Drip Capital went from zero to $1 billion in transactions: Fintech meets global trade finance | Summary and Q&A

Transcript

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Summary

In this video, Neil Kothari, co-founder of Drip Capital, discusses how the fintech startup has grown from a simple idea to facilitating $1 billion in transactions. He shares insights on the challenges they faced, the importance of customer feedback, and the incremental nature of progress in entrepreneurship.

Questions & Answers

Q: What is Drip Capital and how did it get started?

Drip Capital is a cross border trade finance company that focuses on providing working capital to small and midsize businesses in emerging markets. The founders, Neil Kothari and Pushkar Mukewar, started the company after realizing the difficulties faced by exporters and importers in accessing capital to grow their businesses. They received initial funding from investors like Wing VC, Accel, and Sequoia, which was crucial in building their company.

Q: How did Drip Capital identify the need for their services?

Neil Kothari and Pushkar Mukewar identified the need for trade finance after conducting extensive customer research. They attended trade shows and met with thousands of potential customers, specifically targeting small businesses in the US. They discovered that many of these businesses faced challenges in accessing capital to pay their overseas suppliers and manage the trade process. This insight led them to pivot their go-to-market strategy and focus on the India-US trade corridor, where they could provide financing to Indian exporters selling to US buyers.

Q: What were some of the challenges Drip Capital faced in building their business?

One of the major challenges Drip Capital faced was the lack of access to capital for small and midsize businesses in emerging markets. Traditional banks primarily focused on larger companies and were not willing to lend to SMBs. To overcome this challenge, Drip Capital had to build a highly automated lending operation. They also had to develop a cross border underwriting model to manage risk effectively. Additionally, they encountered difficulties in scaling their operations while maintaining compliance and risk mitigation measures.

Q: How did Drip Capital use data in their risk management processes?

Drip Capital leveraged the availability of digitized data in the trade finance industry to develop their risk management model. They realized that government customs and central governments tracked trade activities at a granular level, which provided them with valuable data for risk assessment. By analyzing this data and integrating it with their underwriting processes, Drip Capital could effectively manage risk and ensure the repayment of funds. This data-driven approach also allowed them to scale their operations and expand to new geographies.

Q: How has Drip Capital performed during the COVID-19 pandemic?

Drip Capital has demonstrated resilience during the COVID-19 pandemic, maintaining consistent performance despite the challenging economic conditions. Their risk management model and low loss rate have proven effective in managing the impact of the recession on small businesses. Their ability to continue providing financing and support to exporters and importers has remained steady, showcasing the stability of their business model.

Q: How does Drip Capital plan to expand its operations?

Drip Capital aims to scale its operations globally, expanding to multiple countries and trade corridors across Asia and Latin America. They have built a versatile platform that can be easily adapted to new regions and languages, making it possible to explore various markets. Additionally, they intend to deepen their presence in the countries where they are already established, comprehensively serving the needs of exporters and importers.

Q: What advice does Neil Kothari have for first-time entrepreneurs?

Neil Kothari advises first-time entrepreneurs to embrace the incremental nature of progress and approach their journey one step at a time. He emphasizes the importance of focusing on the next step that can move the business forward and addressing the bottlenecks along the way. He also highlights the significance of discerning whose advice to consider, as not all advice may be relevant or helpful for every stage of the startup journey.

Q: How does Drip Capital provide yield opportunities for investors?

Drip Capital offers a short-term liquidity product that provides attractive yields to investors. They can offer yields of 5-8% for three to six-month investments, which is significantly higher than what traditional banks or money market funds provide. This makes Drip Capital an appealing alternative for investors seeking higher yields in a low-interest-rate environment.

Q: What impact does Drip Capital hope to have on the global trade industry?

Drip Capital aims to make a significant impact on the global trade industry by providing access to capital for small and midsize businesses. They seek to level the playing field for these businesses, as traditional banks primarily focus on larger customers. By facilitating trade finance and enabling businesses to grow, Drip Capital contributes to the global economy and supports manufacturers in overcoming the constraint of limited capital.

Q: How has Drip Capital grown since its inception?

Drip Capital has experienced substantial growth since its inception. In just three and a half years, they have facilitated $1 billion in transactions and worked with over 2,000 exporters and importers across 50 different trade routes and 30 product categories. They have expanded their operations to multiple countries, including India, the US, and Mexico, and have offices in India, Palo Alto, and Mexico City.