Velocity's 3-6X SaaS Boost: Rs 300 Cr Fund Unveils Tailored Credit Product

Velocity, a revenue-based financing startup, has introduced a dedicated capital fund of Rs 300 crore, focusing on growth through fixed-term credit for B2B Software-as-a-Service (SaaS) businesses.

How Velocity's Financing Is Different?

Through the fund, Velocity will offer a fixed-term credit product, specifically designed to provide SaaS businesses with financing amounting to 3X to 6X their monthly recurring revenue. The offering has a repayment structure spread over 12 months.

Since its inception in 2020, the Bengaluru based startup has invested a substantial Rs 750 crore across e-commerce and direct-to-commerce (D2C) enterprises, making approximately 2,000 strategic investments.

Velocity's latest initiative involves collaborating with leading Non-Banking Financial Companies (NBFCs) and regulated entities to offer a fixed-term credit product tailored for the unique needs of SaaS businesses. The financing is designed to provide these enterprises with funds equivalent to 3 to 6 times their monthly recurring revenue, without requiring equity dilution.

Revenue-Based Financing Model

Velocity's financing model adopts a revenue-based approach, wherein businesses agree to share a percentage of their future revenues with the financing provider. This model, popular among startups and SMEs, offers a flexible alternative to fixed loan amounts with interest.

How Velocity Helps SaaS Companies In Expansion?

Co-founded by Abhiroop Medhekar, Atul Khichariya, and Saurav Swaroop, Velocity aims to address the specific challenges faced by SaaS companies during their expansion phase. The primary hurdle often revolves around the substantial costs associated with customer acquisition. To navigate this, Velocity's financing solution is positioned as a bridge, enabling SaaS businesses to scale operations, expedite product development, and broaden their market presence.

“SaaS enterprises encounter distinctive hurdles in their expansion, mainly concerning the costs associated with customer acquisition. These companies must allocate significant funds towards sales and marketing to attract customers, with the breakeven point for such investments typically falling between 6 to 18 months. Particularly for firms on a high growth trajectory, this results in negative cash flows due to ongoing investments. This period underscores the need for flexible and understanding capital solutions that can bridge this gap. Our financing is designed to support these unique requirements, ensuring that SaaS enterprises have the necessary resources to innovate, market effectively, and scale with efficiency,” said Abhiroop Medhekar, Founder and CEO of Velocity.

Velocity's Financing & Investors So Far

Velocity has reported significant success in its financing endeavors, disclosing that it disbursed loans totaling over Rs 400 crore in 2023 alone. The company has alraedy crossed the milestone of 2,000 lifetime investments, with 500 brands receiving funding in the previous year. Among the notable brands that have benefited from Velocity's support are French Crown, Iconic Fashion, Soulflower, Chumbak, IDC Kitchen, Off Duty, Itsy Bitsy, Bear House, and Zlade.

Backed by renowned investors like Peter Thiel's Valar Ventures, Velocity positions itself as an alternative to traditional venture capital and bank loans for e-commerce businesses. The startup collaborates with NBFCs such as Oxyzo, U GRO Capital, CredAble, and Trillionloans to provide financial support to startups in the sector.

Navigating Challenges and Restructuring

While Velocity has garnered success, it faced its own set of challenges, including a workforce reduction of 14% in September 2023. Abhiroop Medhekar, Founder and CEO of Velocity, emphasized the importance of reaching profitability and framed the restructuring as a crucial step in that direction. The startup had last raised USD 20 million in a Series A funding round in November 2021.

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