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A new source of growth capital to “arm the innovators” of India’s D2C ecosystem

  • Revenue-based financing rises to become the fastest and most preferred source of growth capital for India’s D2C ecosystem

  • Velocity.in emerges as the front runner among the multiple fintech players with a market share of over 50%

  • A combination of capital, analytics and partnerships have cumulatively helped Velocity cement the pole position

Bangalore, 21st September 2021: Velocity.in, a revenue-based financing venture has emerged as the leading fintech player in the D2C segment, with over 50% market share. Over the last 12 months, the company has invested in 120+ D2C brands, which is more than the D2C investments from VCs in India combined. Velocity has received 1000+ signups and has over Rs 850 crores of fundable revenues on the platform at the moment.

The Indian direct to consumer segment is in a stage of hyper growth. The market is expected to grow at a CAGR of 25% from $44.6 Bn in FY21 to $100 Bn by FY25. Increased internet penetration, widespread use of digital payments and COVID-19 induced adoption of online buying resulted in 88% order volume growth on D2C websites in 2020. While VC interest in the D2C sector has been rising, it remains inaccessible to a vast majority of brands. Out of 75,000+ independent eCommerce stores hosted on platforms like WooCommerce and Shopify, less than 0.5% are equity funded.

The VC model is not well suited to meeting the financing needs of the D2C sector. D2C businesses require an increasing amount of capital to deploy towards inventory and marketing as they scale, diluting equity to meet this demand ends up being an extremely expensive proposition for founders. Moreover, VC’s prefer to invest in companies that have the potential to be large and achieve aggressive growth targets, thereby excluding thousands of D2C brands that are profitable and cater to niche segments.

This dynamic has opened an unique opportunity for fintech players such as Velocity.in. The company provides revenue-based financing of up to INR 2 Cr to D2C businesses without any collateral, personal guarantee, or equity dilution. “We are currently working with over 120 DTC brands which have already seen a 1.5-2x jump in revenues because of Velocity’s funding. We have a retention rate of 78%, our portfolio companies use our funding as a recurring source of funding and keep coming back to us to further fuel their growth trajectory,” said Abhiroop Medhekar, Founder and CEO of Velocity.

Velocity has provided funding to several D2C brands such as Bella Vita Organics, Bombay Troopers, WaterScience, GreenSoul, Athlos, Nobero, Imagimake, Setu.in etc. The company offers value beyond capital to their portfolio companies. “Our retention rate is high since our proposition goes far beyond just capital. We have tied up with multiple D2C enablers such as Cashfree, AWS, ShipRocket, AdYogi and others, and our portfolio companies get access to preferred commercials from these partners. Additionally, we also help D2C businesses make sense of the data at their disposal via our product Velocity Insights. These added services make our proposition stronger than any other capital provider in the market,” Abhiroop added.

Sudeep Nadukkandy, Co-Founder and CEO of WaterScience, one of Velocity’s portfolio companies said “Thanks to Velocity, we always have ready access to funding that can be raised without diluting equity or pledging our assets. We use these funds for new product development, to boost digital marketing spends and address any demand spikes attributable to seasonality. Additionally, we have the benefit of financing flexibly – paying back based on our revenues.”

As festive season approaches, Velocity wants to empower India’s young e-commerce brands and the DTC sector to capitalise on incremental demand.

“We believe this will be a bumper festive season for D2C in India. The pandemic resulted in a fundamental shift in consumer behaviour as they grew more comfortable with spending online. This shift coupled with a strong economic recovery, pent up demand and the first festive season that people can celebrate in person post the pandemic should result in exponential growth for D2C brands. We are look forward to working with more D2C brands to satiate this demand.” Abhiroop said.

Based on public sources, companies like Klub and GetVantage have invested in 55 and 45 businesses respectively. Cumulatively, with Velocity, revenue based financing has been leveraged by around 250 D2C brands in India. The concept of revenue-based financing has seen wide uptake in more developed eCommerce markets such as North America and Europe. It’s interesting to note that world’s largest eCommerce investor is not a venture capital firm but a North American revenue-based financier called ClearCo which has invested over $2 Billion in 5,500+ businesses.

About Mahender Bansal

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