Revenue-based finance startups continue to raise capital in the MENA region, where this model is working
In an era where raising venture capital is becoming more difficult, many companies have turned to non-dilutive revenue-based financing (RBF) as an alternative. As a result, a lot of startups have risen to meet this challenge, especially in the MENA region, which has taken to this model like a duck to water. The latest is Crediplex Which raised a seed funding round worth $55 million led by an Abu Dhabi-based company More projects This is to take advantage of the thriving revenue financing market in the Middle East.
By providing working capital financing to SMEs, CredibleX operates in a market where we have seen companies such as MENA competitors FlapKap and Flow48 Expansion and capital increase in 2023Not to mention others elsewhere like Modifi ($353.6 million so far), Drip Capital ($528.1 million so far), and Incomlend ($25 million so far).
So what’s going on here?
As SMEs in the MENA region continue to struggle to access working capital through traditional banking channels, CredibleX has found a way into the market. It partners with large aggregators and then goes after SMEs in its vertical ecosystem.
“We believe this approach helps us recover payments easily as we have a direct relationship with the debtor/payer,” CEO and co-founder Anand Nagaraj told TechCrunch. “Most others in this space work with SMBs to try to get receivables/sales waived.”
In particular, revenue-based financing works very well for SMEs in high-income countries like the UAE and similar countries, since it is difficult to obtain financing from so-called development finance institutions, which are primarily set up to invest in Projects in fewer areas. Economically developed countries.
The way the platform works is “MENA,” given the explosion of platforms set up for service-based industries like restaurants, of which there are millions in the MENA region.
Here’s an example: An SME like a restaurant uses a platform like Talabat (acquired By Delivery Hero in 2015 for $ 158.52 million ) to deliver its food, and wants access to RBF. This applies to the loan during The Talabat platform integrated with CredibleX uploads its historical sales data/ratings, and CredibleX then makes the credit decision on issuing a loan, all within 24 hours.
The restaurant then repays the loan with Talabat making payments directly to CredibleX (which also has similar relationships with 37 other partners).
The company began operations in March 2024 and claims to have issued more than AED 100 million (US$27 million) to SMEs.
Nagaraj previously worked at Citi, then created Invoice Bazaar, a supply chain finance platform that helps SMEs provide large enterprises with early payments. After exiting that startup in 2021, Nagaraj, along with co-founders Ahmed Malik and Hassan Raza, launched CredibleX.
“Our approach helps us reach a wider range of SMEs, and it definitely helps when things go wrong, in terms of recovering payments from SMEs,” Nagaraj explained. CredibleX is also fully regulated by the FSRA in the Abu Dhabi Global Markets.
The seed round consists of equity from Future Ventures and debt from various providers, including Kilgour Williams Capital. More projects have LPs that Includes ADQ and Mastercard.
