Startups, especially in e-commerce and B2B software-as-a-service (SaaS), leaned heavily on revenue-based financing (RBF) in 2024 as equity markets remained muted. The trend marked a shift in how businesses sought capital for growth, inventory management, and market expansion.
RBF platforms such as Velocity and GetVantage experienced a surge in activity, with Velocity reporting a 50% increase in disbursals and GetVantage doubling its investments. These platforms, which offer non-collateralised loans repaid as a percentage of a company’s gross revenue, have emerged as critical funding sources for startups navigating tough funding environments.
“A lot of brands are looking for capital to grow in quick commerce and manage inventory effectively,” said Atul Khichariya, co-founder and COO of Velocity. “We’ve also observed rising demand from cloud kitchen startups over the past few months,” he added.
RBF offers a flexible and accessible funding option for startups and small and medium enterprises (SMEs) that often struggle to secure institutional capital or traditional bank loans. Companies can access funds in exchange for 5-20% of gross revenue as monthly repayment, coupled with a fixed fee on the principal. The fee ranges from 6-6.5% for a six-month term to 10-12% for up to a year.
Among notable beneficiaries are brands like Smoor Chocolates, Imperio Restaurants, and IDC Kitchen, which have utilised RBF for initiatives such as launching new restaurants or cloud kitchens.
While venture debt — typically reserved for venture-backed startups — remains larger in scale, with an estimated $900 million in investments in 2024, RBF is rapidly growing. Collectively, Velocity and GetVantage has each deployed Rs 1,000 crore since their inception in 2019-20.
B2B SaaS companies also turned to RBF in significant numbers. Velocity earmarked Rs 300 crore for SaaS startups in 2024, while GetVantage launched a Rs 250-crore fund for the sector. Efficient Capital Labs, focused on the South Asia-US SaaS corridor, doubled its disbursals last year, originating more than $70 million in financing between Q12023 and Q22024.
“These companies are leveraging RBF to break into and expand within US markets,” said Kaustav Das, co-founder and CEO of Efficient Capital Labs. Das, a finance veteran, believes competition in the RBF space will intensify in 2025 as interest rates decline and venture debt players and commercial banks become more active.
“Interest rates are coming down, which will lead to more competition. Venture debt and bigger commercial banks will play a larger role, and existing players will need to offer more competitive pricing,” Das noted.
While RBF platforms currently manage a smaller asset base compared to venture debt, their ability to cater to non-venture-backed startups and SMEs has made them indispensable. The model’s appeal lies in its flexibility, speed, and alignment with revenue cycles, making it particularly attractive in uncertain economic climates.
As equity funding gradually recovers and interest rates ease, the dynamics of startup financing will further evolve. However, analysts said that RBF has firmly established itself as a vital alternative for growth-focused startups, cementing its role in the broader funding ecosystem.