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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 entails 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 that no matter funding we make into the enterprise is repaid, together with our small fastened payment, as a set share of the each day gross sales, until the entire excellent quantity is absolutely repaid,” Ahmed Coucha, co-founder and CEO of FlapKap, explains. “In different phrases, our purchasers pay us again solely once they promote. If gross sales enhance, so do our repayments. And, vice versa, compensation slows down if gross sales fall.”
Now, it’s no secret that the e-commerce growth witnessed by means of the course of the coronavirus pandemic incentivized a whole lot of companies to start out promoting on-line. Coucha, nevertheless, laments that this shift magnified a whole lot of funding-related points for the already financially underserved SMB market. “On the one hand, e-commerce SMBs, that are always struggling to entry the wanted funds for progress, should not simply understood by the standard banks,” Coucha says. “To not point out that the banking course of could be very gradual for his or her rising wants, and that extreme collaterals are often required, which add further threat on the founders. Alternatively, getting buyers’ cash to finance working capital means giving up fairness. This creates an opposed incentive for progress. The extra these firms can develop, the extra the founders will lose of their possession. To not point out that this selection is simply obtainable to a choose few. That is why we’ve got 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 referred to as GP&Ok,” Coucha remembers. “At GP&Ok, we’ve got largely labored with what we name the ‘top-of-the-pyramid’ purchasers corresponding to Amazon, Netflix, Coca-Cola, P&G, and lots of others. However alongside our journey, we realized that other than providing these purchasers promoting providers, we had been additionally providing them banking providers, 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. Through the coronavirus e-commerce growth, I got here throughout the RBF mannequin, and that is once we determined to start out FlapKap to change 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 challenge 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 characteristic for stock administration, FlapKap additionally seeks to supply a holistic resolution for SMB founders. “We help our purchasers in optimizing their digital adverts by means of a synthetic intelligence (AI) mannequin that we’re constructing, in addition to entry to our progress specialists, and that is why we see ourselves as a full-fledged progress resolution,” Coucha provides. “We help our clients in optimizing their enterprise and figuring out progress areas, then fund them in probably the most versatile technique to notice this progress.”
With the funds they’ve now raised, the FlapKap staff hope to have the ability to scale their providers throughout the MEA area. “Whereas the newly raised funds might be used to gasoline extra progress for our clients, the vast majority of the funds might be deployed to extra purchasers throughout KSA, UAE, and Egypt,” Coucha says. “One other half might 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 12 months not less than and we needed to give attention to constructing the product,” Coucha says. “Nonetheless, we determined to open the spherical once we obtained curiosity from QED. Apart from being one of many largest fintech buyers on the earth, QED is the main investor within the RBF area globally. They had 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 companion on board early on can speed up our progress massively.” It was this resolution to open a strategic ad-hoc spherical for QED that ultimately 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 just a few phrases of recommendation for fellow entrepreneurs. “Elevating throughout this time shouldn’t be a straightforward activity 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. “An important of those learnings is to lift if you end up not most in want. Elevating whereas quick in money will drive 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!”