In the ever-evolving world of finance and technology, there is a constant quest for innovative solutions that empower businesses to grow while retaining control and ownership. In this pursuit, Efficient Capital Labs (ECL), a New York City-based financial company with a subsidiary in Bangalore, stands out as a prominent example. Founded in 2022 by Kaustav Das and Manish Arora, ECL has carved a niche for itself in the realm of non-dilutive capital solutions for Software as a Service (SaaS) companies and is making waves for all the right reasons.
A game-changing product
ECL’s distinctive approach to non-dilutive financing has the potential to impact the industry, and it will be intriguing to observe stories of SaaS businesses that have utilised this innovative capital solution to expedite their growth.
The company is gearing up to launch a new product – INR funding – which promises to complement its existing product, which is a non-dilutive USD-denominated revenue-based financing that comes with competitive rates, fast process, fixed annual fees and easy 12-month repayment options.
The new product’s ability to offer funds in both Indian rupees and US dollars is a groundbreaking development. This offering, which will be launched by the end of this month, will empower customers to mix and match funding currencies according to their cash flow needs, a level of flexibility and customisation that sets ECL apart as a pioneer in non-dilutive financing.
For instance, this upcoming product will let a customer take USD 400,000 from Efficient Capital Labs in the US (and in US dollars) to build a sales leadership team in the United States. Adding on to that, the company can also take another INR 1.5 crore in India to expand its headcount and office operations in India. Considering no other fintech company provides this kind of flexibility globally, this product could be Efficient Capital Lab’s innovative solution to the new-generation companies’ global funding problems.
So far, ECL has raised $110.5 million across debt and equity combined and provided $25 million of financing to SaaS companies. Moreover, it has a 65% repeat customer rate (customers that have taken more than one financing from ECL).
The genesis of Efficient Capital Labs
The story behind the inception of ECL is inspiring and pragmatic. At its core, ECL was born from a realisation that many SaaS businesses, particularly those with global aspirations, were struggling to find funding options aligned with their international operations. These companies, predominantly based in India but generating around 70-90% of their revenue from US customers, were facing a conundrum. They were thinking globally when it came to customers and sales, but their funding options remained confined to local sources.
Kaustav Das, ECL’s Co-founder and CEO, observed this incongruity during his two-month stint with Indian SaaS founders. His background in fintech, including pivotal roles at American Express and Kabbage, provided him with valuable insights into the financial challenges these businesses were grappling with. Then came the idea of financing founders who operated across international “corridors”. ECL aimed to bridge the gap by offering funding based on a global business perspective, providing lower rates through US capital.
Das’s personal journey as a founder and his extensive experience in the fintech landscape has played a significant role in shaping ECL’s mission. With over two decades of experience in financing and a notable track record in the fintech sector, he brought a wealth of knowledge to the table. This unique blend of experience and passion became the cornerstone of ECL’s approach to non-dilutive capital solutions for SaaS companies.
Setting the bar high
In a competitive landscape where innovation is paramount, ECL distinguishes itself as a distinctive option for SaaS businesses seeking to scale without dilution. Here’s what sets the company apart:
01. Laser focus on international SaaS corridors: ECL is focused on SaaS companies operating across international corridors, such as the India-US corridor or the Southeast Asia-US corridor.
02. Fast and cost-effective: Traditional banks often hesitate to lend to SaaS companies due to their intangible assets and a lack of understanding. Compared to venture debt firms, ECL offers a faster and more cost-effective solution, with simple fixed costs and no closing or legal fees, or dilution through warrants.
03. Significant funding capacity: ECL can provide funds up to $1.5 million in a single transaction. It also lets its customers take money in multiple, overlapping tranches, a feat that few companies globally can match.
04. Own debt facility: ECL operates through its own $100 M debt facility, ensuring predictability for customers and immunity from marketplace dynamics that affect some funding platforms. Additionally, it is the only fintech globally that can underwrite across geographies and provide funding in multiple currencies.
The power of non-dilutive capital
While there is a significant drop in venture capital funding globally in 2023 along with increased interest rates from banks, ECL’s commitment to providing non-dilutive capital is intriguing. Its approach ensures a fast and seamless process for SaaS companies while offering key advantages over traditional equity raises.
The company leverages AI-powered technology and data integration to automate its underwriting process fully. This enables it to understand customers’ finances swiftly and accurately, resulting in rapid response times throughout the funding process.
Traditional equity raises often demand 90 to 180 days of founders’ time and significant equity dilution of around 20% in each round. ECL provides capital in less than a week, allowing founders to retain a larger share of their businesses and retain control.
Empowering founders for the journey ahead
ECL empowers founders to retain control while strategically raising future equity on their terms and timelines. By offering non-dilutive capital solutions that are faster, more cost-effective, and tailored to the unique needs of SaaS businesses, ECL is changing the game for entrepreneurs in the ever-competitive world of technology and finance.
Das and Arora, the founders, offer valuable advice to SaaS entrepreneurs seeking capital-efficient ways to grow their businesses without compromising ownership:
01. Understand your Total Addressable Market (TAM): Not all SaaS businesses have large TAMs, so it’s essential to have a clear grasp of your market potential.
02. Determine your capital requirements: Raise equity capital for product-market fit (PMF), and leverage non-dilutive capital for growth. This approach allows you to scale while maintaining control and ownership.
As the financial landscape continues to evolve, ECL’s commitment to non-dilutive financing positions it as a partner for ambitious entrepreneurs.
To know more about the innovative product from Efficient Capital Labs,
