How this Bengaluru startup has survived and thrived through two crises

Having survived the 2018 IL&FS NBFC crisis, Bengaluru fintech startup Capital Float is taking the coronavirus pandemic challenge head-on.

India is home to over 63 million micro, small and medium enterprises (MSMEs), many of whom had to pivot to new business models to survive the coronavirus pandemic. And there have, of course, been the unlucky ones who had to shut shop entirely due to their cash reserves totally drying up. The MSME sector is considered the backbone of the Indian economy, and thus it’s no surprise that the revival of the two are deeply inter-linked. A recent survey showed that 50 percent of MSMEs have seen a 20-50 percent impact on their earnings due to disruptions caused by COVID-19.

In this backdrop, several digital lenders have stepped up to help the sector, especially hand holding them through the process of digital adoption, which is still new to many small businesses.

Bengaluru-based startup Capital Float is one such player, doing its bit to help the MSME sector out of the woods. Founded in 2013, by Stanford MBAs Gaurav Hinduja and Sashank Rishyasringa, the Reserve Bank of India (RBI) registered NBFC (Non Banking Finance Company) has disbursed over Rs 8,000 crore in loans across 314 cities so far.

“In April, when the country was locked down, our first reaction was what do we do, how do we actually handle this? And our collections efficiencies fell to about 50-55 percent in April-May. But the moment Unlock 1.0 happened, our team jumped back into the field, got close to the customer, and started figuring out who was doing well and who was not, and gave them moratorium in a thoughtful way such that we were actually able to get back to 85-86 percent collections efficiency. 

“We find ourselves, almost to our own surprise, having one of the best collection efficiencies among our peers at this moment, whereas a year ago, this was not something that was even on our radar,” Sashank Rishyasringa, Co-founder and MD, Capital Float tells YourStory Founder and CEO Shradha Sharma during a chat in July.

Watch the full interview here:

Capital Float redesigned its entire SME (Small and Medium Enterprises) loan product portfolio (something that was already in the pipeline) in the three months of lockdown, enabling its SME customers to apply for and repay a loan digitally. The loan gets sanctioned in real-time, with the right kind of credit checks and parameters weaved into the system.

“What has really changed is the delight we're able to give an SME, while he or she is applying for a loan completely online. I think it is a key way of looking to change the business, and going forward, the idea is to keep inventing on that. How can you make every small process even more digitised?,” Gaurav shares. The idea is to give the customer an experience that is as seamless as buying a TV or fridge online, he adds.

Pandemic partners

Apart from financing loans, Capital Float has partnered with ecommerce companies such as Amazon (which is one of its investors), to provide customers with a credit programme. The Bengaluru-firm also partnered with a bank after there was a massive uptake in the number of customers applying for the programme. 

“Along with us, the bank is also seeing growth in terms of the number of customers, and how this is actually advancing its technology to be able to adapt to a digital credit programme. So the combination of a partner like Amazon, a bank, and Capital Float in the middle, not just being the tech provider but also a credit provider, and using that combination skillfully, is what our edge has been over the last few years,” Gaurav explains.

Backed by investors such as Amazon, Saif Partners, Sequoia Capital India, and Ribbit Capital, the NBFC has a customer base of 4.7 lakh in India. According to Gaurav, the company nearly touched its highest customer acquisition in a quarter during the months (April, May, June) when the pandemic was at its peak. In April, Capital Float raised $15 million in a fresh funding round from its existing investors.

Tackling a crisis, yet again

This is not the first time that Capital Float has been in the middle of a crisis. Back in 2018, the company had to go through a gut-wrenching transformation due to the IL&FS NBFC crisis that virtually brought India's $370 billion shadow banking sector to its knees.

“We found ourselves better prepared when COVID-19 hit, both to respond to some of the challenges that had come up and also try and find opportunities in the midst of all these crises. So it's been a very tumultuous and interesting time. I think there have been areas that we've been challenged by where we've had a playbook to respond, and there have been things that have taken us completely by surprise,” Sashank says. 

According to Gaurav, being “a little slower, more focussed on what you take on your plate and the realisation of which industry you are in and respecting the journeys of traditional players” has helped the co-founders and the company grow. 

“I think a lot of that has been around figuring out what do we need to be really good at and what's the customer segment we need to focus on,” Sashank adds.

Edited by Ramarko Sengupta


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