smallcase

An Arkam Ventures Investment Analysis

Introduction
smallcase is a fintech company launched in 2015 by 3 IIT Kharagpur graduates, Vasanth Kamath, Anugrah Shrivastava, and Rohan
Gupta. It allows investors to invest in baskets (smallcases) of stocks, focusing on different metrics per smallcase, whether
industry, returns, or market cap specific. They’re, however, different from a Mutual Fund, as in this regard, investors are directly
buying into the stocks rather than holding shares of the Investment Trust as in the case of a mutual fund. The process is more
transparent as an investor can view all their holdings in real-time, unlike a (usually monthly) delay in seeing what the mutual fund
owns. The company has been increasingly successful in roping in leading broking and distribution platforms for this process, in
addition to a fast-growing user base. By April 2022, the number of users on smallcase was already 3.5mil+, and the months after
that pushed that number higher. With more than INR 29,000cr transacted on the platform, the company has been growing
steadily and is expected to grow even faster in the years to come. smallcase does not charge a brokerage fee itself, however its
partners charge a Rs.100 fee for the first transaction on any portfolio, while subsequent transactions on the same portfolio are
free of charge.

History and Growth

Keeping all these things in mind, it would seem relatively easy to classify an investment in this company as a no-brainer, but in
doing so, we would be committing a beginner’s mistake of viewing the past with definite knowledge of the present. Let us dive
into the past to understand better the nature of Arkam’s investment and the reason for its success. Following is a table of the
company’s history, including the funding it raised, in conjunction with the growth in user base and total transaction amounts on
the app over the years.

Year Users Amount Transacted (in cr) Funding (in mil)

Pre-2019 0.15 mil INR 2850 $1 (Pre-Seed)
February 2019 0.25 mil INR 2000 $8 (Series A)
December 2020 2 mil INR 5000 $14 (Series B)
August 2021 3 mil INR 19000 $40 (Series C)

Committing to the company in 2021, along with other investors like Amazon, Faering Capital and Premji Invest, Arkam Ventures
took to a company which had already shown a history of YoY growth in both the number of users and the total amount
transacted through the service. This proved, amongst other things, that it was not a company where only the number of users
was increasing; it was also something most users were sticking with. In 2018, the platform’s repeat rate was 78%, reinforced by
the increase in per-user transactions by more than 76% during 2021-22. The company was able to onboard all major brokerage
services and distribution platforms, including HDFC bank and Zerodha, which even went as far as to invest directly in the
company. With more than 1000 curated smallcases and an ever-growing number of investors(5mil+), the path forward for
smallcase looks exceptionally bright.

While operating in a highly competitive and growing fintech space, smallcase – thru its innovative business model, has not only
made its seeming competitors, such as Groww or Zerodha, necessary partners on its platform but also used them to project more
authenticity to prospective customers. The presence of traditional big players like HDFC Securities has also strengthened the
company’s image to a prospective retail investor if/when they choose to go for an IPO. They cater to investors, investment
managers, and brokerages, making it a sunny-side-up deal for every stakeholder.

Theme Compatibility
While its business model promises growth, it also aligns perfectly with Arkam’s thesis of ’Middle India Digitization’, as the app has
combined both the ease of access/simplicity of understanding through its user-friendly design and made available to the middle-
class retail investor the deep research that usually goes behind large scale investments, for just a small fee. Its model is
transparent, has outstanding product design, has a low customer acquisition cost, and has proven to have high customer
retention, all in line with Arkam’s thesis.

As for the ‘SaaS from India to the World’ theme of the firm, smallcase would be a significant export from India to the world and
would be a hit amongst retail investors, especially in other developing countries with many middle-class investors.

Conclusion
In conclusion, the decision to invest in smallcase by Arkam Ventures was based on solid reasoning and growth potential. The
company exhibits all indications of a disruptive long-term player, and with solid management and experienced investors backing
it, it should only be a matter of time before it can become a market leader, both domestically and globally.