Karmen Raises $9.4M for Revenue-Based Financing

Karmen Secures Funding to Enhance Instant Financing Solutions

The French fintech startup, Karmen, has recently completed a funding round designed to facilitate improvements to its offerings in the realm of immediate financial support. The company specializes in providing short-term loan options to small and medium-sized enterprises (SMEs) experiencing challenges related to working capital.

Funding Details and Investors

This financial injection totals €9 million, a combination of equity and debt, equivalent to approximately $9.4 million based on current exchange rates. Seventure Partners led the equity portion of the investment, acquiring a stake in the company.

Additional debt financing was provided by Financière Arbevel and Bpifrance, further bolstering Karmen’s financial resources.

Competitive Landscape

Karmen operates within a growing sector of instant financing for SMEs. Several other French companies are active in this space, including Silvr, Defacto, Unlimitd, and Hero.

The Rise of Revenue-Based Financing

Revenue-based financing is gaining traction as a viable alternative to traditional bank loans for SMEs. Conventional financial institutions often struggle to efficiently serve the needs of smaller businesses at scale.

This market is characterized by fragmentation and relatively low profit margins, creating an opportunity for technology-driven startups to address the financing gap through data-driven methodologies.

Recent Developments and Growth

This funding announcement follows a recent €100 million debt facility secured by Karmen, which serves as the foundation for its short-term lending operations.

The company reports that a significant number of businesses – around 600 – are currently utilizing Karmen’s services to manage their cash flow, specifically for purposes like inventory purchases, supplier payments, and marketing campaign funding.

Loan Characteristics

Karmen’s loan amounts range from €20,000 to €3 million, with repayment terms extending from two to 24 months.

The average loan size is €200,000 with a six-month duration. However, the company caters to a diverse clientele, ranging from one-person businesses with €300,000 in annual revenue to larger companies generating up to €160 million annually.

Customer Loyalty and Retention

Karmen emphasizes strong customer retention, stating that 80% of its borrowers return to access additional funding lines multiple times per year.

Notable clients include brands such as Maison Kitsuné, Balibaris, Les Raffineurs, and Almé.

Distribution Strategy: Direct and Embedded

While many companies approach Karmen directly, the startup employs a hybrid distribution model.

It collaborates with other fintech companies, enabling them to offer Karmen’s financing products to their existing customer base. Integrations with ERP systems, e-commerce platforms, and business banking solutions like Qonto are already in place.

Focus on Embedded Financing

Currently, 40% of Karmen’s clients are acquired through these embedded financing partnerships.

The company aims to increase this proportion to 75% of new clients by the end of 2025.

Risk Management and Technology

Acknowledging the inherent risks associated with lending, Karmen prioritizes robust risk assessment.

“We mitigate these risks through our data-driven approach, providing us with detailed insights into the financial and operational health of our clients,” explains Gabriel Thierry, co-founder and CEO of Karmen.

The company is actively investing in artificial intelligence (AI) powered risk assessment tools to further enhance its capabilities.

Data-Driven Loan Scoring

Karmen currently utilizes approximately 60 different financial metrics to evaluate loan applications in real time.

The embedded financing strategy provides access to valuable data from sources like bank accounts, accounting software, and invoicing tools, enabling more informed lending decisions.