In today’s challenging landscape for securing venture capital, numerous companies are opting for non-dilutive, revenue-based financing (RBF) as a viable alternative. This trend is particularly pronounced in the MENA region, where numerous startups are thriving in this domain. One such startup, CredibleX, has successfully raised $55 million in seed funding, led by Abu Dhabi’s Further Ventures, capitalising on the growing market for revenue financing in the Middle East.
CredibleX provides essential working capital financing to small and medium-sized enterprises (SMEs). The company operates in a competitive environment, having witnessed MENA rivals such as FlapKap and Flow48 scaling up and securing investment in 2023. Additionally, other entities globally, including Modifi (which has raised $353.6 million to date), Drip Capital ($528.1 million to date), and Incomlend ($25 million to date), are also part of this dynamic sector.
What is driving this trend?
MENA SMEs continue to face considerable hurdles in obtaining working capital from conventional banking systems, leading CredibleX to carve out a beneficial market strategy. The company collaborates with major aggregators, targeting SMEs within their established vertical ecosystems.
CEO and co-founder Anand Nagaraj shared with StartupSuperb: “Our strategy enables us to recover repayments effectively, as we maintain a direct relationship with the debtor or payer. In contrast, many others in this sector work alongside SMEs to secure an assignment of receivables or sales.”
Revenue-based financing is particularly advantageous for SMEs in high-income nations like the UAE, where securing funding from Development Finance Institutions is often more challenging, as these institutions primarily focus on less economically developed regions.
The CredibleX platform’s operation aligns closely with the rapid growth of service-oriented platforms, especially in industries such as the restaurant sector, which is prevalent across MENA.
For instance, a restaurant SME might utilise a service like Talabat (acquired by Delivery Hero in 2015 for $158.52 million) for food delivery and seek RBF. The SME can apply for a loan through Talabat’s interface, integrated with CredibleX, upload its sales history and ratings, and receive a credit decision from CredibleX within 24 hours.
The repayment process is seamless, with the restaurant repaying the loan through Talabat, which facilitates payments directly to CredibleX, who also partners with 37 other similar service providers.
Commencing operations in March 2024, CredibleX has reportedly funded over AED 100 million (US$27 million) to SMEs.
Anand Nagaraj previously held a position at Citi before founding Invoice Bazaar, a platform designed for supply chain finance that assists SMEs supplying to large corporations with prompt payments. Following his exit from Invoice Bazaar in 2021, Nagaraj, along with co-founders Ahmad Malik and Hassan Reda, established CredibleX.
Nagaraj noted: “Our method allows us to engage with a broader range of SMEs, which is particularly beneficial in challenging situations concerning repayment recovery.” Furthermore, CredibleX holds full regulation from FSRA at Abu Dhabi Global Markets.
The seed funding comprises equity from Further Ventures and debt from various investors, including Kilgour Williams Capital. Further Ventures counts ADQ and Mastercard among its limited partners.
