California-based trade finance firm Drip Capital has raised $15 million (around Rs 102 crore) in a Series A funding round from venture capital firms Accel Partners, Sequoia India and California-based Wing VC, a company statement said.
The round also saw participation from existing investors Y Combinator and others.
Registered in the US as Drip Capital Inc, the company has also raised an undisclosed amount of debt capital from Silicon Valley Bank and others, the company said. It had previously raised $5 million in seed funding from Y Combinator and Accel Partners among others.
Founded by Pushkar Mukewar and Neil Kothari in 2015, the company will use the capital to scale up operations apart from entering the overseas markets. Drip Capital provides working capital loans to small and medium sized enterprises (SMEs) that are engaged in cross-border trade.
“Drip 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% of exports (around $120 billion). However, these SMEs experience 50% rejection rates from banks for trade finance,” said Mukewar, co-chief executive of the venture.
Drip Capital uses alternative data and technology to underwrite and finance cross-border trade transactions, irrespective of value, thereby giving SMEs access to working capital, the company said. Banks, with their manual underwriting processes and high touch customer model, have not been able to do so cost effectively for SMEs, it added.
“Our assessment is based on trade performance rather than asset value which allows us to effectively service SME exporters,” said co-founder Kothari.
The company has funded over $100 million of trade flows across industries in the last 18 months of operations, it said in the statement.
Drip Capital offers exporters a collateral-free facility with quick approval within a week, allowing them to service these orders in time, the company said. It provides loans ranging from $100,000 to $2.5 million to exporters.
“This offers a huge boost to small and medium businesses which play such a significant role in India’s trade network. This will address their working capital constraints,” said Mohit Bhatnagar, managing director, Sequoia Capital India Advisors.
Drip Capital has offices in California in the US, and Mumbai and Bengaluru in India. Investors Accel and Wing VC believe that the company can replicate its success in the overseas markets as well.