Trade finance is an age-old paper-based industry dominated by banks focusing on large, established corporate customers. Hence, banks largely neglect small businesses, accounting for 40% of all international trade. A recent report by the Asian Development Bank highlighted the global trade finance gap to be $1.7 trillion, most of which exists across the SME segment in emerging markets, says Pushkar Mukewar, co-founder and CEO, Drip Capital, a company focused on addressing the trade finance gap for small businesses in emerging markets using data and technology. Basically it is a trade financing firm that utilises Artificial Intelligence (AI)-based risk assessment to lend working capital to MSME traders across India.
Drip Capital uses new-age technology such as machine learning and cloud technology to make cross-border trade easy and accessible for small businesses, says Mukewar. An alumnus of The Wharton School of the University of Pennsylvania, Mukewar started his career at Capital One—a leading player in subprime consumer credit. He learned how data and technology could be leveraged to fill credit gaps for underserved market sections. He then spent three years at Oliver Wyman, solving strategic and operational issues large companies face across several sectors and geographies. While at Oliver Wyman, he decided to take a sabbatical and work with the Acumen Fund in India, a player in social impact investing. Learning from his experiences there, he eventually founded Drip Capital.
Cut to present. His digital trade finance company (Drip Capital) has innovated on two fronts—first, via a robust, automated risk management system, and second, with an online, self-serve, low-touch distribution model. Drip Capital leverages a variety of third-party electronic data from customs, shipping lines, and global credit insurance companies to assess the risk of every cross-border trade transaction holistically.
Since 2015, when Drip hired its first employee and onboarded its first customer in India, it has steadily grown to a global organisation of over 250 highly-talented individuals from diverse backgrounds in technology, financial services, and actuarial sciences. In 2018, it launched its Mexico operations, providing post-shipment credit services to SMEs. In 2019, the company launched buyer financing solutions for small businesses in the US.
Drip currently works with over 3500 sellers and buyers in over 75 countries. Since partnering with the company, many of Drip’s customers in India have seen a 40% year-on-year growth in their export business, says Mukewar. To date, Drip Capital has financed over $2 billion worth of global trade international transactions, of which over nearly 80% comes from India. Despite the Covid-19 pandemic, the company’s revenue has grown by almost 2.5x in the last year, and aims to maintain its growth trajectory.
Drip Capital has raised nearly $525 million through private equity and debt since 2016. On the equity front, it has raised $95 million from venture investors including Accel Partners, Y-Combinator, Wing VC, Sequoia Capital, Irongrey, and the TI platform. It also partnered with institutional investors, family offices, and wealth advisors on the debt side. Drip Capital has also partnered with Barclays and East West Bank for warehouse credit facilities.
According to Mukewar, in the next 18 months, Drip Capital aims to accelerate its go-to-market in North America, Latin America, UAE, and South Asia. “Drip is also confident that it will finance $10 billion worth of global trade transactions through its digital platform in the next two to three years. Furthermore, MSME engaging in cross-border trade often find processes like forex handling, logistics management, and insurance as complex and bureaucratic. The company is eyeing to emerge as a one-stop solution through a partnership with other ecosystem operators and service providers to address the pain points of MSMEs and make cross-border trade hassle-free for small businesses,” he adds.