Drip Capital, a fintech start-up that provides unsecured trade finance to SME exporters, has raised $15 million in Series-A funding co-led by Sequoia Capital and includes existing investors Accel, Y Combinator and Wing VC. It had raised $5 million in seed funding from the last three in 2017. The company has also raised an undisclosed amount in debt from the US-based Silicon Valley Bank. After funding $100 million in trade flows of Indian SME exporters, Drip plans to consolidate in India as well as take its product to other emerging markets, starting Southeast Asia.
Although SMEs in emerging markets account for $2.5 billion of global trade flows, limited access to capital restricts their growth. Drip uses alternative data and technology to underwrite and finance cross-border transactions. Banks, with their manual underwriting processes and high touch customer, have not been able to do so effectively. The $20-25 billion trade financing market is dominated by multinational banks who cater to large exporters while SMEs, who borrow from PSU and private banks, suffer from inadequate lending. In view of the PNB scam, banks have cut down on cross-border lending.
Pushkar Mukewar, Co-Founder and Co-CEO of Drip says “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 per cent of exports (Rs120bn), however experience 50 per cent rejection rates from banks for trade finance.”
Banks charge LIBOR+300-400 basis points for packing credit in foreign currency from SMEs, which translates into an interest rate of 6-7 per cent. But banks insist on hard collaterals. Drip Capital offers unsecured credit to SMEs at 8-10 per cent, depending on the size of the SME and its creditworthiness, said founder & CEO Pushkar Mukewar. Accel’s Abhinav Chaturvedi says, “Drip is one of the few fintech companies
that focuses heavily on data analytics to build a highly scalable trade finance platform which, we believe, can go global. We are excited to continue our partnership with the team at Drip Capital.” Jeff Schneble, Partner at Wing VC says, “With a cross border presence and expertise in data science and credit, we believe Drip’s team is well-positioned to capitalise on the global trade finance opportunity.”
A California and India-based fintech company, Drip Capital was founded by Pushkar Mukewar and Neil Kothari, both roommates at Wharton. Drip’s credit line to exporters 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. Exporters can apply online. The company uses electronic data and an automated risk assessment platform to revert in 48 to 72 hours.