- Trade finance company Drip recently announced it raised $25 million in Series B funding led by Accel
Drip Capital — a trade finance company — recently announced it raised $25 million in Series B funding led by Accel with participation from existing investors like Sequoia India, Wing VC, and Y Combinator. And the new investors in this round include GC1 Ventures and Trusted Insight. Including this round, Drip Capital has raised more than $45 million in equity and $55 million in debt.
What does Drip Capital do? The company uses technology to provide working capital to entrepreneurs and small company. This is essential as the trade finance gap is currently at $1.5 trillion globally, the majority of which is among small business exporters in emerging markets. This means $1.5 trillion of trade does not happen due to lack of access to working capital.
“We empower small companies and entrepreneurs in emerging markets whose export volumes range from $100,000 to $40-50 million a year. We focus on 10 different industry segments such as agro commodities, readymade garments, and industrial goods, and stay away from gems and jewelry and perishables (fruits and vegetables),” said Drip Capital co-founder and co-CEO Pushkar Mukewar in an interview with Mint. Mukewar also pointed out that trade finance is an antiquated paper-based industry that is dominated by banks that primarily focus on established corporate customers. As a result, small businesses remain largely neglected despite accounting for 50% of merchandise exports from India.
Drip Capital utilizes electronic data and technology for rapidly underwriting and financing cross-border B2B transactions. And with an automated system for financing transactions, Drip provides seamless customer experience and can finance a shipment with the click of a button. On the backend, Drip integrates with more than 20 electronic data sources and has built proprietary algorithms to underwrite the risk of every shipment.
“SMB exporters in emerging markets contribute to over $2 trillion of global trade flows. Due to inefficient local financial systems, half of the small businesses get turned down by banks for the capital they need, many of which are creditworthy. Drip’s technology and proprietary underwriting enables it to identify these creditworthy SMBs and provide them with the working capital they need to grow,” added Arun Mathew of Accel.
So far, Drip Capital has already funded over $500 million of trade across 400+ exporters (representing 500% growth since announcing the Series A round last year). And the company has a goal of funding $1 billion of trade originating from India next year. With the new funding round, the company is planning to expand its global footprint.
“We have been associated with Drip since its inception and have participated in all their funding rounds to date. It has been inspiring to see the company’s progress in the last two years. We are excited to support them in their next phase of growth as they take their business model global,” explained Abhinav Chaturvedi of Accel.
The team at Drip also shared that two-thirds of its customers come from cities that do not have an international bank branch, 80% are receiving trade finance for the first time and on average their businesses are growing 20% faster each year because of the financing we provide. The exporters working with Drip are selling their products to brand names such as Honeywell, Sam’s Club, TJ Maxx, Whole Foods, and Zara.
Shailesh Patel — a rice exporter in India — recently took over the stagnant 30-year old business from his father. And he was able to secure orders from Sam’s Club through a distributor but was denied working capital from the bank to fulfill them. Local Indian suppliers required upfront payment, but his customer Sam’s Club wouldn’t pay the invoice until 120 days after he shipped. Drip solved this problem by paying Patel upfront for the invoices so that he can pay his suppliers on time without waiting for Sam’s Club to pay him.
“Due to the limited bank facilities available to us as a mid-sized exporter, our business started stagnating. With its collateral-free finance solution and an online approach to trade finance, Drip gave us the flexibility to service more orders which helped increase our revenue considerably,” explained Isinox Limited director Siddharth Gupta.
As Drip Capital co-founder Neil Kothari was growing up in Hong Kong, his father was running an export business manufacturing leather garments in China and selling to the U.S. And one of the biggest challenges in growing the business was getting access to working capital before getting paid. And Mukewar — who hails from a business community while growing up in India — saw the challenges that SMBs faced while raising capital from traditional lending.
