Shark Tank India fans will agree that the best part of the show was the bit when budding entrepreneurs negotiated with sharks to get the best deal. These negotiations are one of the primary reasons for the show's thriving popularity.
While it was “entertaining” watching founders and the sharks have tough conversations around 0.25-50% equity in exchange for a relatively small amount of funding, it was equally distressing to watch. Equity in one's company is precious, and founders should rightly want to keep most of it. Most entrepreneurs looking for funding go through several rounds of pitches, numerous rejections, and some heartache before finding a deal that best suits the entrepreneur and the start-up's interests. These challenges compound multiple times for smaller start-ups, especially in the D2C space.
Traditional funding options like Venture Capital continue to be the first port of call for many entrepreneurs today. However, times are changing quickly and the funding options available today are also evolving to cater to the ecosystem's growing needs. An unconventional yet effective new capital option for founders is performance-based financing or revenue-based financing (RBF). This innovative founder-friendly model empowers business-owners with fast, fair, and flexible access to growth capital without diluting any equity or ownership. Instead, the platforms providing RBF do so on flexible terms that ensure repayments are linked to revenue performance and growth.
The process of traditional equity funding is long, complex, riddled with bias and isn’t always ideal for all brands depending on their vintage and growth trajectory. It might take a week to a few months to not just raise funds through VC or PE, but often it takes that long just to get a meeting. On the other hand, high interest rates and collateral options makes traditional debt almost unviable. With a data-driven approach that eliminates bias, RBF solves these problems in no time. The model offers a fair, flexible, and founder-friendly alternative to entrepreneurs to access the growth capital they need to supercharge their business without giving up ownership or taking on the burden of traditional debt in just a few days.
The model is quickly gaining popularity around the world with players like Clearco and Wayflyer making waves around the world and others like Pipe, Capchase, and Fairplay focused on the Americas and Europe. In India too companies like GetVantage are pioneering this innovative, equity-free model of fundraising to supercharge growth for young, fast-growing, digital-first businesses that are slated to present a potential eCommerce market opportunity of US$ 100 bn by 2025.
Most young online brands face two significant challenges-- getting quick funding for growth (marketing, inventory, expansion) and customer acquisition and retention. GetVantage has established a powerful all-in-one finance & growth platform for SMEs that provides access to non-dilutive growth capital, real-time insights, business optimization tools, and a powerful support system to empower businesses to thrive on their terms.
With RBF owners are not tied up to a fixed interest cost. The return is linked to the revenue performance and potential of a business. No interest. No equity. N o board seats. No warrants. No collateral. The capital and a small flat fee are repaid as a portion of future revenues. With RBF, there is minimal impact on cash flow as repayments growth with the business. If business is not so good in a month, the returns will be lower.
Compared to other models, RBF is also significantly morehassle-free. The banking sector has matured over the past decade to support businesses. However, for start-ups that require readily available funds, particularly in the e-commerce sector, applying for bank loans is a complex process with a long turnaround time. For instance, a D2C firm selling fashion jewelry on social media may not have the credit line required for a bank loan. The founder may do a decent business but may still find an investor willing to pump funds at short notice, especially when orders are piling up.
Revenue-based funding is a faster and much less complex avenue for such digital-first, asset-light start-ups. With GetVantage, an application takes a few minutes, and founders can expect to receive a bespoke funding offer within 72 hrs and can get funded in less than five days. It's a far more transparent investment option too. The credit-decision is based on business performance data and not on who you know. Being an equity-free long-term growth partner for brands means every founder has the autonomy to run their business the way they want to, with all the support they need, without any interference.
In just about 12 months, GetVantage has quickly established itself as the largest and fastest-growing RBF platform in India. The company has leveraged its technology infrastructure and data-driven approach to fund 200+ founders building the new brands of India.
Data is the force behind the success of RBFs. Why? Data doesn't endorse biases that humans may subconsciously possess. The biases of the Indian start-up ecosystem are no secrets. Studies have shown that women founders have it difficult when looking for funding. Similarity bias and gender bias are commonplace.
This is where RBF comes up trumps. Usually, companies are able to offer an RBF-style funding option to brands with a minimum vintage of 6-12 months as that ensures there’s robust revenue, sales, growth, marketing data to review and study. Automated, digital processes mean that for platforms like GetVantage, they’re fundamentally making the funding process for founders, frictionless, transparent, and fair.
The D2C space is booming as consumers today are spoilt for choice with home-grown products. As per research firm RedSeer, India’s digital consumer business is expected to become a $800 billion market by 2030, from the current $90 billion market. Venture Capital taps less than 5 percent of this market and the rest are left scrambling for funding options.
The growing hype around revenue-based financing is real. As more businesses, from eCommerce, to gaming, and edtech to B2B SaaS, look to scale, companies like GetVantage are no longer the alternate funding option but have fast-become the preferred funding partner as this model goes mainstream.