It is established that the underserved retail segment of small and medium enterprises (SMEs) does not have as much access to formal funding and the necessary financial assistance as startups do. NeoGrowth aims to bridge that gap with their signature product 'NeoCash'.
Founders: Dhruv Khaitan and Piyush Khaitan
Year it was founded: 2012
Where is it based: Mumbai
The problem it solves: Serving SME merchants with necessary funds
Funding raised: Angel funding, $90 million
A problem plaguing small businesses in the country is the lack of institutional funding options available to them. This dwarfs their growth and expansion plans.
With a mission to have a positive social impact on the financial lives of small and medium-sized business (SMB) merchants across India, the brother duo Dhruv Khaitan and Piyush Khaitan founded NeoGrowth to process unsecured loans to merchants who accept card or other digital payments from customers using its proprietary technology platform.
The platform is backed by Omidyar Network, Aspada Investment Company, Khosla Impact, Accion Frontier Inclusion Fund (AFIF) - Mauritius, IIFL Seed Ventures Fund I and LeapFrog Investments.
Founder Piyush Khaitan told YourStory,
"About 50 percent of the SME merchants in the country are creditworthy but they have been excluded from accessing loans based on traditional underwriting methods. We want to change that."
Prior to NeoGrowth, the brothers had founded and managed Venture Infotek, which was a prominent leader in the Indian e-payments industry and managed merchant transactions for acquiring banks as well as credit card issuers and large loyalty programmes.
It was during these years that they both understood the behaviour of merchants from close quarters and noticed their pain points, especially the difficulty they faced in terms of meeting the financial needs of their business.
"It was during this time that the thought of helping this segment formulated into an idea, which today you can see in the form of NeoGrowth," said Piyush.
Set up in 2012, NeoGrowth has disbursed more than 12,000 loans till date across India and has a renewal rate of more than 65 percent. The customer segment varies from restaurant owners, petrol pump owners, and automobile dealers to mom & pop grocery stores and pharmacies.
NeoGrowth loans are short-term and hassle-free, with the facility of daily repayment, which reportedly is a key customer delight factor.
The brothers know a thing or two about SMB requirements. They had together founded and managed a number of touch and tech-based companies to serve the SME segment. They have deep experience in technology and a clear understanding of the retail finance sector along with entrepreneurial skills.
With its signature product 'NeoCash', the company aims to help various merchants across India grow their business by providing them with the much needed financial help without many hassles. The company caters to the underserved SME market by adopting an innovative approach and validating the creditworthiness of the business by looking at current business performance and stability.
Right now, NeoGrowth offers loans ranging from Rs 5 lakhs to 1.5 crores. These loans are given based on the payment card swipes happening at the merchant’s outlet. With a team strength of 400, NeoGrowth now operates in 21 different cities of India.
The short-term loans have a key advantage in the form of automatic repayments offered over a conventional loan. This small feature helps the merchants to better plan their cash flows, especially during the slow and offseasons.
"NeoGrowth loans are processed much quicker than a typical loan, and are given basis the underlying performance of the business rather than the personal credit history of the merchant itself thereby providing an alternative for these underserved businesses that typically may not qualify for such loans."
With their in-house technology itself, the company processes loans to merchants against their future digital sales, thereby unlocking credit that is tailored to the business requirement of the merchants and helping them grow their business. The technology relies on analytics-driven underwriting.
With companies like Capital float, LendingKart moving steadily in the market, Piyush says that the digital lending space is much bigger than what they imagined.
Last August, Bengaluru-based Capital Float had raised $45 million (Rs 293 crore) in Series-C funding in a round led by Silicon Valley-based Ribbit Capital, along with participation from existing investors SAIF Partners, Sequoia India and Creation Investments.
"Based on our experience, achieving unit economics and credit assessment of the underserved borrower are key challenges in this business. We are yet to achieve the perfect synergy to acquire large number of customers through Digital medium. This is a crucial acquisition channel for us and we aim to utilise it in a much more effective manner."
The average loan amount given by NeoGrowth is Rs 18.5 lakh. Today, with an assets under management (AUM) of Rs 1,000 crore, NeoGrowth has seen its revenue double every year.
With a total funding amount of $90 million, NeoGrowth claims to be the only firm in the Fintech domain that measures its success based on the positive social impact caused by the loans it gives.
"We come out with an annual social impact report prepared by an independent third party. The report showcases the impact that NeoGrowth loans has brought on the lives of retailers in terms of business growth, women empowerment, job creation, and fostering entrepreneurship."
Having A/B tested his career with engineering, sales, writing, and product management, Sampath now executes a callback function for a second stint with YourStory. Loves to eat, learn, write, travel, and take photographs. Often spotted consuming lethal doses of Dosa on the main roads of Bangalore. Tweet to him at @sampathptrvu.