Rupifi is an innovative fintech company in India, specializing in micro-lending to small business customers. The company is evolving into a SaaS company after its first successful year as a startup.
- Rupifi’s borrowers usually get approval for the average credit line of the equivalent of US$1,000 in inventory purchases. Each lending transaction is an average of US$150. (Please note: US dollar-equivalents are used throughout this article, even though the company operates in Indian Rupees.)
- Rupifi’s borrowers pay a ZERO interest rate on any credit line advances, with a payback time for the credit advance of 14 to 30 days.
- Rupifi receives a 2% fee as a deduction from the payment to the supplier for the inventory sold to Rupifi’s borrowers.
Huge Lending Volume Increase with a 12x Revenue Increase in Three Months
Rupifi launched in 2020 by offering inventory financing to small grocery shop owners in India. The company needed to use most of the first twelve months of operations for system development. The founders also used this time to create partnerships with suppliers and gain traction with borrowers by becoming an embedded lender on India’s major B2B systems.
In June 2021, the company had the equivalent of US$100k in lending volume. For that month, the company earned a total of about US$5k in revenue. This milestone demonstrated the viability of the Rupifi system. Once the system started working on large B2B systems, there was an immediate, explosive growth in terms of the amounts of loans made and revenues earned.
In September 2021, the company placed US$7.5 million in credit line advances, earning US$60k in revenues for the month’s activities.
This table shows the revenue growth.
|Activity||June 2021||September 2021|
|Loans Made During the Month||$100,000||$7,500,000|
|Monthly Recurring Revenues (MRR)||$5,000||$60,000|
|Projected Annual Recurring Revenues (ARR)||$60,000||$720,000|
|Number of Users||1,250 (est.)||15,000|
|Average Monthly Revenue per User (ARPU)||$4||$4|
|Annual Customer Value (ACV)||$48||$48|
The 2% Win-Win-Win-Win-Win
Traditionally, B2B inventory suppliers offer their customers a 2% discount for the prompt payment of an invoice, or they may factor receivables and sell them to a third party for a similar discounted amount. The suppliers do this to improve their cash flow, which accelerates inventory turnover and increases profits.
For small businesses in India, paying off their inventory invoices earlier than due may not be possible because they lack the cash required. Moreover, they usually do not have access to traditional bank credit lines. The Rupifi system provides the financing they need.
A 2% fee on a loan repaid in 14 to 30 days creates an annual rate of return from 24% to 48. This dynamic makes these micro-lending transactions very profitable. The borrower has flexibility in repayments. The borrower can repay a portion daily, on a schedule, or after the lending period ends.
The Rupifi system solves many pain points and produces a multiple-win scenario:
- Rupifi’s customers (borrowers) get no-cost, no-fee, interest-free, inventory financing.
- Inventory suppliers sell more inventory and get an immediate cash payment for sales at the traditional 2% discount for cash.
- B2B online marketplace systems get free software developer integration support to help embed the Rupifi API. A payment choice of using Rupifi becomes a part of the online checkout process. The B2B system can then offer no-cost financing to its users to increase total sales volume. The B2B system collects the 2% fee on all sales made using Rupifi for payment and gives the collected fees to Rupifi.
- Rupifi’s balance sheet/capital providers get 60% of the collected 2% processing fee for providing the transaction funding. The funds are at a lower rate than the Rupifi company could get on its own (300 to 600 basis points lower).
- The Rupifi company gets 40% of the collected 2% processing fee for its software development, API integration work, marketing efforts, customer acquisition, customer credit evaluation algorithms, underwriting, and the collection of repayments. Rupifi gets ownership of the information about the customers (borrowers) and vendors who utilize this process.
From a Few to Over 25,000 Customers in About One Year
The average Rupifi small-business borrower makes less than $20k per year in sales. The industry sectors served by Rupifi are 1) fast-moving consumer goods (FMCG); 2) pharmacy and healthcare; 3) agriculture/food; 4) fashion, and; 5) electronics.
The funding these businesses need for inventory purchases is provided by Rupifi’s balance sheet/capital providers. These include Axis Bank, Dhanvarsha, Great Meera, and TVSCredit. The liability for outstanding loans does not sit on the Rupifi balance sheet. Rupifi is a loan processing company yet has full customer ownership of the borrower and the participating inventory suppliers.
