SIDBI backing is a ‘huge stamp of credibility’ for Cedar Hill Capital: Sahil Anand

Enterprise FinTech is becoming a major focus as India's financial services sector embraces technology-driven changes, with AI, cybersecurity, fraud detection, and regtech revolutionizing banking operations. The Managing Partner of Cedar Hill Capital, Sahil Anand, is placing a strong emphasis on this prospect, employing a strategy concentrated on industries to invest in emerging businesses catering to Indian and worldwide economies. In this conversation with ET Digital, Anand discusses Cedar Hill’s investment thesis, what it looks for in founders, the growing role of AI in enterprise FinTech, and why legacy banking infrastructure could offer a significant opportunity for the next generation of technology companies. Edited excerpts.

Economic Times (ET): SIDBI’s Startup India Fund of Funds 2.0 has committed 15–20% of your target corpus. What does this institutional backing mean beyond capital, and how do you expect it to influence your ability to attract more LPs and source high-quality startups?

Sahil Anand (SA): The institutional backing of SIDBI means a lot to us, especially because SIDBI’s protocols have become more stringent and advanced over time. We were fortunate to have a number of institutional LPs even before SIDBI came on board, but having SIDBI join our fund right before the final close is a huge stamp of credibility and gives our other LPs a lot of confidence.


From a founder’s perspective, SIDBI capital is permanent capital. As opposed to having primarily HNIs as LPs, having large institutions such as SIDBI gives founders confidence that the fund investing in them has a steady and strong base of capital-not only for the initial investment, but also for follow-on rounds.

ET: Why did Cedar Hill Capital choose to focus exclusively on AI-first enterprise technology for financial services when much of the venture ecosystem continues to chase consumer AI and horizontal SaaS opportunities?

SA: For anybody who knows the background of Cedar, the Cedar ecosystem, and my own background over the last 10 years, our expertise is strongest in enterprise technology and SaaS. So, for us, it was logical to focus on enterprise rather than consumer FinTech for the first fund.

We also know that enterprise technology and banking technology have been outdated for a very long time. Banks have traditionally operated on clunky, legacy systems provided by old-school vendors. We are very confident that FinTech 2.0 is going to be the enterprise revolution of FinTech. We believe the B2C phase has largely played out, and adding AI to this mix makes the opportunity even more exciting.

New-age enterprise technology, AI and the digital transformation of financial services together create a significant opportunity. We also believe consumer AI can be challenging because of regulatory issues and unit economics, and it can be difficult to build a real moat or remain deeply vertically focused. For all these reasons, enterprise technology is where we have chosen to focus.

ET: You plan to make another 10–12 investments over the next three years, with five expected this year. What qualities are you looking for in founders and startups, and which sub-sectors within enterprise FinTech excite you the most today?

SA: Yes, we plan to make another 10–12 investments. We hope to announce the next three or four soon; we are in the final stages of constructing those investments.

In terms of founders, one of the biggest qualities we look for is a genuine hunger to grow both within and outside India. The international aspect is important because enterprise technology solutions can often be geography-agnostic. Founders therefore need to be excited about chasing new markets, travelling, and building sales teams across regions.

The second thing we look for is how founders see AI playing a role in their businesses. We would very rarely entertain a company that has no AI anywhere on its roadmap. We may not make it mandatory for them to be an AI company today, but at the bare minimum, having a clear AI roadmap is very important.

In terms of sub-sectors, we are currently very excited about fraud, risk, and fraud intelligence. We recently invested in Sign3 in the fraud intelligence space, where they are solving for money mule accounts and the onboarding of risky users for BFSI. There is a lot happening in this space, particularly because of recent regulations.

The other areas we are actively evaluating include RegTech, GRC and cybersecurity. These are again sectors that have been dominated by old vendors and legacy technology for many years, and we are quite excited to discover new companies in these spaces.

ET: Enterprise FinTech often involves long sales cycles and highly regulated customers. How do you evaluate startups at the pre-Series A stage when commercial traction may still be limited, and what are the biggest red flags you watch out for?

SA: Enterprise FinTech is challenging because sales cycles are long and complicated. But it is important to recognise the flip side: once you win an enterprise customer, the nature of that relationship tends to be deeply integrated, sticky, and long-term. So, there are both positives and negatives.

We feel confident about enterprise technology because my background, and the Cedar platform’s background, has been in helping enterprise FinTech companies grow and helping banks and CTOs select enterprise technology companies. The Cedar platform has almost 70 years of legacy in this space. If there is anyone who should be betting on enterprise FinTech, I think it is us, and we say that with a lot of confidence.

