Financing platform Velocity announces Rs 300 crore fund for B2B SaaS startups

Financing platform Velocity announces Rs 300 crore fund for B2B SaaS startups

Revenue-based financing platform Velocity on Wednesday announced a Rs 300 crore (around $36 million) fund to provide growth capital to B2B (business-to-business) software-as-a-service (SaaS) startups. According to Velocity, the new fundaligns with the growth in the Indian SaaS market’s revenue to around $26 billion by 2026.

The fund will invest in the form of a fixed-term credit product with financing proportional to three tosixtimes the amount of companies’ monthly recurring revenue without any equity dilution.

Abhiroop Medhekar, Founder and CEO of Velocity said SaaS enterprises encounter distinctive hurdles in their expansion, mainly concerning the costs associated with customer acquisition.

Such enterprises have to allocate significant funds towards sales and marketing to attract customers, with the breakeven point for such investments typically falling between 6 to 18 months. Particularly for firms on a high growth trajectory, this results in negative cash flows due to ongoing investments, he said.

Velocity’s new fund will look to address the need for flexible and understanding capital solutions to bridge this gap, according to Medhekar.

Founded in 2020, Velocity offers fixed-term credit, revenue-based financing, revenue-based overdrafts, and credit lines. In 2023, the company disbursed over Rs 400 crore which was greater than its total disbursements over the last three years combined to D2C brands and e-commerce businesses.

Bengaluru-based Velocity works with over 4,000 brands and has disbursed over Rs 700 crore with French Crown, Soulflower, Chumbak, Off Duty, Itsy Bitsy, Bear House, and more in its portfolio. It has raised $30 million in funding so far led by Peter Thiel’s Valar Ventures.

As per estimates from management consulting firm McKinsey, the Indian SaaSmarketis expected to be worth $50-70 billion by 2030, up from $7 billion in 2022. However, India would still beunder 5 per cent of the global SaaS market, which is likely to grow from $450 billion to $1.3-$1.6 trillion during the same period.