Fintech Startup NAKAD Raises $7 Mn To Offer Working Capital To MSMEs

Four-month-old fintech startup NAKAD has raised $7 Mn in a seed funding round led by Accel and Matrix Partners India along with AdvantEdge Founders. The round was essentially an equity funding round. 

It also saw participation from angel investors – Razorpay founders Harshil Mathur and Shashank Kumar; Zetwerk founders Amrit Acharya and Rahul Sharma; Uni Cards founder Nitin Gupta; Zolve founder Raghunandan G; Five Star Business Finance CEO Rangarajan Krishna; Bizongo founders Sachin Agrawal, Aniket Deb and Ankit Tomar, among others. 

The startup will deploy the funds for product development and expanding NAKAD’s operations across India. Besides, the fresh capital will also be used for boosting tech infrastructure and hiring talent across verticals. 

Founded in January 2022 by Ujwal Kalra, Sambhav Jain and Avinash Uttav, NAKAD works as an invoice discounting platform for micro, small and medium-sized enterprises (MSMEs). The startup has partnered with several anchors (big companies) and their suppliers (primarily MSMEs), private banks and NBFCs to build an entire ecosystem on its platform. 

NAKAD defines anchors as large growth companies which have a vast supplier base. The startup classifies suppliers into tier-1, tier-2 and tier-3 on the basis of their degree of operations. If a supplier provides materials to anchors directly, then it is categorised as tier-1 supplier, while those who provide materials to a tier-1 supplier are called tier-2 suppliers. 

The startup fulfils the working capital requirement of MSMEs by allowing them to sell their invoices at a discounted rate to lenders on its platform based on the credit worthiness of the anchors. NAKAD charges a fee from the suppliers for registering on its platform.  

Technology Behind The Platform

NAKAD employs its self-developed proprietary technology named MicroBill to offer financial assistance to small businesses. 

Explaining the technology, Kalra said, “We basically tokenize the invoice by breaking it and flowing it down the chain. Then, the stakeholders get to know what number of the tokens or MicroBills they have in their wallet and through the banking partnerships that we have, they (suppliers) can get money in exchange of invoices.” 

Kalra said that owing to this technology, the benefits of early payment are not just limited to tier-1 or tier-2 supplies but to all the participants in the supply chain.

NAKAD is also looking to increase its headcount to 70 by the end of 2022. Besides, NAKAD will also be adding new products to its offerings in the near future. “The thought is to utilise our financing as a hook and then…to get more,” Kalra said.  

India’s Burgeoning Fintech Segment

According to an Inc42 report, India’s fintech market is anticipated to reach $1.3 Tn by 2025. Out of this, the lending tech segment will account for 47% ($616 Bn). 

Each sub-sector within the fintech space has a “lot of nuances and there are multi-billion-dollar companies sitting in each of these pockets”, Kalra said on the growth of the fintech sector in the country.

With large private sector banks also partnering the Indian fintech startups and adopting their innovations, the disruption in the sector through new models will keep happening, he added.