Efficient Capital Labs Raises $11 Million in Series A Funding to Expand Cross-Border Revenue-Based Financing

Rhea-AI Summary

Efficient Capital Labs (ECL), a leading revenue-based financing provider for B2B SaaS companies in the South Asia-U.S. corridor, has secured $11 million in Series A funding. The round was co-led by QED Investors and 645 Ventures, with participation from existing and new investors. ECL plans to use the funds to expand into Singapore and other Southeast Asian markets.

The company has shown significant growth, originating over $70 million in financing and tripling its customer base to over 100 companies in 12 months. ECL's unique approach evaluates a business's revenue across all geographies, providing a holistic risk assessment for cross-border companies. The company has experienced strong growth in accounts receivable and plans to offer Singapore dollar-denominated loans by the end of 2024.

Positive

• Secured $11 million in Series A funding
• Originated over $70 million in financing
• Tripled customer base to over 100 companies in 12 months
• Accounts receivable increased sixfold from 2022 to 2023
• Default rates below industry standards
• 70% repeat rate of customers taking additional financings
• Plans to expand into Singapore and other Southeast Asian markets

Negative

• None.

Insights

Financial Analyst

Efficient Capital Labs' $11 million Series A funding represents a significant milestone in the revenue-based financing sector. The company's unique approach to cross-border financing, evaluating global revenue streams holistically, addresses a critical gap in the market. With $70 million in financing originated and a tripling of their customer base in just 12 months, ECL demonstrates strong growth potential. Their sixfold increase in accounts receivable from 2022 to 2023, coupled with below-industry default rates and a 70% customer repeat rate, indicates a robust business model. The expansion into Singapore and other Southeast Asian markets could further accelerate growth. However, investors should monitor how ECL manages risk across different regulatory environments and currencies as it scales.

Market Research Analyst

The timing of ECL's expansion is strategic, capitalizing on the current VC funding crunch. As traditional funding sources become more restrictive, alternative financing options like revenue-based financing are gaining traction, especially in developing markets like India. ECL's ability to provide loans in multiple currencies (USD, INR and soon SGD) offers a competitive edge, addressing forex challenges for cross-border businesses. The company's growth from $3.5 million seed funding to a $100 million SPV in just over a year demonstrates strong market demand. With plans to expand the team, including key hires in CRO/CMO and business development roles, ECL is positioning itself for rapid scaling. Investors should watch for ECL's ability to maintain its low default rates and high repeat customer rates as it enters new markets.

Tech Expert

ECL's technological approach to cross-border financing is innovative. By developing infrastructure and APIs that can evaluate business revenue across multiple geographies, they've created a unique value proposition in the B2B SaaS financing space. This tech-driven approach allows for a more accurate risk assessment of global companies, potentially leading to better lending decisions and lower default rates. The company's ability to offer loans in multiple currencies through its platform demonstrates advanced fintech capabilities. As ECL expands, the scalability and adaptability of their technology stack will be crucial. Investors should consider how ECL's tech infrastructure can handle increased transaction volumes and adapt to new regulatory environments in different countries. The planned hiring of additional engineers suggests a focus on further technological development, which could enhance their competitive edge in the revenue-based financing market.

QED Investors and 645 Ventures co-lead latest round

NEW YORK--(BUSINESS WIRE)-- Efficient Capital Labs (ECL), the leading revenue-based financing provider that provides non-dilutive capital to B2B SaaS companies operating in the South Asia-U.S. corridor, today announced an $11 million Series A fundraise co-led by QED Investors and 645 Ventures. The round included participation from existing investors Riverside and Generalist. New investors FJ Labs and Eudemian Ventures also participated in the funding.

The funding will be used to expand into Singapore and other Southeast Asia markets, building on the successful traction seen in the U.S. and India where ECL has originated more than $70 million in financing and tripled to serve over 100 companies over 12 months from Q1 2023 to Q2 2024.

“We are doubling down on what we have seen since Day 1 – that the South Asia-U.S. corridor is highly devoid of funding for the simple reason that any cross-border company is never evaluated as a global organization, only as a series of siloed companies in each country,” ECL co-founder and CEO Kaustav Das said. “As a result, cross-border companies get the short end of the stick and never get financing up to their potential.”

Today, a global B2B SaaS company may have $2 million of revenue coming in from the U.S., another $2 million of revenue from India and $1 million of revenue from Singapore. Historically, a revenue-based financing company based in the U.S. would only evaluate this business as a $2 million company because they have zero visibility on what is happening outside the country.

“The way their infrastructure, risk strategies and APIs are built is local,” Das said. “ECL is the only revenue-based financing company that evaluates a business’ revenue across every geography to provide a holistic risk assessment, rather than simply looking at one cog in the wheel.”

ECL increased its accounts receivable outstanding sixfold from 2022 to 2023. In the first six months of 2024, the company has already doubled that number again, in part because of default rates way below industry standards and a 70 percent repeat rate of customers taking additional financings.

ECL currently lends to cross-border companies that have at least one entity in the U.S. or India and is the only revenue-based financing company that provides two different denominations of loan for the same customer – USD and INR. By the end of 2024, it will extend this to Singapore dollar-denominated loans, better supporting businesses by uniquely allowing the customer to choose where they want the funding. The advantages include less reliance on foreign exchange (forex) – exchanging one currency for another – and avoiding often strict regulations that govern international money movement.

