Photo by Hemant Latawa on Unsplash

WHY WE INVESTED

Meet the startup saving small businesses in the midst of India’s COVID-19 crisis

Launched at the start of the global pandemic, Rupifi is giving India’s 40 million SMEs a way to buy now and “pay flexibly” for business expenses.

It was after starting and selling his fourth company, a consumer lending app called Qbera, that Anubhav Jain had his “eureka” moment. Based in Bangalore, India, Jain, who’d held roles at American Express and Citibank over the years, saw a massive untapped market: small businesses (SMBs) across India. Contributing more than 45% to the national GDP, SMBs play a crucial economic role, yet as a segment, they were not expanding. “We are talking about 40 million businesses who need formal financial credit that they aren’t getting,” he says. “How do we build for that?”

It’s a question central to the once-in-a-lifetime digitization happening across India. While the initial wave was consumer-focused between 2010 to 2020, in the past few years, SME digitization has become the fastest-growing segment. An entire ecosystem of digital SMEs and supply chains has sprung up as a result, but it’s also created a huge market need. Traditional financial companies, banks, and fintechs have struggled to power this digital wave with adequate access to financing.

That’s where the idea for Rupifi was born. With Rupifi, Jain wanted to focus on helping small- and medium-size businesses cover the costs of day-to-day needs. “ Is there a way to give small businesses more flexibility in how they pay for basic expenses?” he asked himself. This might mean, for example, that a family-run shop could stock up on inventory today and have the option to pay for it flexibly, as it is sold over the coming days or weeks, rather than upfront — an evolution of the traditional Buy Now, Pay Later model used by fintechs like Klarna and Affirm.

He and his co-founders, Ankit Singh and Jawaid Iqbal, knew they had to get customers at little to no cost if they wanted a shot at building a sustainable business. “In fintech, the cost of acquisition can make or break you, especially when you are going after smaller customers (in our case the SMEs) with low ticket requirements,” he says.

That’s why Jain and his co-founders focused on partnering with some of the biggest distributors SMBs in India were buying from. This would give them instant access to a huge customer base. They would underwrite these customers with a “closed-loop” credit limit that gave them flexible payment options when buying online from multiple distributors, so they could pay only for the days they use the credit.

Rupifi put this theory to the test in late 2019. The founders approached an executive at one of India’s largest restaurant aggregator and food delivery companies, which also ran a B2B supplies business for their restaurants to source from. What if they could offer all the restaurants that used the aggregator a “buy now, pay flexibly” option? The executive was excited about the idea. “Such a large vendor saying yes to our idea before a single line of code was even written gave us conviction that there was a real need for this,” says Jain.

That’s when he and his co-founders quit their jobs to focus on Rupifi. They got their first round of seed funding in January 2020. Soon after, the restaurant aggregator became their first customer. They tapped into their networks to court new distributors and B2B marketplaces Rupifi could work with, partnering with massive suppliers in pharma, food/fast-moving consumer goods (FMCGs), and agriculture. “We went to online wholesalers and said, ‘We will power your customers with credit,’” says Jain. “Once you crack the leader in the market, everyone else follows.”

Jain also made the most of relationships with bank executives he’d worked with. He and his co-founders understood a crucial element to building Rupifi was partnering with big banks and financial institutions in India rather than building the financial infrastructure from scratch. “Most fintechs try to become the balance sheet themselves. But if you can scale with a bank, it’s always better and cheaper,” he says.

Just as Rupifi was getting off the ground, Jain and his co-founders found themselves in the middle of a global pandemic. In the spring of 2020, they kept their heads down and focused on building the product. It was the last remaining piece of the puzzle. They built a backend technology that could integrate seamlessly into the online purchasing experience of B2B marketplace apps so that when SMB customers buy from a distributor online, at checkout they can choose Rupifi as a payment option. This means customers can use Rupifi’s buy now, pay flexibly service on even the most basic smartphones.

Rupifi officially launched last June, a time when lenders had stopped giving money to new customers, putting many SMBs in increasingly dire straits because of the pandemic. Rupifi approached distributors selling essential goods — those least hit by COVID — with their business proposition. “For a lot of places, we were the only option available,” says Jain. “We got some of the largest clients because none of the banks or even SME lending fintechs were lending.”

Today Rupifi works with more than a dozen B2B marketplaces across India and is growing at a rate of more than 40 percent month-to-month. The company aims to reach one million SMBs in India over the next five years. “Our goal is that wherever a B2B transaction happens, Rupifi is powering it,” says Jain.

Quona led Rupifi’s $4.1 million pre-Series A round in March 2021.

Disclaimer: Quona portfolio companies were selected for profiles based on objective, non-performance-based criteria for the purpose of illustrating the types of investment made by Quona funds and their impacts. These profiles are being provided for illustrative purposes only, in order to provide examples of the idea generation, research, and thought process of Quona investment teams. No representation is made as to whether or if the investment ideas represented in these profiles have been or will be profitable. It should not be assumed that Quona will be able to identify similar investment opportunities in the future, or that any such opportunities will be profitable. The above statements include the opinions of the Firm and are for illustrative purposes only. There is no assurance that any trends depicted or objectives described in Quona profiles will continue or become successful.

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Quona Capital

Quona Capital

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Quona Capital is a venture firm specializing in financial technology for inclusion in emerging markets. Learn more at quona.com.