Velocity raises $20 mn in funding round led by Peter Thiel's Valar Ventures

The fintech firm plans to deploy over Rs 1000 crore in India's e-commerce brands

Velocity.in, a Bengaluru based fintech startup, said that it has raised $20 million in Series A funding led by Peter Thiel’s Valar Ventures, a US based VC firm. Launched in early 2020, Velocity has established revenue-based financing as a credible alternative to venture capital and traditional bank debt for e-commerce businesses in India.

Armed with capital, the start-up has set its sights high and aims to deploy over Rs. 1,000 crore towards over 1,000 e-commerce businesses.

“Our vision is to build the future of business financing in India. We are glad to partner with high-conviction investors like Valar since our early days,”  Abhiroop Medhekar, Co-founder and CEO of Velocity.”They have re-affirmed their belief in Velocity by doubling down and leading our Series A. We are already India’s largest revenue-based financier and keen to use this funding to build multiple world class products for thousands of new age businesses.”

Within a short span of 1.5 years, over 1500 D2C (direct to consumer) and e-commerce businesses have signed up for Velocity’s revenue-based financing. The fintech player has over Rs 1,200 Crores of fundable revenues connected to its platform and has already processed 250+ investments across 175 companies.

The D2C segment in India is in a state of acceleration and is expected to grow at a CAGR of 25 per cent from $44.6 billion in FY21 to $100 billion 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. However, despite this growth, capital remains out of reach for most businesses. Out of over 75,000 independent e-commerce stores hosted on platforms like WooCommerce and Shopify in India, less than 0.5 per cent are equity funded - leaving a massive headroom for Velocity’s growth.

“Since our last investment, Velocity has grown 10X and secured the lead position in this fast-growing market,” said Andrew McCormack of Valar Ventures. “Despite this exponential growth, their portfolio quality remains strong. We were impressed by their strong customer orientation, tech-product DNA, and ambitious growth plans. We are excited to support their bold vision of empowering thousands of entrepreneurs in India.”

Online businesses, while asset-light are data-rich. Velocity leverages this digital data to evaluate an application across 50 parameters and extend up to Rs. 3 Crore of financing within 5 days. The repayments happen flexibly as a share of the company’s online revenues. Velocity does not take any collateral, personal guarantee, or equity dilution and only charges a fixed fee of 4-8 per cent on the deployed capital. Brands that have historically raised capital through Velocity have grown their revenues by 1.5x within 6 months of funding and 78 per cent of these brands become repeating customers of Velocity.

Velocity’s portfolio includes many of India’s fastest-growing D2C brands such as PowerGummies, Green Soul, WallMantra, BellaVita, Smoor Chocolates and CrossBeats.

“We chose to raise capital through Velocity because of their speed and convenience. We were able to securely connect our online sales and marketing data with Velocity’s platform within a few clicks and got funded within a week,” said Divij Bajaj, Founder of PowerGummies. “Their terms were better than other alternatives and we got to retain our equity in a growing business.”

As the repayments are directly linked to a company’s revenues, Velocity said it has a skin in the game to support the revenue growth of its portfolio companies. To facilitate this, Velocity recently launched Velocity Insights - an analytics tool kit that helps businesses gain actionable insights to improve their sales and marketing performance.  Over 300 D2C brands have already signed up for Insights. Additionally, through its partnerships, Velocity unlocks preferred access to a curated set of e-commerce enablers across marketing agencies, logistics providers, payment gateways etc., which help address every growth challenge an e-commerce brand could face.

Other investors who participated in Velocity’s Series A include Presight Capital, Utsav Somani’s iSeed, Maninder Gulati (Oyo), Zac Prince (BlockFi) and Philippe De Mota (Hedosophia). Combined with the $10 million seed round announced earlier this year, this brings Velocity’s total equity raised till date to $30 million. In addition, Velocity has also secured multiple debt lines with leading NBFCs to rapidly scale its revenue-based financing platform.