Financial tech startup Capital Float raises $13 million from SAIF Partners & Sequoia Capital

Bangalore based
financial tech startup Capital Float has raised $13 million in Series A funding
round led by SAIF Partners and Sequoia Capital. Existing investor Aspada also
participated in the round, reports TechCrunch. The company will use the funds to
expand into more cities, improve its tech platform, and launch new products.

The company is
also using its equity to finance loans, but plans to open up to other sources
of capital by partnering with banks and individual investors. It makes money
through a combination of interest and fees.

Founded in 2013,
Capital Float has raised a total of $17 million to date, all within the past
twelve months. Capital Float has loaned more than $6 million to small
businesses in 12 Indian cities. Its founders, Gaurav Hinduja and Sashank
Rishyasringa, say the number of applications it processes increased by 10 times
in 2014, with Capital Float now receiving about 200 loan requests per month.

According to the
report, the company’s growth has been fueled mainly by India’s rapidly growing
e-commerce market, and about 70% of its applicants are vendors who sell goods
on marketplaces like Snapdeal, Flipkart, Amazon India, Paytm, or Myntra. The company
also intends to launch products tailored to offline businesses, such as small
manufacturers and business service providers.

According to the
TechCruch report,  about 20 -30% of
applicants are approved after the platform accesses their suitability based on
2,000 data points. In addition to the usual metrics, like credit bureau scores,
Capital Float’s technology scores applications based on online data, including
customer feedback and transaction history from online marketplaces. It also
does psychometric assessments: in other words, applicants are asked questions
to judge things like their ability to scale a business, attitude toward credit,
and how they compare to competitors.

Capital Float
founders say it offers interest rates similar to banks, or about 16-18%, but a
much faster application process. Potential lenders typically get a response to
their online applications within seven days, compared to about two months for a
traditional bank.