“The fact that VC markets are still so constricted and valuations are still so suppressed is prompting people to look at alternative funding options that they had not explored before, irrespective of how much money they have raised,” ECL co-founder Manish Arora said. “Historically, revenue-based financing has typically not been as popular in developing countries like India, but in the past two to three years with the reduced availability of VC funding and venture debt markets being challenged, people have started to turn to alternative financing that was not there before.”

ECL was co-founded in 2022 by Das and Arora. Before founding the business, Das spent more than 20 years in the industry as chief risk officer at multiple organizations, including Kabbage (now a part of American Express), in both commercial and consumer finance sectors. Arora has worked extensively as a senior leader in B2B SaaS, fintech and regulatory technology spaces, most recently as the general manager, South Asia for PayJoy, a San Francisco-headquartered B2B SaaS fintech.

"We are excited to co-lead Efficient Capital Labs' Series A funding round,” said Aaron Holiday, co-founder and managing partner at 645 Ventures. “ECL's innovative approach to revenue-based financing for cross-border B2B SaaS companies in the South Asia-U.S. corridor is a game-changer. Their ability to evaluate revenue across geographies and provide non-dilutive capital solutions sets them apart. With an exceptional team and deep domain expertise, they achieve best-in-class unit economics for a revenue-based finance business. We are thrilled to support their continued growth and expansion into new markets.”

“We have been amazed with the unit economics, credit performance and growth that Kaustav and Manish have been able to achieve since our initial investment over a year ago,” said QED Investors Partner and Head of Asia Sandeep Patil. “They have surrounded themselves with a terrific team and we are excited to double-down on our partnership -- this round sets the company to explode its TAM and achieve escape velocity.”

ECL raised a $3.5 million seed round led by 645 Ventures in April 2022, followed by a $15 million debt facility in November 2022 which it updated to a $100 million SPV in June 2023, and a further $7 million pre-Series A round which it announced in July of 2023.

ECL currently has 25 employees located between the U.S and India. The company expects to grow to 30-35 employees by the end of year, including plans to hire a CRO/CMO, a head of business development and partnerships and additional engineers.

About ECL

Founded in 2022, Efficient Capital Labs is a New York-headquartered fintech that provides non-dilutive capital to B2B SaaS companies operating in the South Asia-US corridor - i.e., companies that generate a majority of their revenues from the US or North American market while maintaining a significant part of their technology, product development, and operations teams in South Asia. Efficient Capital Labs provides revenue-based financing to its clients and deploys capital out of its own balance sheet. To learn more about Efficient Capital Labs please visit: https://www.ecaplabs.com.

About 645 Ventures

Founded in 2014, 645 Ventures is an early-stage venture capital firm that partners with exceptional founders who are building iconic companies. We invest at the Seed, Series A, and growth stages, and leverage our Voyager software platform to enable our Success team and Connected Network to help founders scale to the growth stage. Select companies that have reached the growth stage include Iterable, Goldbelly, Resident, Shift5, Lunchbox, and Squire. Our exits include FiscalNote (NYSE: NOTE), Oort (acquired by Cisco), Betterview (acquired by Nearmap), Aryeo (acquired by Zillow), and Rosie (acquired by Instacart). 645 manages $550m+ in AUM across 5 funds, and is growing fast with backing from leading institutional investors, including university endowments, funds of funds, and pension funds. The team has prior experience from top VC firms and financial institutions including Insight Partners, Vista Equity, Thrive Capital, First Round Capital, Goldman Sachs, and Volition Capital. The firm has offices in New York and SF, and you can learn more at www.645ventures.com.

About QED Investors

QED Investors is a global leading venture capital firm based in Alexandria, Va. Founded by Nigel Morris and Frank Rotman in 2007, QED Investors is focused on investing in disruptive financial services companies worldwide. QED Investors is dedicated to building great businesses and uses a unique, hands-on approach that leverages its partners’ decades of entrepreneurial and operational experience, helping companies achieve breakthrough growth. Notable investments include AvidXchange, Betterfly, Bitso, Caribou, ClearScore, Current, Creditas, Credit Karma, Flywire, Kavak, Klarna, Konfio, Loft, Mission Lane, Nubank, QuintoAndar, Remitly, SoFi, Wagestream and Wayflyer. Visit www.qedinvestors.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240821807861/en/

Kaustav Das

media@ecaplabs.com

Source: Efficient Capital Labs

FAQ

How much did Efficient Capital Labs raise in their Series A funding round?

Efficient Capital Labs raised $11 million in their Series A funding round.

Who led the Series A funding round for Efficient Capital Labs?

The Series A funding round for Efficient Capital Labs was co-led by QED Investors and 645 Ventures.

What is Efficient Capital Labs' main business focus?

Efficient Capital Labs provides revenue-based financing to B2B SaaS companies operating in the South Asia-U.S. corridor.

How much financing has Efficient Capital Labs originated to date?

Efficient Capital Labs has originated more than $70 million in financing to date.

What are Efficient Capital Labs' expansion plans following the Series A funding?

Efficient Capital Labs plans to expand into Singapore and other Southeast Asian markets following the Series A funding.