Fund focus: Quona doubles down on financial inclusion

Ganesh Rengaswamy, a co-founding partner of specialist financial technology investor Quona, observes that his sector is now in vogue. Due to a rising awareness of the sector’s potential, policy-driven initiatives and the emergence of mature entrepreneurs, the amount of capital looking for deals has grown. Not every contributor of capital, however, is a good partner for an enterprising fintech start-up. Hedge funds, for example, may not share the same long-term vision.   

“Fast money and late-stage investors investing in an early-stage company could be detrimental because they have limited patience. As a result of this, if they abandon the company in tough times [after leading a significant round), it will be quite hard for the company to raise the next round,” warns Rengaswamy, noting that a similar phenomenon emerged in 2016.

Regardless, he expects Quona – formerly the venture arm of US non-profit Accion – to remain unfazed in its mission. Following the close of its second fund, the firm has $203 million in dry power and has already made four investments in Asia as part of a pan-emerging markets remit. The region already accounts for seven of the 16 portfolio companies in Quona’s first fund as well as all three of its exits.

India and Indonesia will remain a key focus, but Quona is also keen to branch out. The plan is to invest in more than 20 companies, writing checks of up to $10-15 million, of which half will be headquartered in Asia. Other marginal strategic changes in Fund II are likely to include doing more pre-Series A rounds and exploring fintech “adjacencies” – newer start-ups serving customer segments made accessible by the growth of businesses in mobility, healthcare, digital commerce, small commerce and education.

In this context, novel business models remain of interest to Quona. For example, last year it committed $11 million in a Series A round to Sunday, a Thailand-based insurance technology firm. The company offers a mobile-first claims platform for motor and health insurers. Quona is also looking at fintech players that seek to improve services related to financial advisory and lending.

At the same time, start-ups will face more competition. The two giants of Southeast Asia’s ride-hailing and local services space, Go-Jek and Grab, are both pushing into financial services as the glue that holds their other business lines together. Even in India, Paytm is branching into new product verticals, acquiring a license to sell insurance products earlier this month. Will these heavily backed players snatch a piece of the pie from other VC-backed fintech start-ups? Rengaswamy thinks it’s easier said than done.

“Fundamentally, the expectations on super platforms or decacorns are too high. They have no choice but to acquire customers at any cost without taking the time to reflect on the right way to monetize them. They have to move on to multiple business lines before they can make foundational ones work in a profitable way,” Rengaswamy says.

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• Topics
• Fundraising
• Venture
• Technology
• Financials
• Asia
• India
• Indonesia
• Quona Capital
• Fintech