Our team has built a FinTech marketplace called ImpactCred. ImpactCred seeks to solve for the unmet annual debt financing need of $1.5B across graduates of accelerator programs around the world. By partnering and serving as the financier for the 500+ accelerators around the world, we can leverage the qualitative feedback and quantitative data that they are able to share about these companies. Through integration with Stellar, we can power the economics of cross-border lending for social enterprises focused on the UN SDGs while improving yields for impact investors such as Foundations, HNW investors, Corporations and Family Offices. Over time, we expect to become a lending as a service for investors looking to have a more direct impact on sustainable development goals.

We have currently built our product and it is in beta. We have under 10 users (businesses) of our product who are currently onboarding to the FinTech marketplace. Our pilot is currently in Kenya. We are currently raising a pre-seed round of funding.

Problem & Solution

ImpactCred seeks to solve the unmet annual financing need of $1.5B from graduates of accelerator programs in emerging markets. Our customers are often unable to find debt financing or when they do, it is fairly expensive. By applying an alternative credit underwriting methodology, in addition to our partnership approach with our accelerators, we are able to source and vet social enterprises efficiently.

We propose to integrate Stellar wallets and leverage Stellar’s cross border transfer capabilities using anchor banks and its cost differentiation to make our US lender loans more efficient and competitive to borrowers in emerging markets, starting with Kenya.

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Target Market

Our user profile from the Borrower side is a 3-5 year old profit generating social enterprise. These are registered Kenyan companies who are run by seasoned management teams and have revenue between 250K -1M. They have often raised equity but still need debt as they weather the pandemic, market realities and the typical time lags between one funding round to next. They are in the startup stage, trying to hit the growth stage. Their teams are semi urban, urban teams who serve last mile customers (farmers and rural populations). Our user profile from the investor side spans across local debt funds and Banks who need to be able to more efficiently source and vet local companies (and this helps us validate our concept). Our investor user profile includes HNW investors, Corporations, Foundation and Family Offices who are looking to increase accountability and investing related to ESG.

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Revenue Model

IC earns money in three ways:

1. Subscription fees to participate in the marketplace
2. Finder’s Fee (in markets we don’t have a fund) and
3. Interest spread, approximately four to six percent on emerging market loans (after we launch our fund and post pilot).

As a working capital and bridge financing fund, IC will be focused on a volume play and seeks to bring down the cost of capital for social entrepreneurs while boosting returns for concessionary impact investors from products offered by other notable leaders in this space such as Kiva, CNote and Calvert Impact Capital.

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ImpactCred is piloting and testing a digital first impact debt aggregation and intermediation alternative model whereby we seek to facilitate more efficient debt matching and syndication between the small medium enterprise investors and borrowers. On the demand side, by tapping into intelligence from accelerators, we are able to efficiently tap into their early-stage yet debt ready pipeline of borrowers. On the supply side, our marketplace’s feature of filtering deals by risk profile and impact goals (SDGs and Geographies) offers a way to bring new capital to bear and also support resource constraints of local funds, Corporations and Banks.

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Platform subscription revenue is earned by charging monthly platform fees to different types of customers beyond their free trial offer using a cost plus strategy: These customers include:

• Corporates
• Private Foundation
• HNW Investors
• Governments
• Multilaterals
• Accelerators.                                                                                                                                                                  

According to the customer's ability to pay, the customers are charged as follows: $5k/yr for Corporates, $2.5k/yr for Foundations and HNW Investors and $1.2k/yr for other members.        

Platform subscription offers the ability to track, search and share SDG investment profiles, more efficiently facilitate deals and co-investment and offers investors deal flow which they can filter based on risk profile and impact goals. Finder's fee is a deal based fee for using our risk engine to more efficiently connect impact lenders, primarily local Banks, to bankable deals. The matchmaking fee is priced at $1.2K per deal which is roughly 2% of revenue earned from the transaction spread over a five year tenure.      

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Industry & Market Research

Our market research and qualitative feedback from business accelerators and impact ecosystem builders over the last two years has led our team (comprised of several leaders in the impact investing sector) to understand that there is a sophisticated network of accelerators and incubators which is not being leveraged at scale due to lack of capital financing options. For the pilot and to test our hypothesis, ImpactCred proposes to bridge financing gaps for enterprises in Kenya, including a focus on equitable access to women-led accelerator alumni and ventures focused on women’s empowerment to solve UN SDG challenges.

We seek to mitigate the specific trend that our surveys and interviews validated: Bankable enterprises, in a post-revenue phase with inventory orders, struggle to find reasonably priced working capital to scale their enterprises in an efficient manner. The large network of accelerators collects great qualitative data on Founders and Founding teams, as well as critical information on pipeline needs, but are unable to reach out to a dedicated financier with those leads or to be rewarded for their value-added services in the ecosystem.

According to the IFC, the annual, worldwide SME financing gap is 93B which we see as the Total Addressable Market (TAM). ImpactCred believes that the market we can pursue (Service Addressable Market, SAM) is equivalent to$1.5B; this is calculated as 10% of the assumed 50 companies which go through accelerator programs annually from 1000 accelerators as bankable and with an average loan ticket size of $300K. Initially, IC plans to pursue market leadership of a Service Obtainable Market (SOM) of $150M over the first seven years which represents 10% of the SAM. Based on our customer discovery, the working capital needs tended to be higher in a large market like India where it ranged from $450K - $500K. In Kenya, requests tended to be lower, closer to $100K.

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SWOT Analysis

Strengths

• Partnership Model with Accelerators
• Strong Industry experience (Investing, Impact and Finance)
• Digital First Lending model

Weaknesses

• Difficulty in raising an evergreen fund

Opportunities

• Small Medium Enterprise (SME) finance is a hugely underserved area in emerging markets
• Lenders are continuing to increase their demand for ESG linked debt
• ESG linked debt is linked to real world performance

Threats

• Compliance associated with cross-border lending

Borrowers we serve can always look to traditional lenders in their markets. We also see competition from traditional debt and impact funds. However, we believe that the local lenders have shown reticence to lend to new models in the AgTech, HealthTech and EdTech sectors. The debt and impact funds are often lending at upwards of 15% and in India we have seen competitors at 28% due to their local overhead costs of running local offices and fund management. We believe a digital first lending model is ripe to disrupt this space.

We are currently able to reach our borrower prospects throughout accelerator partners in Kenya and India. We also have lender prospects through our CEO’s affiliation with several women in social finance and impact investing groups. Our marketing objectives are to identify at least 10 but likely 20 deals through our referral partners and to identify appropriate capital for these partners through a few funders.

Prospective Funders have been listed based on either existing relationships or affinity to business model, whether it be that we are also women-led or focused on innovation to build infrastructure in impact investing to solve for equitable access to capital for social enterprises. During the first quarter of 2023 or as appropriate to the anticipated timing of the first tranche of loan disbursements, ImpactCred will plan to register its fund to establish its debt facility to lend directly to SMEs as part of this pilot.  

Below are some of our strong relationships we are currently pursuing:

• Prospective Equity Funders: Angel Investors (Various), Portfolia Funds.
• Prospective Debt Funders: Wellington Management Company, Nia Capital, Calvert Capital, and MicroVest Capital Management.

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Parent Company Website: https://kshetra-disruptx.web.app/about-us