The new funding was led by Lightrock India, bringing the firm’s all-time raise to over $600 million. The investment also saw the participation of existing investors including Sequoia Capital India, Ribbit Capital, and Creation Investments, as well as high-profile entrepreneurs David Vélez of Nubank, Kunal Shah of CRED and Amrish Rau of Pine Labs.
Capital Float specialises as a Buy Now, Pay Later firm and the funding announcement comes just days after rival Buy Now, Pay Later startup ZestMoney raised $50 million from Australian Buy Now, Pay Later startup Zip Co. In addition to its Buy Now, Pay Later services, Capital Float offers credit services and reaches customers through partnerships with other firms. It partners with major online platforms including Amazon India, Unacademy, and MakeMyTrip. The startup also has partnerships with payments firm Razorpay to reach small and medium-sized businesses, and with Walnut to offer personal finance to customers.
The round by Capital Float and ZestMoney is among the major investments in buy now, pay later startups in India; a segment that has attracted risk investors globally, and which Capital Float has been making traction. India’s buy now, pay later market is one that is still at a nascent stage, and only a fraction of the population have credit cards. This low penetration of credit cards in India has meant that very few people in the nation have a traditional credit score that banks heavily rely on to establish one’s creditworthiness before issuing them a loan. About half of Capital Float’s user base lack credit cards, yet they are granted loans. This is possible because the firm “has built a sophisticated underwriting and collections capability, along with an ethical lending playbook, that makes the model very compelling.” The startup underwrites each customer by using a range of signals, and the underwriting is said to take place “within two clicks and five seconds.”
In light of this, Capital Float Co-founder, Sashank Rishyasringa said the firm doesn’t see the buy now, pay later service as an alternative to credit cards. “It’s a different product designed for ease of accessibility, especially for first-time credit users. To win in this space, the focus has to be on customer experience and speed of underwriting for merchants,” he said.
Notably, Capital Float, unlike many other buys now, pay later services, is a fully regulated entity. This means that the firm has to report to the credit bureaus about users’ transactions, thereby helping them with building their credit score profiles. Capital Float currently touts over 2.5 million customers, and according to the firm, these customers make over 2 million purchases a month and are using the service to finance over $271 million a year.
The fresh funds, according to Sashank Rishyasringa, will help the firm shore up its risk stack and also help in acquiring more merchants. The startup also has plans to broaden its partnerships and widen its customer reach.