Bengaluru-based fintech start-up Velocity has raised $20 million (about ₹150 crore) in the Series-A funding round led by the US-based venture capital firm Valar Ventures, doubling down its previous investment.

Launched in early 2020, Velocity offers revenue-based financing as an alternative to venture capital and traditional bank debt to e-commerce businesses and so far onboarded over 1,500 e-commerce businesses.

Other investors who participated in the current funding include Presight Capital, Utsav Somani's iSeed, Maninder Gulati's Oyo, Zac Prince's BlockFi and Philippe de Mota's Hedosophia.

Combined with the $10 million seed round announced earlier this year, this brings Velocity's total equity raised till date to $30 million. In addition, Velocity has also secured multiple debt lines with leading NBFCs to rapidly scale its revenue-based financing platform.

The fintech player has over ₹1,200 crore of fundable revenue connected to its platform and has already processed over 250 investments across 175 companies, it said in a statement, adding that it has plans to deploy over ₹1,000 crore to over 1,000 e-commerce businesses, Abhiroop Medhekar, Co-founder and chief executive of Velocity, said.

The direct-to-consumer segment is expected to grow at an annual rate of 25 per cent from $44.6 billion in FY21 to $100 billion by FY25, he said quoting market data.

Factors driving growth

Increased internet penetration, widespread use of digital payments, and the pandemic-induced adoption of online buying resulted in 88 per cent order volume growth on such websites in 2020.

But despite this growth, capital remains out of reach for most businesses as of the over 75,000 independent e-commerce stores hosted on platforms like WooCommerce and Shopify, less than 0.5 per cent are equity funded.

Andrew McCormack of Valar Ventures said since our last investment, Velocity has grown 10 times and we are impressed by their strong customer orientation, tech-product DNA, and ambitious growth plans.

Velocity does not take any collaterals, personal guarantees, or equity dilution but only charges a fixed fee of 4-8 per cent on the deployed capital.

Velocity's portfolio includes many growing D2C brands such as PowerGummies, Green Soul, WallMantra, BellaVita, Smoor Chocolates and CrossBeats, to name a few.

As the repayments are directly linked to a borrowing company's revenue, Velocity has skin in the game to support the revenue growth of its portfolio companies.

Velocity was launched by IIT Bombay graduates Abhiroop Medhekar, Atul Khichariya, and Saurav Swaroop. The trio had earlier worked together at Taskbob, a managed marketplace for high-quality home services.

Valar Ventures is a venture capital fund based in the US, founded by Andrew McCormack, James Fitzgerald and Peter Thiel.