MUMBAI : Leap Finance, a fintech startup for Indian students pursuing international higher education, on Tuesday, said it has raised $5.5 million led by venture capital firm, Sequoia Capital India Advisors. The round also saw participation from angel investors, including Bhupinder Singh, founder of consumer lending firm InCred and Kunal Shah, founder of credit card payment startup Cred.
Founded in 2019 by IIT-Kharagpur alumnus Vaibhav Singh and Arnav Kumar, the startup offers loan products and services that help Indian students pursue overseas education. It is currently accepting applications from students starting graduate studies in the US in the upcoming fall season (2020), offering them education loans that cover full study cost coverage with no collateral, at interest rates starting at 8%.
“Indian students make up for 25% of a class in many top graduate programs in the US. These are smart, hard-working students who got in the best programs and have a great future ahead. Yet, the education loans they avail of are at interest rates twice as high as their American peers,” said Vaibhav Singh, co-founder of Leap Finance.
“This disparity stems from systemic inefficiencies and lack of innovation. We have innovated on multiple dimensions – technology, financial structuring and risk – to bring down the interest rate and improve customer experience,” he added.
The company’s technology-enabled platform enables students to apply online and get a financing offer in less than 10 minutes. Presently, the startup supports more than 150 American schools, and is looking to finance 1,000 students in the upcoming fall season.
“Indian students studying abroad today spend $15 billion annually and we estimate an annual credit need for over $5 billion against this. This attractiveness of the market, strong founder-market fit and Leap’s mission-driven team is what led to our belief in an early partnership with them,” said Ashish Agrawal, principal at Sequoia Capital India Llp.
Sequoia Capital India, the local arm of storied Silicon Valley venture investor Sequoia, is an investor in startups such as Oyo Rooms, Zomato, Byju’s Learning and online grocer Grofers. The fund is presently investing in startups across India and Southeast Asia, from its sixth fund that closed at $695 million fund in August 2018.
Last June, Mint reported that the venture capital firm was looking to raise an additional $200 million to add to its existing fund, driven by a fast-growing market and interest from limited partners. Along with the add-on, Sequoia’s sixth fund will almost be on a par with the $920-million fifth fund launched in 2016.
From the sixth fund, its other Indian investments include two-wheeler rental startup Bounce, payments aggregator BharatPe and student housing firm Stanza Living.
While lending startups have been at the core for venture investments, 2019 saw a funding boom in fintech companies that focus on newer verticals, such as neo-banking, education financing, school financing, enterprise accounting for small businesses, and digital payments funding.
As of 2019, fintech startups raised a record $1.47 billion in venture capital across 118 deals, compared with $826 million across 106 deals in 2018, according to Venture Intelligence, a data tracker. Here, startups are firms less than 10 years old.