Velocity, a cash-flow-based financing platform, recently announced the launch of a Rs 300 crore growth capital fund dedicated to Indian B2B Software-as-a-Service (SaaS) businesses.
“SaaS enterprises encounter distinctive hurdles in their expansion, mainly concerning the costs associated with customer acquisition. These companies must allocate significant funds towards sales and marketing to attract customers, with the breakeven point for such investments typically falling between 6 to 18 months. Particularly for firms on a high growth trajectory, this results in negative cash flows due to ongoing investments. This period underscores the need for flexible and understanding capital solutions that can bridge this gap," said Abhiroop Medhekar, Founder and CEO of Velocity.
The fund's structure
The fund is structured as a fixed-term credit product, offering financing proportional to 3 to 6 times a company's monthly recurring revenue. Velocity has established partnerships with leading Non-Banking Financial Companies (NBFCs) and regulated entities in India to facilitate this initiative.
According to the firm, The approach allows SaaS businesses to receive growth capital without diluting their equity, aiding in scaling operations, accelerating product development, and expanding market reach.
The vision behind the fund
Abhiroop Medhekar, co-founder and CEO of Velocity, highlighted the unique challenges faced by SaaS enterprises, particularly in customer acquisition and the associated costs.
"These companies must allocate significant funds towards sales and marketing, with the breakeven point for such investments typically falling between 6 to 18 months," Medhekar explained.
He emphasized the need for flexible and understanding capital solutions to support these unique requirements.
What does Velocity do?
Established in 2020 by Abhiroop Medhekar, Atul Khichariya, and Saurav Swaroop, Velocity offers credit ranging from Rs 50 lakh to 5 crore for 12 months. The firm leverages the businesses’ data and robust online cash flows to offer innovative financial solutions.
Velocity's financing suite has expanded to include various products such as fixed-term credit, revenue-based financing, overdrafts, and credit lines.
"Our financing is designed to support these unique requirements, ensuring that SaaS enterprises have the necessary resources to innovate, market effectively, and scale with efficiency,” Medhekar added.
Velocity's notable capital infusion
Velocity has disbursed loans worth over Rs 400 crore in 2023 and crossed 2,000-lifetime investments. Last year alone, it funded 500 brands, including notable names like French Crown, Iconic Fashion, Soulflower, Chumbak, and Zlade.
Doubling e-commerce disbursements
Velocity plans to double its e-commerce disbursements to Rs 800 crore in 2024 and allocate an additional Rs 500 crore to new sectors, including B2B SaaS. The Bengaluru-based fintech, which works with over 4,000 brands and has disbursed over Rs 700 Crore, aims to empower businesses to thrive in a competitive marketplace.
Investment from Peter Thiel’s Valar Ventures
In November 2021, The firm raised $20 million in a Series A round led by Valar Ventures, with participation from Presight Capital, AngelList India head Utsav Somani’s iSeed, Maninder Gulati of Oyo, Zac Prince of BlockFi, and Philippe da Mota of Hedosophia.
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