Efficient Capital Labs (ECL), a fintech company, announced that it raised $7 million in a pre-Series A round. This funding round was led by QED Investors, with participation from existing investor 645 Ventures and new investors, including The Fund, Lorimer Ventures, Riverside Ventures, and Generalist. With this recent investment, the total amount raised by the startup now stands at $110.5 million. The figure includes a $100 million debt facility and a $3.5 million equity round in April last year.
ECL plans to channel the raised funds towards greater automation and team expansion across engineering, product, underwriting, sales, and operations. According to the company’s press release, this move aims to achieve better unit economics.
Company Overview and Background
Co-founded in 2022 by Kaustav Das and Manish Arora, ECL offers business-to-business SaaS companies a percentage of their ARR (Annual Recurring Revenue) as upfront capital. This capital provision is unique for being 100% non-dilutive. ECL funds customers through its balance sheet, enabling customers to access capital at significantly reduced costs. This mechanism eliminates the uncertainty often faced by companies when relying on third-party investors or marketplace dynamics for capital against revenue.
So far, ECL, operating from both Bengaluru and New York, has extended funding to over 50 SaaS businesses. The company anticipates its client base to expand to more than 150 customers by the end of 2023.
Bridging the Financing Gap in the South Asian Market
Despite the existence of numerous companies in the U.S. offering revenue-based financing to SaaS companies such as Capchase, Pipe, Founderpath, and Arc, the options for South Asian companies are significantly limited. ECL emerged as a new startup intending to provide B2B SaaS companies operating in the South Asia-U.S. corridor with more financing options. The recent funding will facilitate this growth.
Das and Arora, after garnering extensive experience in risk-related roles for the past two decades, recognized the substantial financing gap in the South Asian market. Das, who spent nearly 15 years as a vice president at American Express and served as the chief risk officer of Kabbage, Petal, and Quadpay, saw the massive opportunity for revenue-based financing in South Asia. During his visit to India in late 2021, he found that “SaaS is growing 6x-7x and the cost of capital is still very expensive — even if more available — in India”. He noted that most SaaS companies had a U.S. entity and bank account. Still, they lacked access to cheaper capital in the U.S. This inspired the creation of ECL — a solution aimed at bridging the cost of capital gap between geographies. For more details, visit ECL.
Unique Service Proposition
ECL is focused on pre-seed, seed, and Series A startups, charging a fixed fee of between 9% and 12% of the upfront capital it provides. Its services are currently concentrated on the U.S.-India and U.S.-Singapore corridors. As per Das, Efficient Capital is the “only platform that does dual risk assessment in both geographies.” Das added, “For us, we follow the entire course and have access to the interbank account so we can see the usage of those funds or the reverse of it.” As such, Efficient Capital is also equipped to handle KYC (know your customer) in India, thereby offering a comprehensive financial service package.
ECL currently counts 43 SaaS companies as customers and has originated over $13 million in loans without defaults. Such impressive performance and its unique proposition strengthen the company’s position as a significant player in the fintech space. Aaron Holiday, co-founder and managing partner of 645 Ventures, noted the “steady growth” of SaaS startup formation and growth in India, envisioning an opportunity for the total addressable market to reach $10 billion within eight years. He praised ECL’s operation and domain expertise in risk management coupled with B2B SaaS growth in India, which gives the company a unique advantage. , making it an attractive choice for early customers exploring revenue-based lending opportunities in India and internationally. “After working with ECL for over a year from pre-launch to launch, it’s clear that they’ve released a product that is resonating and being pulled by the market,” Holiday added.
Empowering Founders and Global Collaboration
With ECL’s financing model, the founders are empowered to build for the long term and drive innovation and growth. This unique approach makes it possible for startups to maintain control while accessing the necessary capital to expand their operations. QED Investors partner Sandeep Patil, who heads the firm’s Asian investments, expressed that “Indian SaaS companies are known for innovative and specialist software solutions, and their growth in selling to the U.S. represents a new era of entrepreneurship and global collaboration.”
Role of Efficient Capital
Patil further highlighted the crucial role of ECL in this evolving entrepreneurial landscape. “By providing non-dilutive capital to these companies, ECL empowers the founders to build for the long term and drive innovation and growth,” he said. Indeed, ECL’s unique financing model bridges the gap between different geographies. It provides an effective solution for startups in South Asia seeking affordable capital options, thereby fostering greater global collaboration.
In sum, the recent $7 million funding in Efficient Capital Labs is more than an injection of capital. It marks an important step towards reducing the capital accessibility gap between different geographies. As ECL grows, it promises to offer more South Asian B2B SaaS companies better access to financing options, leveling the playing field and opening the door for a new wave of entrepreneurship and innovation in the region. With the co-founders’ extensive experience and significant investors’ backing, ECL is poised to redefine the dynamics of B2B SaaS financing in the South Asia-U.S. corridor. This development marks a promising future for B2B SaaS companies in South Asia, unlocking opportunities for growth and global collaboration.