GetVantage financed 40 businesses, while Klub has enabled over 75 rounds of investments over the last year With more and more start-ups turning to revenue-based financing (RBF), this fund-raising mode is now in vogue.
The market size for RBF in India is estimated to be about $5-8 billion from over 10,000 new small businesses entering the market every year. At the same time, entrepreneurship efforts are also being recorded from remote cities and towns.
Revenue-based financing, also known as royalty-based financing, is a mode of raising capital from investors in exchange for a percentage of its gross revenue. While investors conduct proper diligence on a company’s revenue-earning potential, this also means that if a firm does not earn any income, then investors don’t get any return.
Being a recent phenomenon in India, there are only a few companies – including Getvantage, Klub and Velocity, among others – providing revenue-based financing in the country.