In terms of what we look for, we expect to see some revenue. We don’t invest at the idea stage. Typically, the companies we back have early revenues of around Rs 10–20 lakh a month and five or six customers.

Those customers don’t necessarily need to be Tier-I institutions. They could be a Tier-II bank, cooperative bank, NBFC or FinTech. We don’t look only for big logos; we look for validation -real customers, paying customers and signed contracts.

Our role as an investor is then not only to bring capital, but also to leverage the fund’s deep expertise to help these companies with their go-to-market strategy and supercharge their GTM.

ET: AI adoption in banking and financial services is accelerating, but so are concerns around security, compliance, explainability and model hallucinations. How do you assess whether an AI startup is truly enterprise-ready rather than simply riding the AI wave?

SA: AI adoption is certainly accelerating, and there is a fair amount of technical diligence and questioning that we do around compliance and ensuring that data is being used in the right way.

From our fund’s standpoint, we run technical due diligence in parallel with business diligence. We look at what the company is doing around data, regulations, and cloud infrastructure, and how the data itself is being processed. So, there is quite a thorough analysis as part of our investment process.

The good news is that most of the companies we meet today have their own checklists for making customers comfortable around data. Interestingly, we are also seeing data increasingly move back on-premise. After the cloud wave of the last 10–15 years, some things appear to be moving back on-premise simply because it gives banks and BFSI institutions greater comfort.

Most companies today are very conscious of these issues. I wouldn’t say that anyone is ignorant about the need to operate within regulations, protect data, and remain compliant. Everyone has their eyes wide open.

ET: Your first investments include companies like Sign3, which addresses fraud intelligence and behavioural biometrics. Can you share what convinced you to back the company, and what early indicators suggest it is on the right growth trajectory?

SA: Sign3 was actually our third investment. We were very excited about the company because, traditionally, fraud and risk vendors have largely provided reactive fraud and risk-management software. These were typically old-school solutions from legacy vendors.

After doing a lot of outbound research in this space, Sign3 was one of the first solutions we found that was pre-emptive -identifying risk at the pre-onboarding and onboarding stage itself.

We discovered Sign3 when it had around 20 customers. They were able to demonstrate that approximately 80% of the time, they could detect fraud, money mule accounts and risky users for banks and FinTechs. They were also able to demonstrate recurring revenue and a clear ability to add new customers.

As we speak, they are in the process of multiple POCs with large public-sector and private banks, where they are likely to be selected as the onboarding and fraud-intelligence layer. For us, the investment was a combination of entering the space at an interesting time, seeing significant demand for a solution like this, and the company already demonstrating strong traction.

ET: India’s financial institutions are increasingly investing in AI-led infrastructure. How large do you believe the opportunity for enterprise FinTech is over the next five years, and where do you expect the next wave of innovation to emerge?

SA: As I mentioned earlier, banks and financial-services companies have grappled with old technology for many years. The last 10 years have been heavily focused on B2C and consumer FinTech disruption. Now, everything in and around the enterprise architecture of a bank -including core banking systems -is beginning to be disrupted and transformed.

We think this represents a huge opportunity. There are an enormous number of banks of different shapes and sizes, insurance companies and finance companies, both in India and globally. All of them increasingly need to operate on new-age technology, and technology is a significant part of their budgets.

So we believe the opportunity is immense. It is also an opportunity we deliberately selected because of my own background, the background of the fund manager and the FinTech lab that I was running before the fund, which we continue to run in parallel.

ET: Looking ahead, what are Cedar Hill Capital’s own growth ambitions? Are you targeting a larger successor fund, expanding beyond financial services, or maintaining a focused, sector-specialist investment strategy?

SA: There are a lot of advantages in being sector-focused. We can comfortably claim that we have some of the deepest domain expertise in this space - not only in India, but across the region and even globally because of the 70-year legacy of the Cedar platform.

For the moment, we will remain sector-focused because we believe we have a genuine right to win, both with LPs and founders, as well as a real ability to add value.

At the moment, we are not planning another fund because we are still deploying our first fund. We are only about two to two-and-a-half years into Fund I and still need to make another 10 investments. So, it will be some time before we announce our second fund.

That said, the future plan is obviously to have multiple funds. Our long-term ambition is to become the go-to investor across stages for anything related to financial services or financial-services technology. That is the overall aspiration.