There are a variety of corporations within the U.S. that supply revenue-based financing to SaaS corporations, together with Capchase, Pipe, Founderpath and Arc. However the choices for South Asian corporations are way more restricted.
A brand new startup, Efficient Capital Labs (ECL), has emerged to present B2B SaaS corporations working within the South Asia-U.S. hall extra financing choices, and it lately raised $7 million in funding led by QED Buyers to assist it develop.
Kaustav Das teamed up with Manish Arora, a former common supervisor for PayJoy’s South Asian division, to discovered New York-based Environment friendly Capital Labs in early 2022 after working in numerous risk-related roles over the previous twenty years. The corporate gives B2B SaaS corporations a proportion of their annual recurring income (ARR) as upfront capital that Das says “is 100% non-dilutive in nature.” As a result of ECL funds prospects by way of its steadiness sheet, Das mentioned its prospects “get entry to capital at a less expensive value and don’t must face the uncertainty that comes with relying on third-party buyers or market dynamics to obtain capital towards income.”
After spending almost 15 years as a vp at American Categorical, the place he labored as its chief credit score officer of non-card industrial lending, Das additionally served because the chief danger officer of Kabbage, Petal and Quadpay.
His foray into revenue-based financing began in June of 2020 when he was approached by Miguel Fernandez, CEO and co-founder of Capchase to function an advisor to that firm. Whereas Das by no means formally grew to become an advisor to Capchase, he was launched to corporations in India expressing curiosity in financing.
That obtained Das pondering. So he went to India in September and October of 2021, and realized the “alternative was large.” “SaaS is rising 6x-7x and the price of capital continues to be very costly — even when extra obtainable — in India,” Das recollects. “And I noticed that a lot of the SaaS corporations had a U.S. entity and checking account however they weren’t in a position to entry the cheaper capital that’s within the U.S. That grew to become an important pillar of what we’re constructing in Environment friendly Capital — to bridge the price of capital hole between geographies.”
Das was in a position to elevate $3.5 million led by 645 Ventures for his firm, which allowed him to begin hiring and construct out his product. He additionally closed on a $15 million debt facility final November, which he lately up to date to a $100 million particular function car in June. Different institutional backers embody The Fund, Lorimer Ventures, Riverside Ventures and Generalist.
He describes Environment friendly Capital as a revenue-based financing firm that focuses on South Asia and Southeast Asia, and is presently centered on U.S.-India and U.S.-Singapore.
“The U.S. part is essential,” Das mentioned. “There’s at all times going to be a dollar-denominated mortgage to a U.S. entity and a U.S. checking account.”
Environment friendly Capital is targeted on pre-seed, seed and Collection A startups, charging a set price of between 9% and 12% of no matter upfront capital it gives. Most of its loans are made on 12-month phrases. Something above, Das believes, turns into extra dangerous because it’s troublesome to foretell with an extended time horizon.
To date, Environment friendly Capital counts 43 SaaS corporations as prospects, and has originated greater than $13 million in loans with zero defaults, based on Das.
He claims that his startup is the “solely platform that does twin danger evaluation in each geographies.”
And that, Das believes, is one in all Environment friendly Capital’s greatest differentiators.
With different platforms, he mentioned, corporations don’t have visibility into what occurs to the cash as soon as it leaves the U.S. checking account.
“For them, it’s only a line merchandise within the financial institution,” Das advised TechCrunch. “For us, we observe all the course, and have entry to the interbank account so we are able to see the utilization of that funds or the reverse of it.”
Which means, he mentioned, that Environment friendly Capital can do KYC (know your buyer) in India.
Aaron Vacation, co-founder and managing associate of 645 Ventures, mentioned that given the “regular progress” of SaaS startup formation and progress in India, his agency noticed a chance for the entire addressable market to achieve $10 billion inside eight years.
“The [ECL] group members working and area experience in danger administration mixed with B2B SaaS progress in India gave the corporate a singular benefit at onboarding early prospects to check the income primarily based lending worth proposition in India and internationally,” he wrote by way of electronic mail. “After working with ECL for over a yr for pre-launch to launch, it’s clear that they’ve launched a product that’s resonating and being pulled by the market.”
QED Buyers associate Sandeep Patil, who heads the agency’s Asian investments, advised TechCrunch that “Indian SaaS corporations are recognized for modern and specialist software program options, and their progress in promoting to the U.S. represents a brand new period of entrepreneurship and world collaboration.”
He added: “By offering non-dilutive capital to those corporations, ECL empowers the founders to construct for the long run and drive innovation and progress.”
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