Revenue-based funding startups continue to raise capital in MENA, where the model just works

In an era when raising venture capital has become increasingly difficult, many companies have turned to income-based financing (RBF) as an alternative. As a result, many startups have risen to address this challenge, none more so than in the MENA region, which has taken to its model like a duck to water. The latest one CredibleX Raised a $55 million Seed funding round led by the Abu Dhabi-based Additional Businesses To take advantage of the growing market for income financing in the Middle East.

CredibleX, which provides working capital financing to SMEs, operates in a market where we see the likes of MENA rivals FlapKap and Flow48. Expand and increase capital in 2023Not to mention other places like Modifi ($353.6M raised to date), Drip Capital ($528.1M to date), and IncomLend ($25M to date).

So what’s going on here?

As MENA SMEs (Small/Medium Enterprises) still struggle to access working capital through traditional banking channels, CredibleX has found a way to market. It partners with large aggregators and then goes after SMEs in their vertical ecosystem.

CEO and co-founder Anand Nagaraj told TechCrunch, “We believe this approach helps us recover payments easily as we have a direct relationship with the debtor/payer. Many in this space work with SMBs to determine accounts receivable/sales.”

In particular, income-based financing works quite well for SMEs in high-income countries like the UAE and similar countries because it is more difficult to get funding from institutions called Development Finance Institutions, which are created to invest less in projects in the first place. economically developed countries.

Given the explosion of platforms built for service-based industries such as restaurants, which have millions in MENA, how the platform works is very “MENA region”.

Here’s an example: An SME like a restaurant uses a platform like Talabat (has been obtained $158.52 million by Delivery Hero in 2015) to deliver its food and wants to tap into RBF. Applying for a loan through Talabat platform integrated with CredibleX uploads its historical sales data/ratings and then CredibleX makes a credit decision within 24 hours.

The restaurant then repays the credit in the form of Talabat paying directly to CredibleX (which also has similar relationships with 37 other such partners).

The company launched in March 2024 and claims to have already given out AED 100 million (US$27 million) to SMEs.

Nagaraj previously worked at Citi and then founded Invoice Bazaar, a Supply Chain Financing platform that helps SMEs equip large corporations with early payments. After leaving the startup in 2021, Anand launched CredibleX with co-founders Ahmed Malik and Hasan Reda.

Nagaraj explained, “Our approach helps us tap into a larger pool of SMEs, which certainly helps in recovering payments from SMEs when things go wrong.” CredibleX is also fully regulated by the FSRA in Abu Dhabi Global Markets.

The seed round consists of equity from Additional Ventures and debt from various providers, including Kilgour Williams Capital. Additional Ventures have LPs Includes ADQ and Mastercard.