Let’s talk about evolution today. Aah, to be specific – funding evolution! Before introducing the new way of funding – let’s quickly look at why the evolution was required.
Equity Funding - Share Dilution/loss of control. Expensive.
Debt Funding - Fixed EMIs. Collaterals. Time-consuming
Solving these issues - "Revenue-based financing”, is now creating ripples in the funding space.
So, tell me what is RBF?
It is a unique solution to pledge your revenues without collateral, personal guarantees, or equity dilution. With an already $5-8 billion market in India, RBF has proven to be a lucrative option for entrepreneurs primarily in the D2C, SaaS, and EdTech sectors.
Can you give an example of any company?
One of the blockbusters in the RBF universe is Klub, an ideal investment platform to infuse capital into businesses. Founded in 2019 by Ishita Verma and Anurakt Jain, Klub is headquartered in Bengaluru.
Interesting, tell me more about Klub?
So, let's understand why there is so much buzz about Klub. Klub operates on a business model differing from Angel Investors and VC funds. It offers a hybrid model for investment by raising capital from both NBFCs and financial institutions along with individual patron investors across different products by employing financial innovation, deep data-driven analytics, and community engagement.
And, how does it finance businesses?
So, Klub provides growth financing by taking revenue share as returns instead of equity dilution or fixed EMIs. And this type of financing is especially suited for brands with seasonal or uncertain revenue profiles as it allows them to manage their cash flows better. Moreover, RBF has spread its wings across sectors, including wellness, FMCG, direct-to-consumer, food services, fashion, beauty & personal care, subscription, and online-first retailers.
Owing to the unique product offering, Klub has seen an accelerating growth of 40x in the past year and has made over 150 investments in companies including Tjori, Third Wave Coffee, Pipa Bella, Wellversed. Currently, it is funded by 17 investors and has raised a total of $34.8M in funding over six rounds.
After understanding in and out about the RBF-based Klub, the question is whether Revenue Based financing will be tomorrow's future?
With the projected $50 billion RBF market in India, there is a lot of excitement around the RBF-based products and holds substantial potential for the future financial market space. And Klub seems to be acing this race with spectacular growth and expansion by powering the digital transformation of the fintech ecosystem.
Credits - Shivani Gupta