According to a top executive at OfBusiness, a commerce startup that sells industrial goods and provides finance to small businesses, the company’s valuation has doubled in less than two months to $3 billion.
According to OfBusiness co-founder and chief executive Asish Mohapatra, Tiger Global led the $207 million Series F financing, which also included SoftBank and Alpha Wave. SoftBank led a $160 million round in OfBusiness just two months ago, valuing the company at $1.5 billion.
The funding round announced on Thursday is OfBusiness’s third this year. The startup, whose revenue has increased dramatically this year, was valued at $800 million in April.
OfBusiness is a raw material aggregator and provider of procurement financing. The startup collaborates with banks to provide credit lines to small and medium businesses with annual sales of more than $3 million.
The platform gathers information about user behavior that it uses to underwrite loans to firms that use the OfBusiness platform to get raw materials and bids. Last year, Mohapatra told Bernstein analysts, “This enables us to move from collateral-based loans to cash-flow/transaction-based lending — a fundamental differentiator to banks.”
“Small businesses pay interest on their working capital loans (provided in the form of card limits) as well as a margin on the raw materials they purchase. The Bid-Assist tool allows SMEs to search for tenders that are relevant to their industry. Tender sourcing and raw material margins help with monetization and, more significantly, give predictive data for underwriting.” The company is profitable and has a sales run-rate of over $1 billion. Its loan book had grown to $220 million by July of this year.
“We offer credit lines that are similar to cash credit or overdrafts. Borrowers are obliged to obtain raw materials from the platform and only pay interest on the limits drawn. This gives us an idea of how the loan will be used in the end, as well as data for new underwriting and monitoring. Borrowers who use debt to buy inventory are better than those who use debt to pay off past debt.”
The new cash will be used to grow the startup’s activities in India. OfBusiness is also looking into mergers and acquisitions, according to the company.
