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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) companies QED and Outliers, in addition to Egypt-based VC companies 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
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) companies, which is then repaid as a set proportion of the income they generate. “Because of this no matter funding we make into the enterprise is repaid, together with our small mounted payment, as a set proportion of the every day gross sales, until the whole excellent quantity is totally repaid,” Ahmed Coucha, co-founder and CEO of FlapKap, explains. “In different phrases, our shoppers pay us again solely once they promote. If gross sales improve, so do our repayments. And, vice versa, compensation slows down if gross sales fall.”
Now, it’s no secret that the e-commerce increase witnessed by means of the course of the coronavirus pandemic incentivized a number of companies to start out promoting on-line. Coucha, nonetheless, laments that this shift magnified a number of funding-related points for the already financially underserved SMB market. “On the one hand, e-commerce SMBs, that are continually struggling to entry the wanted funds for development, usually are 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 traders’ cash to finance working capital means giving up fairness. This creates an opposed incentive for development. The extra these firms can develop, the extra the founders will lose of their possession. To not point out that this selection is just out there to a choose few. That is why we’ve created what we name a 3F providing: quick, versatile, and founder-friendly funding.”
The chain of occasions that sparked Coucha’s inspiration for FlapKap, nonetheless, 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&Ok,” Coucha recollects. “At GP&Ok, we’ve principally labored with what we name the ‘top-of-the-pyramid’ shoppers equivalent to Amazon, Netflix, Coca-Cola, P&G, and lots of others. However alongside our journey, we realized that apart from providing these shoppers promoting providers, we have been additionally providing them banking providers, and the bigger the shopper’s funds, 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 increase, I got here throughout the RBF mannequin, and that is once we determined to start out FlapKap to grow to be 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 would not essentially see itself performing 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 equivalent 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 offer a holistic resolution for SMB founders. “We assist our shoppers in optimizing their digital advertisements by means of a synthetic intelligence (AI) mannequin that we’re constructing, in addition to entry to our development consultants, and that is why we see ourselves as a full-fledged development resolution,” Coucha provides. “We assist our prospects in optimizing their enterprise and figuring out development areas, then fund them in essentially the most versatile approach to understand this development.”
With the funds they’ve now raised, the FlapKap workforce hope to have the ability to scale their providers throughout the MEA area. “Whereas the newly raised funds shall be used to gas extra development for our prospects, nearly all of the funds shall be deployed to extra shoppers throughout KSA, UAE, and Egypt,” Coucha says. “One other half shall be utilized in scaling our tech platform and additional investing in our AI mannequin to generate extra significant insights for our companions.” FlapKap’s determination to lift a seed spherical, nonetheless, wasn’t at all times on the playing cards, reveals Coucha.”Since our launch, we have been receiving beneficiant curiosity from the funding group, however we needed to respectfully flip down their gives as we had sufficient money to go for one more yr no less than and we needed to deal with constructing the product,” Coucha says. “Nonetheless, we determined to open the spherical once we acquired curiosity from QED. Other than being one of many largest fintech traders on the planet, QED is the main investor within the RBF house globally. They have been additionally amongst the primary traders 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 associate on board early on can speed up our development massively.” It was this determination to open a strategic ad-hoc spherical for QED that ultimately led to FlapKap additionally partnering with the aforementioned VC companies Outliers and Nclude.
Now, in mild 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 will not be a simple 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 if you end up not most in want. Elevating whereas brief in money will pressure 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!”
