French startup Karmen has secured a small funding round to improve its instant lending product. The company provides short-term loans to small and medium-sized enterprises facing a lack of working capital.
This is a €9 million ($9.4 million at current exchange rates) equity and debt round in which Seventure Partners will buy a stake in the small startup. Financière Albevel and BPiFrance are supplementing the round with some debt.
The company is not the only company operating in this field of instant financing for small and medium-sized businesses. French competitors include Silvr, Defacto, Unlimitd and Hero.
Revenue-based finance has become a hot industry because banks and traditional financial institutions are struggling to accommodate large and small businesses. It's a highly fragmented market and profit margins are small. That's why tech startups are taking a data-driven approach to closing the funding gap.
Today's news comes just months after Carmen secured a €100 million debt vehicle that will serve as the basis for short-term financing for the company. After 6 months, it appears that quite a few businesses are relying on Karmen to solve their cash flow problems.
About 600 companies use Karmen to buy inventory, pay suppliers, fund paid acquisition campaigns, and more. Loans range from €20,000 to €3 million, with terms from 2 to 24 months.
On average, Carmen's typical customer borrows €200,000 over a six-month period. But as you can see, there are a wide range of financing options. Similarly, while the smallest customer has an annual turnover of only €300,000 (these are likely private businesses), Carmen's largest customer generates an annual revenue of €160,000,000.
More importantly, Karmen attracts some loyal customers, as 80% of Karmen's customers contact Karmen several times a year to unlock new debt facilities. Clients include Maison Kitsuné, Balibaris, Les Raffineurs and Almé.
While most companies contact Karmen directly, the startup employs a hybrid sales strategy. We partner with other fintech companies to enable us to offer Carmen financial products to our own customers. Some ERPs, e-commerce marketplaces, and business banks such as Qonto already integrate with Karmen.
This built-in financial strategy currently accounts for 40% of Karmen's customers. However, the company says it wants to increase this metric to 75% of new customers by the end of 2025.
While most businesses repay their loans without any problems, you may have trouble repaying the amount you owe.
“This is part of our job as lenders, but we limit these risks through a data-driven approach that gives us a very detailed view of our clients’ financial and operational performance. ” said Gabriel Thierry, Carmen co-founder and CEO.
“Additionally, we are investing significantly in risk assessment technology tools (thanks to AI) to enhance this approach,” he added. So, today's funding round.
Karmen currently scores loan applications in near real-time using approximately 60 different financial metrics. Its built-in strategies can also be leveraged to make smarter decisions. Bank accounts, accounting software, ERP, and billing tools store valuable data about your company's overall performance.
Image credit: Carmen
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