Drip Capital, which provides working capital finance to small and medium-sized enterprises (SMEs) that are engaged in cross-border trade, has raised $15 million in equity funding from Accel India, Sequoia Capital India and Wing VC in a Series A round. The latest funding round also saw participation from the company’s existing investors Y Combinator and others, who had invested $5 million in a previous seed round. Additionally, the company also raised an undisclosed amount of debt capital from Silicon Valley Bank and others.
Although SMEs in emerging markets contribute to over $2.5 trillion of global trade flows, these companies have limited access to credit, restricting their growth. Drip uses alternative data and technology to underwrite and finance cross-border trade transactions. Drip’s working capital offering to exporters is a credit line, which ranges from $100,000 to $2.5 million, depending on the exporter’s size and requirement. The financing is unsecured and offered without any collateral.
“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, however experience 50% rejection rates from banks for trade finance,” said Pushkar Mukewar, co-founder and co-chief executive officer, Drip, in a statement.
Through its investments, Drip has funded over $100 million of trade flows across industries in the last 18 months of operations. Drip now plans to use this funding to scale up operations in India and replicate the model in other geographies.
“With a partner like Drip Capital, emerging market exporters now never need to say ‘no’ to a new order due to working capital constraints. This offers a huge boost to small and medium businesses which play such a significant role in India’s trade network,” said Mohit Bhatnagar, managing director, Sequoia Capital India Advisors.
Sequoia Capital has been one of the most prolific investors in the Indian financial services space. Its portfolio includes the likes of online financial services marketplace BankBazaar, micro credit provider Equitas, online lending platform Capital Float, SMEs focussed non-banking financial company Finova Capital, and MoneyTap, which is India’s first app-based consumer credit line, among others.