Drip Capital Secures $113M Funding to Expand Working Capital Services for SMBs
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Palo Alto-based fintech startup Drip Capital, which specializes in providing working capital to small and medium-sized businesses (SMBs), has successfully raised $113 million in new funding. This round includes $23 million in equity from Japanese institutional investors GMO Payment Gateway and Sumitomo Mitsui Banking Corporation, as well as $90 million in debt financing led by the World Bank’s International Finance Corporation (IFC) and East West Bank.
Drip Capital has now amassed approximately $640 million in equity and debt funding, with notable investors including Accel, Peak XV Partners, and Y Combinator. The fresh capital will be allocated to expanding the company’s working-capital loan offerings to SMBs and to further developing its product and services.
Jay Chandarana, the owner of Dhaval Agri, a sesame seed exporter in India, is one of Drip Capital’s success stories. For over two decades, Chandarana had relied on commercial banks to finance his business’s working capital needs. However, as his company grew to become the largest sesame seed exporter in the market with a 13% share of the country’s total exports, he found that traditional banking arrangements were restrictive.
Banking in India is collateral-based, Chandarana explained. Your volumes may grow according to the business you’re doing, but the bank payments will only increase according to the value of your collateral.
In 2019, Dhaval Agri turned to Drip Capital for an alternative financial solution. Since then, the company’s volume has increased by 50%. This success story highlights the need for flexible working capital solutions for SMBs, which often struggle with capital constraints despite their growth potential.
Drip Capital uses AI to automate and digitize its processes, including risk analysis. The company currently serves between 9,000 and 10,000 businesses, with approximately 60% of its clients located in India, followed by the U.S. and a small number in Mexico. It is already profitable and aims for a 40% year-on-year growth rate over the next two years.
The challenge faced by Dhaval Agri is common among SMBs worldwide. These businesses typically have short capital turnarounds, issuing invoices to customers for revenue that can take time to be paid. In the meantime, they need to maintain inventory by paying suppliers promptly. Drip Capital provides a solution by offering short-term loans that businesses repay once they receive customer payments.
In India, despite the significant number of SMBs, traditional financial institutions have not adequately addressed the need for working capital arrangements designed to promote growth rather than just maintain operations. Drip Capital aims to fill this gap, supporting small and medium importers and exporters like Dhaval Agri not only in India but also in the U.S. and other markets.
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