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Cairo-headquartered revenue-based financing (RBF) platform FlapKap has raised US$3.6 million in a seed funding spherical led by US-based enterprise capital (VC) corporations QED and Outliers, in addition to Egypt-based VC corporations Nclude and A15. The brand new spherical follows the $1.2 million FlapKap raised as an funding in March 2022- the identical month the fintech startup was launched.
FlapKap’s enterprise mannequin includes providing non-dilutive funding -a type of working capital that does not require a startup founder to surrender fairness or possession when receiving it- to small and medium companies (SMBs) and software-as-a-service (SaaS) corporations, which is then repaid as a set share of the income they generate. “Which means no matter funding we make into the enterprise is repaid, together with our small mounted payment, as a set share of the every day gross sales, until the overall excellent quantity is absolutely repaid,” Ahmed Coucha, co-founder and CEO of FlapKap, explains. “In different phrases, our purchasers pay us again solely after they promote. If gross sales enhance, so do our repayments. And, vice versa, reimbursement slows down if gross sales fall.”
Now, it’s no secret that the e-commerce growth witnessed via the course of the coronavirus pandemic incentivized loads of companies to begin promoting on-line. Coucha, nevertheless, laments that this shift magnified loads of funding-related points for the already financially underserved SMB market. “On the one hand, e-commerce SMBs, that are continuously struggling to entry the wanted funds for development, are usually not simply understood by the normal banks,” Coucha says. “To not point out that the banking course of could be very sluggish for his or her rising wants, and that extreme collaterals are often required, which add further danger on the founders. Then again, getting buyers’ cash to finance working capital means giving up fairness. This creates an hostile incentive for development. The extra these corporations can develop, the extra the founders will lose of their possession. To not point out that this selection is barely out there to a choose few. That is why we now have created what we name a 3F providing: quick, versatile, and founder-friendly funding.”
The chain of occasions that sparked Coucha’s inspiration for FlapKap, nevertheless, got here a lot earlier than the pandemic had even begun. “Greater than 11 years in the past, I co-founded a digital promoting company, which has now grown right into a a lot bigger promoting community known as GP&Okay,” Coucha recollects. “At GP&Okay, we now have largely labored with what we name the ‘top-of-the-pyramid’ purchasers corresponding to Amazon, Netflix, Coca-Cola, P&G, and plenty of others. However alongside our journey, we realized that apart from providing these purchasers promoting companies, we have been additionally providing them banking companies, and the bigger the consumer’s price range, the extra beneficiant credit score phrases they get. This at all times struck me as counterintuitive and a bit ironic. We thus felt that this was an immense alternative to assist the ‘middle-of-the-pyramid’ SMEs. In the course of the coronavirus e-commerce growth, I got here throughout the RBF mannequin, and that is once we determined to begin FlapKap to develop into the primary RBF participant within the MENA.”
Ahmed Coucha, co-founder and CEO, FlapKap. Supply: FlapKap
From Coucha’s perspective, whereas FlapKap caters to a really area of interest difficulty within the funding ecosystem, it does not essentially see itself appearing as a separate entity within the grand scheme of issues. “FlapKap acts as a lacking puzzle piece, supporting our companions as an prolonged division,” he explains. “Our enterprise mannequin can remedy their working capital points with the media or stock funding inside 48 hours.” However flexibility in financing aside, by providing instruments corresponding to intuitive dashboards that present insights on commercial spending, in addition to a spend-now-pay-later function for stock administration, FlapKap additionally seeks to supply a holistic resolution for SMB founders. “We help our purchasers in optimizing their digital advertisements via a man-made intelligence (AI) mannequin that we’re constructing, in addition to entry to our development specialists, and that is why we see ourselves as a full-fledged development resolution,” Coucha provides. “We help our clients in optimizing their enterprise and figuring out development areas, then fund them in probably the most versatile approach to understand this development.”
With the funds they’ve now raised, the FlapKap staff hope to have the ability to scale their companies throughout the MEA area. “Whereas the newly raised funds will likely be used to gas extra development for our clients, the vast majority of the funds will likely be deployed to extra purchasers throughout KSA, UAE, and Egypt,” Coucha says. “One other half will likely be utilized in scaling our tech platform and additional investing in our AI mannequin to generate extra significant insights for our companions.” FlapKap’s resolution to lift a seed spherical, nevertheless, wasn’t at all times on the playing cards, reveals Coucha.”Since our launch, we have been receiving beneficiant curiosity from the funding neighborhood, however we needed to respectfully flip down their gives as we had sufficient money to go for an additional yr at the least and we needed to deal with constructing the product,” Coucha says. “Nevertheless, we determined to open the spherical once we acquired curiosity from QED. Other than being one of many largest fintech buyers on this planet, QED is the main investor within the RBF area globally. They have been additionally amongst the primary buyers in our world friends, Wayflyer and Fairplay, who’ve collectively raised over $900 million of debt and fairness. So, it was a no brainer for us that getting such an esteemed accomplice on board early on can speed up our development massively.” It was this resolution to open a strategic ad-hoc spherical for QED that finally led to FlapKap additionally partnering with the aforementioned VC corporations Outliers and Nclude.
Now, in gentle of how the continuing funding winter has led to a stagnation in funding alternatives for a lot of startups, Flapkap’s story many not be significantly reflective of most funding anecdotes within the area proper now. However Coucha nonetheless has a number of phrases of recommendation for fellow entrepreneurs. “Elevating throughout this time isn’t a straightforward job in any respect with many VCs following a strategic wait strategy, however regardless of ours not being a typical spherical, there are such a lot of learnings that may be useful,” Coucha says. “Crucial of those learnings is to lift when you’re not most in want. Elevating whereas quick in money will power us right into a survival mindset, not a strategic one. We do not wish to be elevating to outlive, we hopefully wish to increase to thrive!”