Capital Float gets $13M from SAIF, Sequoia to give startups easier access to loans

Millions of small and medium enterprises (SMEs) in India, including startups, struggle to get working capital. Banks have such rigid security and guarantee structures that new companies can rarely meet the requirements for loans. This is where new age fintech companies come in – they can leverage new data tools to create new risk profiling and financing models.

Capital Float is one such startup founded in 2013. It can evaluate the financial health of SMEs and provide working capital to companies not being served adequately by traditional banks.

The Capital Float platform has so far delivered INR 400 million (US$6.4 million) in loans to SMEs in 10 cities across India. Today the startup revealed it has raised US$13 million in series A funding led by SAIF Partners and Sequoia Capital, with participation from existing investor Aspada. Last year, the company raised US$2 million from Aspada and US$1 million from SAIF Partners.

A statement on the funding says the company saw a ten-fold increase last year in online applications, particularly in the ecommerce market, where it is partnering with sites like Snapdeal, Flipkart, Amazon, and PayTM to finance small merchants selling online. The fresh funding will support a nationwide expansion program.

Co-founders Gaurav Hinduja and Sashank Rishyasringa explain how their platform is making a difference to small businesses:

We started Capital Float with the belief that technology and data would be the key drivers in cracking SME financing in India. Over the past year, we’ve focused on building the platform to deliver what our customers want above all else – flexible and convenient access to finance that can scale with their business. By leveraging alternative data in our underwriting model, we are increasingly able to not only make faster decisions but also lend to emerging business models.

Rishyasringa has an MBA from Stanford University and graduated magna cum laude in Economics from Princeton University. Prior to Capital Float, he was working with McKinsey & Company. His co-founder Hinduja too has an MBA from Stanford University.

SME lending presents a huge opportunity in India. In a recent article for Tech in Asia, Lightbox VC partner Sid Talwar, who is an entrepreneur-turned-investor, wrote about the pain point in this space: “I’ve personally had this problem when I founded my company over 10 years ago and so many of our portfolio companies also struggle with this issue.”

He added: “There is so much data available that robust risk models can give real insight on potential customers. Better models equal better products. I’m not sure how well this will translate into personal loans, but as a B2B business, if you do this right you will thrive.”

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