Investing in startups through my syndicate on Klub

An investor with a keen eye always knows the value of diversifying one’s portfolio. There are these typical, well-known, and conventional options that include bank FDs, mutual funds, and the public equity market. Once you’ve exhausted these types of options and once you know you can get more return on the same money, what comes next?

Klub Patron Pratekk Agarwaal says, “Consider revenue-based financing to foray into the private-placement debt market."

💡 “There is no fixed return per month, but you do get an amount based on how well the company you’ve invested in is doing. And it’s typically 3-4X of what a standard bank FD offers.”

With companies that have already found their product-market fit and are increasing their revenues, the RoI is immediate.

Pratekk, previously Chief Business Officer-Lending at BharatPe, is a Fintech expert who has over 18 years of experience in the domain. He is an avid angel Investor and keeps himself busy with startups and Fintech companies. He can talk non-stop about Fintech, NBFCs, and digital lending. But why does he endorse venturing into the private equity market? What’s in it for investors? And why invest via Klub? Pratekk answers these and more questions for us in this month’s 1:1 With a Klub Patron.

How did your relationship with Klub begin?

I was introduced to Klub’s founders via the Fintech ecosystem, and that’s how I came to know about them. Once the relationship began to develop, I came to see how exceptional they are as a team and what a stellar team they run. Along with the people, the product also shines.

💡 Their product’s functionality and UX sets them apart in the revenue-based financing market. So, I became an investor at Klub, the company itself.

As an investor, I like to experience things myself. So, I jumped in as a patron to fund the brands that use Klub for revenue-based financing. Since August 2021, I’ve led investments on four different brands, along with my fellow investors and we’ve already seen above-market returns on our investment.

At what point did you diversify into revenue-based financing as an investment option?

A decade ago, we were only familiar with bank FDs or the public market to grow our money. Then about a few years ago, not so great things about banks' governance came to light and the average person did not find it 100% safe. Individuals began to wonder what alternative options they had to a typical bank FD. There were few options like convertible debentures.

But what would someone with only about INR 2-3 lakh in hand do? That’s when the private equity market came into the picture. At a nominal platform processing fee, with no extra legal support, someone with a small amount of money could invest in an up-and-coming startup that is already backed by a VC. Hence, the risk is under-written.

💡 klub does these things for you, and in return, you get about 12-15% interest per annum, which is at least twice what a bank FD gives. So, it made perfect sense to be a patron for revenue-based financing.

Anything you feel makes investing with Klub stand out from your entire portfolio?

After multiple investments in D2C and digital startups myself as a patron, I was approached by the team if I wanted to lead a Syndicate and raise debt capital for my portfolio companies. This gave me an opportunity to rope in like-minded investors & build a syndicate of patrons who invest in the brand Since August 2021, I’ve led investments in four different brands including Bonito Designs, Gourmet Garden and Stage 3.

The platform enabled me to bring my fellow investors on board, share the transaction details & control capital commitments for our syndicate. Personally, I was not expecting community-based investing to take this shape, but it was refreshing to be able to invest through a platform where I literally did not have to lift a finger beyond the capital commitment.

What kind of brands at Klub are you a patron of?

At klub, you can be a small-ticket patron to a particular brand, or you can lead the investment for a brand you’re confident about. I’ve led investments for four such brands. First of all, I was very convinced of these brands’ successes. Their products were launched, and they had a product-market fit, traction, and revenues. When it comes to revenue-based financing, I consider this the cut-off. The companies must be at least this mature in order for me to invest in them.

These brands are already making money and they’re just looking for quick debt financing against the traditional debt routes. They don’t mind providing a higher RoI for their investors in return, provided they get the money fast. The whole experience of being a patron at Klub is much smoother because of their product and the way their team executes the transaction.

How long have you been a patron at Klub?

My first deal that went live was in August 2021. Since then, I’ve been a part of 4-5 transactions. Together with the other investors I brought on board, the total quantum of investment has been growing 2X with every deal. We’ve already seen an RoI on our investment, of at least 3-4X net of the FD rate.

What advice do you have for people who are looking to diversify their investments?

Anyone who isn’t conservative and is looking at alternatives like debt financing must consider revenue-based financing. If for nothing else, then the return on the investment itself.

If you consider digital lending at large, then you should know that it’s a ‘pull’ product and not a ‘push’ product. No lender is going to say, “Hey, take a loan from us”. Whereas, if someone is looking for financing, the trust they have in the lender is what makes them go to that lender. Klub is one of them.

💡 The seamlessness of the process, and the lack of red-tapism unlike banks, is what makes the funding journey worth it for both brands and the patrons.

So, for investors, look for a lender who exudes such trust in the market. And when it finally comes down to the investment, please do look at the team first. A good and mature team knows what they’re good at and what they’re not. That’s a basic indicator of how solid they are. Personally, I would invest in a company that has already figured out the product-market fit and knows where they need help from the ecosystem.

💡 Last but not least, if the business is ready to go 100x, then it must be driven by tech, and be less manual. The team doesn’t have to grow more than 3x for a 100X growth. So, I’d look at all these parameters, personally, before considering an investment.