Drip Capital, a Palo Alto and Mumbai-based fintech startup that offers collateral-free working capital to small and medium exporters, has raised $25 million in a series B funding led by existing and new investors. Existing investor Accel led the round with participation from Sequoia India, Wing VC, and Y Combinator. The new investors that backed the trade finance startup include GC1 Ventures and institutional investor platform Trusted Insight.
The company, which commenced operations in 2016, uses proprietary technology for paperless credit risk assessment using alternate data points to extend short-term post-shipment finance, up to a ticket size of $2.5 million, to SME exporters. Drip Capital has facilitated trade worth $500 million till date and says that it aims to enable trade worth $1 billion by FY20.
To facilitate this, Drip Capital will deploy the funds raised through this latest round to offer new products and enter new geographies such as Mexico and the United Arab Emirates.
Till date, Drip Capital has raised $45 million in equity and $55 million in debt.
“Trade finance is an age-old paper-based industry dominated by banks that primarily focus on large, established corporate customers. Hence, small businesses, despite accounting for 50% of merchandise exports from India, remain largely neglected,” says Pushkar Mukewar, co-founder and co-chief executive officer at Drip Capital. “Our mission is to level the playing field for these small business exporters, not just in India but across emerging markets around the world.”
Mukewar co-founded Drip Capital with Neil Kothari, who is the co-chief executive officer. The two were roommates while pursuing their MBA from Wharton School of the University of Pennsylvania.
A statement issued by the company on Wednesday says that Drip Capital’s business has grown 10 times in the last two years as it has extended credit to over 400 exporters across India.
“With an automated system, Drip provides a seamless customer experience and can finance a shipment with the click of a button. On the backend, Drip integrates with multiple electronic data sources and has built proprietary algorithms to underwrite the risk of every shipment,” says Kothari.
The government’s focus on fortifying the health of small and medium enterprises, which can create jobs and add economic value, and the inability of banks to efficiently lend to these borrowers due to the stress of rising bad loans leaves a void that fintech startups like Drip are expecting to fill. The global trade finance gap is estimated to the tune of $1.5 trillion, and the gap in India is pegged at about $80 billion.