How these three IIT Kharagpur alumnus are redifining equity investing in India

Founded in July 2015 by three IIT Kharagpur graduates, smallcase Technologies Pvt. Ltd. was started to introduce a new generation of investors to the Indian equity markets using technology. We are publishing an interview with Mr. Vasanth Kamath – CEO, smallcase Technologies:

Q.: What is the problem you are trying to solve? Please share with us any insights that led you to believe that this is a big enough problem?
Ans: Investing in equities has proven to be the most rewarding vs. other assets like gold, real estate, etc. Yet, the common perception about investing in the stock market is that it’s risky & even akin to gambling. In fact, coming from a family that used to invest in the stock markets, I’ve seen first-hand how risky investing in single stocks can be. With smallcases, that’s exactly the problem we’re trying to solve by providing existing & new investors with a safer way to directly invest in the stock market.

Q.: Please tell us about the founders
Ans: smallcase was founded in 2015 by 3 IIT Kharagpur graduates – Vasanth Kamath, Rohan Gupta, and Anugrah Shrivastava.

• Vasanth Kamath, CEO (Business & Growth). Earlier first employee at Tracxn. MS Economics, IIT Kharagpur 2013
• Rohan Gupta, CTO. Built low-latency trading platforms at Goldman Sachs. Computer Science, IIT Kharagpur 2013
• Anugrah Shrivastava, CIO/Head – Investment Products. Developed thematic indices for institutions at Nomura India. CFA Charterholder. MS Economics IIT Kharagpur 2012

Overall, smallcase has a team of 100+ engineers, designers, and investment professionals.

Q.: Tell us about the Product / Solution. How did you get your first customer? Explain how you went about the Product-Market Fit Process.
Ans: smallcases are a safer way to directly invest in the stock market. We are building smallcases as a new financial instrument that helps you take portfolio exposure with stocks & ETFs.

As mentioned earlier, growing up in a family that used to invest in the stock markets provided me with first-hand exposure on how risky investing in single stocks can be, especially if the investment decision isn’t based on fundamental & technical grounds.

When I learnt about diversification & the concept of building portfolios – that’s the same core philosophy of mutual funds – it was quite surprising to see that despite its benefits, it wasn’t available to regular stock investors.

We went live with our first broker-partner Zerodha in July 2016, and got numerous customers on the very first day itself! Today, approx. 8,00,000 people across various brokerages are now part of the smallcase community & use it to take better investment decisions.

Q.: What is your USP?
Ans: Compared to single stocks, smallcases are a safer way to invest directly in the stock market. Compared to mutual funds, smallcases don’t have an expense ratio, which makes them cost-effective when compared to other instruments like mutual funds. Also, since the underlying securities are held in the investor’s demat account, they have complete control & transparency into their investments.

Q.: How are you pricing the Product? What is the logic behind it? What is the model you are following – Free / Freemium / Premium etc. ? Explain your thought process.
Ans: Fees is one of the most talked about topics in the investments world, though very few outside it truly understand how much of an impact it has on the final returns. Like most other leaders in this field (including Warren Buffett), we believe fees eat into long-term returns. As such, our focus has always been to be low-cost.

The client is only charged when they transact – and only on the transacted amount, rather than the entire investment amount.

To put this in context, mutual funds charge an expense ratio which is deducted on a daily basis, and is based on the entire investment amount.

Q.: Please tell us about the investors
Ans: In February 2019, we had announced raising $8 million in a Series A round led by venture capital firm Sequoia India. Existing investors Blume Ventures, Straddle Capital, Beenext Pte Ltd, WEH Ventures and DSP Adiko also participated in the funding round.

Q.: Since inception, give us a sense of the value of business done by your venture?
Ans: Since launching in July 2016, 3,000+ crores worth of stocks & ETFs have been transacted on the smallcase platform.

Also, approx. 35 SEBI licensed investment professionals today create & manage smallcases, including brokerages like HDFC securities & AxisDirect, Registered Investment Advisors (RIAs) like Alok Jain of WeekendInvesting, Portfolio Management Services (PMS) like Capitalmind run by Deepak Shenoy, and Research Analysts (RAs) like Raghav Behani of Alphamultiple.

In July 2019, ICICI Prudential AMC also created & launched 3 smallcases that are based on their ETFs.

Q.: What is the big picture of your startup? Is this Product/service leading to something bigger? If so, how?
Ans: At smallcase, our mission is to make investing in stocks & ETFs safer & simpler, and providing better building blocks for the industry. We’re doing this by creating an ecosystem for the investments industry by developing different products – all of which help ultimate investors make better investment decisions along with providing a great investing experience.

1. smallcases are already available on leading brokerage platforms, including Zerodha, HDFC securities, Kotak Securities, AxisDirect, 5Paisa, IIFL & more
2. The Publisher Platform enables SEBI licensed professionals (the RIAs, PMS, RAs mentioned above) to productize their stock/ETF based research/advice as smallcases:
   • Provides the ability to showcase their research & communicate market updates as required
   • Makes advise/research more actionable for end clients who can subsequently invest in these “smallcases” on the same platform via their accounts with broker-partners
   • It also takes care of operational functions for advisors, like automatically communicating updates, KYC/payments, promotional campaigns – allowing them to focus on what they do best, i.e. research/advice.
3. With Tickertape, we’re attempting to simplify stock analysis by providing users with readymade tools to screen & analyse stocks. It also includes the Market Mood Index(MMI), a real-time market sentiment indicator that describes the current mood of the overall market. MMI can be used to better time your investment decision.
4. The newest layer we’re adding to our infrastructure stack & building the ecosystem is the smallcase Gateway. This allows non-brokerage platforms to offer smallcases to their base in a native manner. Similar to a net-banking payment gateway, web & mobile apps can enable transactions on smallcases as well as single stocks, ETFs in a non-intrusive yet compliant manner.

Q.: What would be your goal to accomplish in the next six months? Any other information you would like to share?
Ans: In 2020, we’ll continue to build and deepen infrastructure for the capital markets and our partners, keeping the individual investor at the core. This would include developing unique investment products for different use-cases, enabling advisors to scale more efficiently and unlocking new touch-points for stock/ETF transactions.