Drip Capital, a Palo Alto-based fintech company that provides working capital to small and medium-sized businesses (SMBs), has secured $113 million in funding to further expand its operations. This latest investment includes $23 million in equity from Japanese institutional investors GMO Payment Gateway and Sumitomo Mitsui Banking Corporation, along with $90 million in debt financing led by the International Finance Corporation (IFC) and East West Bank. Drip Capital plans to use the debt to offer more working capital loans to SMBs and the equity to scale its company and product offerings.
Founded to address the financial hurdles SMBs face, Drip Capital helps businesses like Dhaval Agri, India’s largest sesame seed exporter, by offering flexible working capital solutions. Traditional banking systems in India, which rely heavily on collateral, often limit the growth potential of companies like Dhaval Agri. Since partnering with Drip Capital in 2019, Dhaval Agri’s business volume has increased by 50%, highlighting the startup’s potential impact on other similar businesses.
Drip Capital’s business model revolves around advancing up to $2.5 million by purchasing customers’ accounts receivable invoices, thus providing companies with cash flow to pay suppliers while awaiting customer payments. It also offers up to $5 million in accounts payable financing to help importers. Currently, Drip Capital serves 9,000 to 10,000 businesses, with around 60% of its clients based in India and the rest from the U.S. and Mexico. The company is already profitable and is targeting 40% year-on-year growth over the next two years.
In addition to expanding its client base, Drip Capital has introduced new products like foreign exchange services through its partnership with Barclays, as well as a pilot sourcing platform to connect buyers and suppliers. It has also applied for a non-banking financial company (NBFC) license to cater to domestic businesses in India.
This investment comes almost three years after Drip Capital’s $40 million Series C round in 2021. Co-founder and CEO Pushkar Mukewar noted that the company’s focus on achieving profitability allowed them to raise only the necessary equity for their next growth phase while minimizing dilution.
Featured Image courtesy of The Star
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