Sequoia-backed Drip Capital finances over $1 bn cross-border trade

As economies have opened up, Drip has witnessed over 50% quarter on quarter growth in the last three quarters

The coronavirus pandemic has accelerated the exports for Indian businesses and unlocked new opportunities. Drip Capital, which provides working capital to small and medium-sized (SMEs) exporters, said it has reached a major company milestone of financing over $1 billion of cross-border trade through its platform. The global fintech company provides this financing in emerging markets like India and Mexico.

“Our core focus has been to innovate and solve credit access problems for the export-import community,” said Pushkar Mukewar, co-founder and CEO of Drip Capital. “With the company crossing the $1 billion mark, we are confident taking the business to new markets and continuing to bridge the trade finance gap for SMEs globally.”

Drip has been providing SMEs with working capital solutions since launching in 2016. The Sequoia and Accel-backed company has continued supporting them through the Covid-19 pandemic. The pandemic disrupted supply chains globally and caused traditional capital providers to stop lending. But there was a change in the export composition accommodating the demand for essential products. 

 

Also, many SMEs remain cash-starved and need working capital to service this spike in demand. Drip said this is further underscoring the need for alternative financing solutions like the ones provided by the company.

“Since our financing products are short term in nature, around 30-50 days, we have performed well during Covid," said Mukewar. “As economies have opened up, we have seen a significant increase in demand for our financing products. We have witnessed over 50 per cent quarter on quarter growth in the last three quarters,” he said. 

Mukewar founded Drip in 2015 along with Neil Kothari, an alumnus of Stanford University. For the first four years after completing an MBA from the Wharton School at the University of Pennsylvania in 2011,  Mukewar had worked as an investor with Indian entrepreneurs at Saama Capital.

Unlike traditional financial institutions, Drip leverages data analytics and technology as the basis for its underwriting engine. This allows it to scale rapidly and provide a seamless and simple experience for SMEs. Currently, it is working with over 1,500 sellers and buyers throughout the world. In India, Drip works with over 700 exporters spread across 60 cities in the country. The company said the financing solutions are collateral-free and offered through a completely digital process.

Drip has raised nearly $200 million through venture capital and debt since 2016. Drip has also partnered with institutional investors, family offices, and wealth advisors to provide investors short-term (3 months to 1 year) Notes backed by a diversified pool of trade finance assets. 

 

Trade receivables are short-term assets that are an alternative source of income. Their performance is uncorrelated with traditional asset classes such as equities, fixed income, or even real estate. To date, Drip has issued $150 million in Notes. The company said it has reported zero principal losses.

The Covid-19 pandemic has unlocked new opportunities in exports for Indian businesses. It is creating growth and new markets in multiple product categories, according to a Drip Capital report. Items like personal protective equipment (PPE), sanitizers, disinfectants, and test kits have seen significant growth in value and depending on the trajectory of the pandemic in key export markets.  These products may continue to contribute to export growth in the coming years as well, according to the report.

Endorsing India’s continuing rise as a global hub of manufacturing,  US retail giant Walmart recently said that it will triple its exports of goods from India to $10 billion each year by 2027. E-commerce firm Amazon which unveiled its Global Selling Programme in India in 2015 is expecting to generate $10 billion in cumulative export sales by 2025 for Indian exporters enrolled in this programme.