Despite a general rise in start-up investments, the Fintech sector saw a 33% decline in funding last year. Digital loan platforms still attract the most capital, but the next era of innovation is focused on AI-driven financial infrastructures, including AI-based subscriptions, risk assessments, and integrated financial solutions.
Kabir Narang, founding general partner at B Capital, notes that the Fintech investment landscape is evolving. He states, “While loans are still a crucial part of the ecosystem, the market is increasingly competitive, making it more appealing for investors in structured credits,” as he shared with Fe.
Narang and his team are now directing their efforts toward AI-driven solutions that promise substantial business growth. They are particularly interested in AI subscription models, decentralized financial systems, and next-generation financial APIs.
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B Capital, a U.S.-based venture capital firm co-founded by former BCG executive Raj Ganguly and Facebook co-founder Eduardo Saverin, has been an active investor in India. The firm successfully closed a $750 million opportunities fund in March of last year and has supported startups like Meesho, PharmEasy, Mswipe, Yubi, Dailyhunt, and Edtech company Bhanzu.
The firm remains optimistic about AI’s role in alternative credit scoring, fraud detection, and highly personalized financial products. Alternative credit scoring uses unconventional data sources beyond traditional credit reports to evaluate borrower creditworthiness. AI’s capacity to process large volumes of real-time data significantly enhances financial decision-making.
However, Narang points out that AI startups have seen much higher valuations compared to non-AI sectors, with many of the latter experiencing valuation adjustments over the past two years. A notable example is Krutrim, an AI subsidiary that achieved unicorn status within just six months of its founding.
Regarding the rising valuations of AI startups, Narang observes that investors are increasingly favoring companies that can show concrete returns on investment, strong growth, and transparency. “The standout companies are those that leverage proprietary data and possess deep sector expertise. While the past decade was about SaaS companies scaling, the next phase will focus on Indian companies becoming leaders—not just in India but globally,” he remarked.
Beyond Fintech, B Capital is also investing in robotics, space technology, and advanced manufacturing in sectors like electric vehicles, defense, and aerospace. The company’s multi-stage investment strategy targets key industries, encompassing Fintech, health technology, and climate tech across Southeast Asia, India, China, Europe, Africa, and the U.S.
On a broader scale, last year, venture capital firms ranked strongly in public market exits, totaling around $4 billion, buoyed by a wave of tech IPOs. However, Narang asserts that the merger and acquisition (M&A) ecosystem still requires further development to enable mid-sized exits in the $500 million to $2 billion range.