Wall Street bank Goldman Sachs Group Inc. is looking to invest in early-stage financial technology, or fintech, start-ups through strategic partnerships in India.
The investment bank’s move comes at a time when venture capital funding for start-ups is ebbing.
The investments will be made by Goldman’s Principal Strategic Investments (PSI) Group that makes long-term investments, said a senior executive at the firm, adding it will start investing in companies in Bengaluru and then expand to the rest of the country.
“We have a significant presence in Bengaluru, and when we think about what we can do, we think of Bengaluru as the starting point for our innovation,” said Alokik Advani, managing director and head of PSI Group at Goldman Sachs.
PSI Group has already met some companies and is assessing investments, said Advani.
The average investment size would be $2-10 million. The investments bank is open to tie-ups with other venture capital funds operating in India to invest in series A rounds.
Most investments would be strategic partnerships which will be used by Goldman Sachs.
To be sure, PSI Group, which invests from Goldman’s balance sheet, has made about 75 investments globally and 12 in the Asia Pacific region. But it is yet to invest in the Indian start-up ecosystem. In India, the PSI team looks after its vintage investment in National Stock Exchange Ltd.
Globally, the PSI Group has invested in firms such as financial communication firm Symphony Communications Services Llc, UK-based data provider Markit Ltd, Kensho Technologies Inc. and trading platforms like AG Delta Pte Ltd, BATS Global Markets Inc., among others.
“Our strategic plan is to mentor and participate with local start-ups, make strategic investments for minority stake and create partnership. If we think we can add value we can take a board seat,” Advani said.
The PSI Group will focus on investments in enterprise solutions, cloud-computing, security and data management, operations, data analytics, trading platforms, payments and crowdfunding, among other things.
“In fintech, large part of our focus is on data analytics and machine-learning, regulatory & compliance technology, which have gained traction in the last 4-5 years,” he added.
The investment banking firm, which employs nearly 35,000 engineers globally and has been projecting itself as a tech firm, is looking to do the same thing in India.
“Globally, a third of our work force is technologists; so, the focus is the same as globally. There are a lot of technology projects, and we are engaging with them deeper and working with start-ups,” Advani said.
According to VCCEdge, the financial research platform of VCCircle, venture capital funding, which hit a peak during January-March 2015, fell in the same period this year.
Between January and March this year, start-ups managed to raise just $334 million across 88 deals whereas during the same period in 2015, companies managed to raise $1.8 billion across 138 deals. The share of venture capital funding, by value, dipped by about half to 14.6% so far this year.