This comes at a time when an increasing number of VC funds are forming a capital pool to meet the demand for debt and structured loans among smaller startups.
“… for a lot of startups that are struggling to raise equity capital, revenue-based financing is the only option to unlock the next stage of growth and, hence, it is becoming a preferred choice for a lot of early-stage founders,” said Manish Kumar, cofounder and CEO, KredX.
Revenue-based financing is where lenders disburse a certain amount of loans to the business, in lieu of an agreed percentage of the gross revenue, for a fixed tenure. Over and above the principal, these businesses pay a multiple agreed to by both parties.
“We have now started working with VC funds, incubators and venture debt funds to identify the companies that are in need of growth capital that we can fund and can be primed for an equity round at a later stage,” Kumar said.
The fund will look to disburse between Rs 5 lakh and Rs 3 crore to such companies for two to 18 months, he added.
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In April, the Tiger Global-backed company said it had forayed into revenue-based financing to lend to small and medium businesses through its network of lenders.
Over the past two years, KredX has been disbursing loans to several brands that sell on e-commerce platforms such as Flipkart, Amazon and Myntra, through its revenue-based financing product.
Till date, KredX has helped more than 25,000 businesses and has facilitated disbursements worth Rs 7,000 crore.
Since smaller businesses do not generally have collateral to offer and equity dilution is expensive, such small-ticket loans help with their working capital requirements.
Demand for such capital is increasing and several startups, such as Velocity, GetVantage, N+1 Capital, have entered the space.
In 2019,
KredX raised $26 million as a part of its Series B funding round, from Tiger Global and existing investors, including Sequoia Capital and Prime Venture Partners.
Founded in 2015 by Kumar and Anurag Jain, KredX helps businesses meet their short-term working capital needs by facilitating discounting of their unpaid invoices.
It also offers small revenue-based loans to small and medium enterprises, especially in the direct-to-consumer (D2C) and Software-as-a-Service (SaaS) sector.
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