Karmen secured $9.4 million for its revenue-based financing products
French startup Carmen It has secured a small funding round so that it can improve its immediate financing products. The company provides short-term loans to small businesses facing a working capital crisis.
It’s a €9 million equity and debt round ($9.4 million at today’s exchange rates) with Seventure Partners buying a stake in the small startup. Financière Arbevel and Bpifrance complete the round with some debt.
The startup is not the only company working in this field that can be described as instant financing for SMEs. Among the French competitors Silver, De facto, unlimited and hero.
The reason revenue-based financing has become a hot vertical trend is that traditional banks and financial institutions are struggling to engage with SMEs at scale. It is a highly fragmented market with small margins. That’s why tech startups are trying to bridge this funding gap with a data-driven approach.
Today’s news comes just a few months after Carmen Believer A €100 million debt instrument that serves as the basis for the company’s short-term loans. Six months later, it appears that quite a few companies are now relying on Carmen to fix their cash flow problems.
Nearly 600 companies have used Karmen to purchase inventory, pay suppliers, fund paid acquisition campaigns, and more. Loans range from €20,000 to €3 million, from 2 to 24 months.
On average, a typical Carmen client borrows €200,000 for six months. But as you can see, there is a wide range of financing options. Likewise, Carmen’s smallest clients generate only €300,000 in annual revenue (and are likely single-person businesses), while Carmen’s largest clients generate €160 million in revenue annually.
More importantly, Karmen has attracted some loyal customers, with 80% of the startup’s customers contacting Karmen several times a year to open a new line of debt. Clients include Maison Kitsuné, Balibaris, Les Raffineurs and Almé.
While most companies contact Carmen directly, the startup has a hybrid distribution strategy. It collaborates with other fintech companies so that it can offer Karmen financing products to its customers. Some ERP systems, e-commerce marketplaces, and merchant banks like Qonto already integrate with Karmen.
This combined financing strategy represents 40% of Carmen’s clients currently. But the company says it hopes it can raise that metric to 75% of new customers by the end of 2025.
While most businesses repay their loans without any problem, companies can sometimes have difficulty paying back what they owe.
“This is part of our job as a lender. We are committed to mitigating this risk through our data-driven approach, which allows us to have a very accurate view of our clients’ financial and operational performance,” said Gabriel Thierry, co-founder and CEO of Carmen.
“In addition, we are investing heavily in our technological risk assessment tool (thanks to artificial intelligence) to enhance this approach,” he added. Hence, today’s funding round.
Karmen currently uses about 60 different financial metrics to record loan applications in near real-time. Its built-in strategy can also be leveraged to make smarter decisions – bank accounts, accounting software, ERP systems and invoicing tools contain valuable data on a company’s overall performance.
