Micro-lending startup KrazyBee raises $8M, plans to enter payday-loan segment

On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.

The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.

Speaking to YourStory about the fundraising, co-founder Madhusudan E said the funds will be used to capitalise the company's NBFC to strengthen the loan book, grow data sciences and risk modelling capabilities and to expand services to six more cities.

Currently, KrazyBee primarily operates in five cities, including Bengaluru, Hyderabad, Vellore, Pune and Mysore. With the fund infusion, it plans to take its services to Mumbai, Chennai, Nagpur, Nasik, Coimbatore and Manipal.

Also read: Tablet, bike or semester fee? KrazyBee gives college-goers purchasing power

Essentially an online instalment store for students, Madhusudan explains Krazybee has an NBFC license under the brand KrazyBee Services, co-lending along with six other partners. IIFL is the largest among the six partners.

The new funds will allow the company to increase lending. The startup is also looking to hire another 50 members, primarily for its technology and sales division. At present, the firm has a team of close to 100 members.

Speaking on the fund raise, Madhusudan E told YourStory,

“We want to now position ourselves as a micro-lending platform for young professionals who have under three years of experience. Generally, banks don’t look at this segment to offer credit cards. We want to grow with our customers, from students to young professionals and be a part of their journey.”

He adds capturing the market early (through students) gives the company the basic advantage over key online lending platforms like ZestMoney, Simpl, and credit lines like MoneyTap.

Further, Madhusudan explains that earlier, all loan tenures with customers (students) mostly lasted the duration of college. Now, the company is looking to extend the tenure beyond college, based on merit-based algorithms, to continue usage of service as students become young professionals.

The firm also plans to foray into cash lending, entering into the payday-loan segment, with startups like EarlySalary already operating in this space. KrazyBee may look to partner with corporate entities to operate this service. 

“The idea is to cater to a customer throughout their lifecycle, and grow with them by adding different product lines to the service,” adds Madhusudan.

How well do their stack up?    

Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications. The founder claims that of this number, 75,000 loans have already matured with steady settlement.

“A big reason for this spike was the heavy discounts given by e-commerce firms as a part of their sale in September,” adds Madhusudan. “When e-commerce spends increase, we see that company growth is in tandem. The numbers have also picked up heavily.”

"The Indian demography has a large population of urban young adults, that spends a lot online and offline. For such an enormous ecosystem, the need for urgent personal finance for purchase requirements is highly underserved. An appropriate focus towards tech-based credit evaluation and compliant sourcing of funds can help capture and penetrate this market big time," said Shirley Mao, Investment Director, Xiaomi Technologies.

The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months. The founder claims that currently there are no product, the firm offers which runs beyond 12 months of tenure.

The company is positive it would reach a loan book size of Rs 150 crore by the end of this fiscal year.

Earlier this month, KrazyBee’s competitor SlicePay also announced raising $2 million as a part of its ongoing Series A. Japan-based Das Capital, Russia-based Simile Ventures joined the round along with existing investor Blume Ventures had invested in the round.

In comparison, SlicePay claims that it has a loan book of close to Rs 45 crore since inception. It currently caters to more than 30,000 orders a month.