[The F Word] Fintech startup Drip Capital raises $20 M from Accel, Sequoia India, Wing VC and Y Combinator
California-based fintech firm Drip Capital, which focuses on the Indian SME sector, has raised $20 million from Accel Partners, Sequoia India Capital, Wing VC and Y Combinator.
Fintech company Drip Capital said it has so far raised $20 million in funding through several tranches in two rounds. The California-based startup raised $15 million from Accel Partners, Sequoia India, and Wing VC in a Series A round, with participation from existing investors Y-Combinator and others, who had invested $5 million in the seed round.
Additionally, the company has also raised an undisclosed amount of debt capital from Silicon Valley Bank and others.
“With this funding, we aim to ramp up sales across India and are also looking to replicate this model in emerging markets,” says Pushkar Mukewar, Co-founder and Co-CEO of Drip Capital.
Started in 2014, the company was a part of Y-Combinator, and pivoted to its current model to launch its product in 2016. Drip Capital is currently focused on India, and provides working capital finance to emerging market small and medium-sized enterprises (SMEs) that are focussed on cross-border trade.
Drip Capital’s aim is to level the playing field for these SMEs and help increase global trade.
The platform uses alternative data and technology to underwrite and finance cross-border trade transactions, irrespective of value, thereby giving SMEs access to working capital. Banks, with their manual underwriting processes and high touch customer model, have not been able to do so cost-effectively for SMEs.
Drip Capital started operations in India and has, in the last 18 months, claims it has funded over $100 million in trade flows across industries. Pushkar says Drip Capital comes at a crucial time for Indian exporters with a slowdown in bank lending, and delays in GST input tax credit refunds.
“The working capital gap is quite pronounced in India, where SMEs contribute to 40 percent of exports - approximately $120 billion. However, they experience 50 percent rejection rates from banks for trade finance,” explains Pushkar.
Once it signs up on Drip Capital, an SME can submit its invoices, and open a credit line to help finance the next orders.
“With a partner like Drip Capital, emerging market exporters now never need to say ‘no’ to a new order due to working capital constraints,” says Mohit Bhatnagar, Managing Director, Sequoia Capital India Advisors.
Neil Kothari, Co-Founder and Co-CEO of Drip Capital, adds that their assessment is based on trade performance rather than asset value. This, he says, allows the company to effectively service SME exporters.
Accel’s Abhinav Chaturvedi says, "Drip is one of the few fintech companies that focuses heavily on data analytics to build a highly scalable trade finance platform which, we believe, can go global. We are excited to continue our partnership with the team at Drip Capital."
Citing an example of how Drip Capital can help SMEs, Pushkar says an agro-commodity exporter from Andhra Pradesh was looking for export finance to service orders from a number of US and European buyers. The exporter wanted additional working capital but his bank needed a month to evaluate the credit application and also required collateral.
“Drip offered the exporter a collateral-free facility with a quick approval within a week allowing them to service these orders in time. Over the last year, with effective utilisation of Drip’s facility, the exporter’s sales have grown 60 percent,” he says.
With offices in California and Mumbai, Drip Capital primarily focusses on raising debt from accredited investors and the US markets. While sector agnostic, Drip Capital founders say the company avoids lending to sectors like arms and ammunition, perishable commodities, and jewellery.
Jeff Schneble, Partner at Wing VC says, “With a cross-border presence and expertise in data science and credit, we believe Drip’s team is well-positioned to capitalise on the global trade finance opportunity.”