Sequoia's Surge-backed Klub raises $20 Mn in seed round

Revenue-based financing platform Klub has raised $20 million in one of the largest seed rounds raised by a startup from India. The funding round saw participation from existing investors 9Unicorns, Sequoia’s Surge along with Alter Global and GMO VenturePartners.

According to Entrackr’s sources, Klub has raised $10 million in equity and $10 million in debt. Klub plans to utilize the capital to expand its team, product offerings and accelerate the development of its tech and data platform, said the company in a press release.

Picking up debt makes sense due to the lending model that Klub follows.  It prevents equity dilution, and provides a clear picture of the startup’s expertise and performance for potential investors, as debt requirements will keep going up with growth in the business.   

The Klub Model

Founded by Anurakt Jain and Ishita Verma, Klub provides growth capital ranging from Rs 2 lakh to Rs 30 crore with zero equity dilution or personal guarantees. The two-year-old startup provides funding for recurring marketing, inventory, and capex spends to digital-first companies and SMEs across e-commerce, D2C, edtech and SaaS. 

The startup claims that more than 500 businesses have explored funding with Klub recently. While that is easy enough, the challenge will lie in its credit appraisal metrics and collection ability in case of accounts going bad. The company was also a part of the second batch of Sequoia’s accelerator program Surge. It had previously raised $2 million in a pre-seed round.

Besides Sequoia's Surge, Klub has also raised funds from AngelList, Better Capital, EMVC Fintech Fund, Tracxn Labs and angels including Naveen Tewari, Kunal Shah, Ramakant Sharma, Rajesh Yabaji, Sachin Maheshwari and Yourstory’s Shradha Sharma.

Competition and investment in the segment

Revenue-based financing is a rapidly emerging complement to venture capital and traditional debt. In this segment, Klub directly competes with GetVantage which claims that its portfolio has nearly 100 brands. The Mumbai-based startup had raised $5 million in October 2020 in its seed round from Chiratae Ventures and others.

Velocity, a similar startup, also raised $10.2 million as a part of its seed round led by US-based Valar Ventures. Other startups in the segment include Recur and IDEABAG.

Large seed rounds the new trend?

Over the past couple of years, startups in their seed stage have been able to pull larger rounds. While the likes of Acko, CRED, INDmoney and Jupiter had started the trend of raising seed rounds in the range of $25-30 million, new-age startups across segments have also made it to the list in 2021.  The trend might indicate better models, investors that go ‘all in’ with some firms, and of course, crowding out of smaller startups.

In June, e-commerce roll up startup 10club surpassed all previous records and had raised the largest seed round of $40 million. Klub will also join the list of top seed funded startups at sixth position.