every six months, which interrupted its work flow. In 2014, their fortunes turned and it saw 2.5 to 3 times growth in customer acquisition and reached a seven figure revenue mark per month. It currently has about 80,000 investors on its platform with over Rs. 1,500 crore Assets Under Management.

In 2015, the company went back to the market for another round of funding, when it raised funds from Faering capital and others to the tune of US $11 million. It plans to utilise these funds to widen its reach across the country and to enhance its service offering, especially using mobile platforms.

Commenting about new product launches, Srikanth says their current investment platform is a large enough bite to chew. “There is a lot we can still do on our platform – an even better customer experience, integrating advisory services and making sure it is seamless and continuously track it to the advisor. That depth is still there to be tapped.” However, he believes that the online and mobile markets are some main channels in the future.