Lightspeed backs fintech startup floated by former Aspada, IndiaStack execs
Photo Credit: VCCircle

Venture capital firm Lightspeed India Partners has led a $3.5-million (Rs 24.5 crore) investment in Setu, a fintech application programming interface (API) infrastructure startup.

Bharat Inclusion Seed Fund, the seed fund under Bharat Inclusion Initiative set up by IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship (CIIE), also participated in the funding round, said Setu in a statement.

Setu, which is operated by BrokenTusk Technologies Pvt. Ltd, will use the capital to build an engineering team and strengthen its technology infrastructure, it said.

The Bengaluru-based startup was founded by Sahil Kini, former principal at social impact investment firm Aspada Investments; and Nikhil Kumar, a fellow at technology think tank iSPIRT Foundation. He also worked with iSPIRT-founded India Stack, a term used for a set of APIs that allows governments, businesses, startups and developers to utilise a unique digital infrastructure to solve India-specific problems.

The startup offers open APIs across four categories—bills, savings, credit, and payments. A developer can access Setu's sandbox to build an application but has to go through a rigorous developer certification programme to go live. This makes it easy for all companies to plug-and-play financial services, rather than spend significant effort and time for one-off integrations.

Setu has launched its product -- Collect -- that helps merchants to collect recurring payments directly from customers’ preferred payment applications.

“Digital finance has accelerated with the emergence of public platforms such as UPI. Except for payments, banking infrastructure hasn't upgraded at the same pace," said co-founder Kini in the statement, "For India's economy to achieve its full potential, a wholesale redesign and API access to financial products is critical," he added.

The company aims to design, build and launch new products every year.

Last year saw some big ticket deals in the broader fintech space, including PolicyBazaar’s $238-million cheque from SoftBank and others, LendingKart’s $87-million round led by Fullerton, ClearTax’s $54-million round led by Hong Kong-based Composite Capital, Digit Insurance and InstaReM’s $45-million (each) cheques, and INDwealth’s $30-million funding round from Hong Kong-based hedge fund Steadview Capital.

Lightspeed India Partners

The VC firm had launched its first India-dedicated fund of $135 million in 2015 and has since then ramped up its pace of investments in the country. Until then, it was investing out of its global fund although Lightspeed continues to make late-stage investments from that vehicle.

Lightspeed raised its second fund of $175 million (Rs 1,200 crore) last July. The second fund expects to invest in 25-30 companies mainly at the early stages and make a few opportunistic deals at the Series B and C stages.

In 2018, it also opened its second India office in Bengaluru after years of working of out of Delhi and strengthened its team by appointing former Andreessen Horowitz executive Hemant Mohapatra as a partner.

The VC firm was one of the early investors in branded budget hotels marketplace OYO. Its other major portfolio companies include ed-tech unicorn Byju’s, business-to-business (B2B) marketplace Udaan, social networking platform ShareChat and food-tech firm FreshMenu.

Earlier in January, VCCircle reported that Lightspeed was set to become the first institutional investor in a company which enables cashless payments on vending machines.

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