How RBF Solves Working Capital Needs for India’s Ecommerce Industry

The Indian e-commerce business has been shown to be a significant disruptor in the last two years. The expansion of internet penetration, the digitization of payments, and the government’s promotion of commerce through different programs have all aided the sector’s growth. So much so that the industry is expected to reach $400 billion by 2030, with the direct-to-consumer (D2C) segment accounting for the majority of the increase – $302.4 billion by that year.

While this has created several opportunities for budding entrepreneurs and new-age firms, it has also resulted in a crowded market. This raises difficulties in getting and maintaining customers, as well as obtaining the financing needed to operate and scale sustainably.

According to a recent study, less than 0.5 percent of the more than 75K independent e-commerce companies hosted on enablers like WooCommerce and Shopify are equity supported.

However, this situation is not exclusive to India. Take, for example, Bhumi, a company located in Australia that sells a variety of items manufactured from organically grown and ethically produced cotton. The startup didn’t want to take investors because they didn’t want to dilute the brand’s value, but they were confronted with the problem of needing more shares than they could afford. This is where Wayflyer, located in Dublin, comes into play.

While entrepreneurs in the worldwide market are finding solutions to their capital-related difficulties with companies like ClearCo and WayFlyer, in India, this story is being told by companies like Velocity and Klub in Bengaluru, and GetVantage and N+1 Capital in Delhi. Velocity, which was founded in 2020, claims to have completed over 450 investments so far, demonstrating the demand for rapid and cheap loan financing.

“Today, online-only firms need financing to grow, but traditional financial institutions are unable to provide it. When analyzing new-age enterprises, these traditional financial institutions suffer data limitations. Of course, venture capital funding is an option, but it has several drawbacks: it is not available to meet the capital needs of all startups, it causes dilation and thus loss of control, and it is an expensive form of capital for working capital needs,” said Abhiroop Medhekar, co-founder and CEO of Velocity, India’s largest provider of revenue-based financing (RBF) for D2C businesses.