InnoVen Capital commits $6.2 million debt funding in Power2SME

Power2SME, the B2B online marketplace for Small and Medium Enterprises (SME), has raised $6.2 million in debt funding. This is the third time that Power2SME has taken debt funding from InnoVen; the online marketplace had earlier taken a loan two years back.

In September last year, the company had raised funding of $10 million from the International Finance Corporation (IFC), a member of the World Bank Group. The five-year-old startup raised around $35 million in four earlier rounds from Kalaari Capital, Accel Partners, Inventus Capital, as well as Nandan Nilekani, who is also their strategic advisor.

Power2SME helps small and medium enterprises buy raw materials at bulk prices and get working capital without collateral. Started in 2012, the lending platform broke even in November 2016, and is now profitable. It recorded revenues of more than Rs 1,000 crore in the last fiscal. R Narayan, Founder and CEO, Power2SME said:

“Every dollar /rupee we raise at Power2SME goes towards enabling the SME ecosystem. Every dollar/rupee that InnoVen has given us will get multiplied manifold over the next few years. So if InnoVen has funded us with 10 million, it means they have funded the SME 100 million over the next year. InnoVen’s understanding of SMEs' growth imperatives and the need to build and strengthen the ecosystem gives us great partners to share our vision. We appreciate their commitment to growing the SME B2B ecosystem and working alongside to drive SME growth and prosperity as we innovate rapidly to remove roadblocks in the SME journey."

Narayan added that raising venture debt helps them conserve equity, minimise dilution, and extend the runway. The Power2SME team believes that this partnership with InnoVen brings in  extensive expertise, and will help accelerate the company's transformation while better positioning them to execute their strategy and mission to enhance the business offerings for the MSME sector.

Power2SME achieves pricing power through aggregation of demand from various SMEs across the country and negotiating a better deal for SMEs with large suppliers in specific sectors. Its increased portfolio offering addresses challenges in raw material procurement, finance, and MRO needs. The venture debt raised by the company will be further directed towards growth and working capital, thus helping them emerge as a strong leader in the B2B commerce platform in India.

Bright future

Elaborating on this recent investment, Ashish Sharma, CEO, InnoVen Capital India, said in a press statement: “We are pleased to partner with Power2SME, a leading B2B commerce marketplace in India backed by a strong group of investors. We have known Narayan and the P2S team, and look forward to continuing to be a part of their growth journey. In addition to venture debt, we will also support their working capital needs through our partner financial institutions”.

More than 40 per cent of the global economy is powered by SMEs. In India, around 17 per cent of the GDP is powered by the SME sector; manufacturing SMEs cover 7.5 per cent of the GDP. With the current government focusing on manufacturing, and addressing the industry’s needs through campaigns such as Make in India and Skill India, the sector is looking at a brighter future.

India has the largest base of SMEs in the world after China. However, Indian SMEs contribute only 8-10 percent to the GDP, compared to 60 percent in China.

The year also seems to be the time of debt funding and investments. The good news for startups is the rise in debt financing. The traditional banking system, with its focus on collateral-based debt, has historically been unable to cater to the tech startup ecosystem. The rise of venture debt funds like Trifecta Capital, InnoVen, and IntelleGrow is ensuring that startups do not have to resort only to equity finance to fulfil their capital requirements. It will be interesting to see how this transforms the ecosystem.