By partnering with the largest B2B online marketplaces in India, Rupifi embedded the Rupifi lending system as part of the B2B marketplaces’ online checkout process. The Rupifi system is an alternative that can pay for qualified inventory by an eligible borrower.
As of September 2021, the Rupifi company acquired more than 25,000 small-business borrowers. Of this customer base, about 15,000 took loans during September 2021.
The company grew its loans and revenues, month-over-month, by about 200% for the previous three months. Much of the rapid growth came from Rupifi’s partnership with the Flipkart Walmart Group. Flipkart’s co-founder, Binny Bansal, is a strategic investor in Rupifi.
The Three Rupifi Founders Each Have 33% Equity Ownership
Co-Founder and CEO Anubhav Jain is an entrepreneur, angel investor, and credit risk professional with a decade of experience in banking and consumer/small business lending. His expertise includes credit cards and loans across the customer life cycle of underwriting, acquisitions, customer management, and loyalty programs. Jain’s current focus is designing and implementing risk assessment strategies and risk analytics for microlending to small businesses in India.
Co-Founder, Ankit Singh, is an experienced Senior Product Manager with skills in entrepreneurship, management, product management, and process engineering.
Co-Founder, Jawaid Iqbal, was previously a staff software engineer at Google for eight years. He is excited about building fintech solutions for the underserved, small-to-medium-sized enterprises (SMEs) in India.
In 2020, the Rupifi company had 20 employees. By September 2021, the company passed the level of 60 employees and is still hiring. Of the current employees, 18 are software engineers.
Total Equity Capitalization of $5 Million Plus $1 Million in Venture Debt
In 2020, the company raised seed capital of US$1 million to get started. In 2021, the company recently raised another $4 million in equity financing plus venture debt of $1 million. The debt portion came from a venture fund. The annual interest rate on the debt portion is just above 10%. The most recent raise used a pre-money valuation of $16 to $20 million. It included issuing 1% in warrants.
The timelines of the financing rounds were as follows:
- In March 2020, the company raised pre-seed money from well-known angel investors in India and venture funds. This raise was a little less than $1 million, with a company valuation of about $5 million.
- The company started operations in July 2020.
- In July 2021, the company raised a pre-Series A round of $4 million in venture funding plus $1 million in venture debt, giving the company a $16 to $20 million valuation.
Fund investors in the Rupifi company include Quona Capital, Ankur Capital, Better, and Cloud Capital.
Strategic investors include Binny Bansal – Co-Founder of Flipkart, Gokul Rajaram – Product & Business Manager of DoorDash, Kunal Shah – Founder of CRED, Ramakant Sharma – Co-Founder of Livspace, Ashneer Grover – Co-Founder of BharatPe, and Sajid Rahman – Founder of MyAsiaVC.
Low 15% Churn Rate
There is an estimated 15% customer churn rate at this time. The experience with new customers is that they become steady, long-term Rupifi customers after using the system for three months in a row.
About 80% to 85% of new customers will use the Rupifi system again the following month. Then, about the same number of 80% to 85% will use the system again for the third month. After that, they continue to perform for the benefit of the long-term company portfolio. Rupifi is a very “sticky” product.
The fast growth, low churn rate, excellent customer retention, and partnerships with major B2B marketplaces are very encouraging, with loan volume expected to double each month over the near term.
Offline Cash-and-Carry Over the Next 2 Years
Plans are to offer offline services over the next two years. For example, Rupifi can support a business owner who enters a cash-and-carry store and wants to use Rupifi credit to make a purchase. Rupifi intends to become an omnichannel, offering small businesses comprehensive buy-now, pay-later (BNPL) services.
SaaS Plans for 2021
The opportunity to increase revenues by offering a SaaS solution to this customer base is already in the works. The SaaS tools will help small business owners who join the system on a paid subscription basis. Taking advantage of the two powerful business models of Fintech and SaaS should keep the churn low and drive net dollar retention for Rupifi.
Co-Founder and CEO Anubhav Jain says that “Speed is the most important thing.” Start a company and build it up fast. Speed is critical.
Nathan Latka predicts, “This will be one of the fastest-growing SMB SaaS companies in India, once they launch their SaaS later this year.