Peter Thiel’s Valar Ventures has doubled down its wager on Velocity, which operates a revenue-based financing platform for e-commerce and direct-to-consumer companies in India, simply months after it first backed the Bangalore-based startup.
The one-and-half-year-old Velocity stated on Wednesday it has raised $20 million in its Sequence A financing spherical. Valar Ventures, which led Velocity’s seed spherical earlier this yr, led the Sequence A as properly, the 2 stated Wednesday. Presight Capital, AngelList India head Utsav Somani’s iSeed, Maninder Gulati of Oyo, Zac Prince of BlockFi and Philippe De Mota of Hedosophia additionally participated within the spherical, which takes the startup’s all-time elevate to $30 million.
Velocity is trying to construct a dependable different to enterprise capital and conventional financial institution debt for e-commerce and direct-to-consumer manufacturers in India. Relatively than charging an curiosity on the loans it sanctions, Velocity takes a low commonplace price and companies pay it again based mostly on their income.
Abhiroop Medhekar, co-founder and chief govt of Velocity, advised TechCrunch in an interview final week that the length of the payback interval varies based mostly on the income a enterprise generates.
“In case the accomplice agency’s income finally ends up rising, it advantages us as a result of the length of the mortgage payback time is shorter. In case the income falls, then we additionally take that danger together with the enterprise. We’re saying it’s completely fantastic for them to take longer if the enterprise just isn’t doing as properly,” he stated.
Velocity integrates its platform with the accomplice agency’s distributors and is ready to inform how the enterprise is doing. The startup makes use of over 50 parameters to evaluate whether or not it might probably present a mortgage to a enterprise, and credit the quantity inside 5 days.
Direct-to-consumer and e-commerce companies, each of that are capital intensive initiatives, sometimes want to boost giant quantities of capital to run their operations. Till just lately, the companies both relied on common lenders or enterprise companies for financing, however the nature of their enterprise has made each such choices not as viable. In accordance with a current estimate, lower than 0.5% of over 75,000 unbiased e-commerce shops on platforms equivalent to WooCommerce and Shopify in India have been fairness funded.
When Velocity companions with a enterprise, “it additionally has a pores and skin within the recreation. And that’s the reason we see so many repeat prospects. 78% of companies which have labored with us come again to take extra loans from us sooner or later,” stated Medhekar.
Citing its personal figures, Velocity stated that the manufacturers which have traditionally raised capital via Velocity grew their revenues by 1.5 occasions inside six months of funding. A few of its prospects embody PowerGummies, Inexperienced Soul, WallMantra, BellaVita, Smoor Sweets and CrossBeats.
Velocity has amassed 175 prospects and made a complete of about 250 investments to this point.
Medhekar, who beforehand labored as an investor at Elevation Capital, stated integrations into a number of distributors and programs provides Velocity full visibility into the financials of how its accomplice companies are doing. To his shock, he stated, even the founders of these companies didn’t have such readability.
“As a founder, my information is scattered throughout Amazon, Shopify, Fb, Google and different companies and I could not be capable to compile all of them to attract any perception,” he stated.
To sort out this, Velocity just lately launched a free product referred to as Velocity Perception that helps its accomplice companies get a every day report delivered to them on WhatsApp every morning. “It’s in our greatest curiosity that our companions additionally develop. We discovered that these actionable insights are serving to the companies inform their choices,” he stated.
The product has made inroads with many companies in current months and plenty of non-customers are additionally signing as much as the platform to obtain insights, the startup stated. Velocity could introduce a paid service for its non-customers and it’s seeking to broaden its perception choices by including extra metrics and benchmarks, stated Medhekar.
Velocity itself has grown 10 occasions in current months, stated Andrew McCormack of Valar Ventures. “Regardless of this exponential development, their portfolio high quality stays robust. We have been impressed by their robust buyer orientation, tech-product DNA, and impressive development plans. We’re excited to help their daring imaginative and prescient of empowering hundreds of entrepreneurs in India,” he stated.
The startup, which companions with NBFCs to finance loans, stated it goals to deploy over $134 million to over 1,000 e-commerce and direct-to-consumer companies within the subsequent one yr. “Our long-term imaginative and prescient is to empower new-age companies via a number of financing merchandise. The rationale we began with revenue-based financing is as a result of we felt the entry to financing is the most important hole for them. As we spend extra time, we’ve got recognized a number of extra areas by which we want to broaden,” stated Medhekar.
Divij Bajaj, Founding father of PowerGummies, a buyer of Velocity, stated, “we selected to boost capital via Velocity due to their pace and comfort. We have been capable of securely join our on-line gross sales and advertising information with Velocity’s platform inside a couple of clicks and bought funded inside per week. Their phrases have been higher than different options and we bought to retain our fairness in a rising enterprise.”