Capillary Technologies, an Indian SaaS startup that offers solutions for customer engagement and loyalty management, has raised $45 million in a funding round to grow into global markets and expand its reach through mergers and acquisitions. The funding comes in at a crucial time during the prevailing market downturn, where startups, particularly those in the late stage, are experiencing a capital crunch.

Avataar Ventures and its LPs Pantheon, 57Stars, and Unigestion led the Series D funding round for Capillary. Filter Capital and Innoven Capital also participated. The round comprises $40 million in equity and $5-$7 million in debt. With the latest capital infusion, the startup has now raised close to $150 million in total.

Capillary Technologies, founded in 2012, initially focused on the South East Asian and Indian retail markets. It recently expanded its offerings and began operations in other markets, including the Middle East, South Africa, and the United States beginning in early 2021.

With a focus on gamification to improve customer loyalty, Capillary is carving itself a unique niche in the industry. The company claims that it has successfully implemented this strategy across the commerce, retail, aviation, and hospitality sectors.

Several customers have been drawn to the Bengaluru-based startup’s range of technology-driven, cloud-native solutions. Over 250 brands from 30 countries have already worked together, and it powers over 100 loyalty programs. Notable clients include Domino’s, Tata Group, Puma, Shell, Petrone, and Marks & Spencer. More than 1 billion customers use Capillary’s technology, which handles more than 5 billion transactions annually.

“The way most of our competitors in the U.S. and elsewhere have built in as like a services business where customers ask you something, and you build it. On the other hand, we have taken a very product view to it,” Capillary Technologies founder and managing director Aneesh Reddy said in an interview.

Without disclosing specific figures, the startup claimed that Capillary’s business had increased 3.5 times in the few years since it debuted in the US and acquired customer experience startup Persuaded. Additionally, it states that the US currently generates more than a third of its revenue.

In the US, the startup has acquired five companies, the most recent being the Texas-based loyalty solutions provider Brearley from Nomura, which was made public in April of this year. With these acquisitions, it can now provide services to customers who operate in a wider vertical.

“The core business is profitable and growing on its own, so most of the money is being used for acquisitions,” Reddy said. “As you would guess, if you have the money, this is a great time to buy.”

Capillary Technologies filed its draft papers to go public in India at the end of 2021. However, the company has postponed that strategy because of the continued market slump. According to Reddy, the idea of filing an initial public offering (IPO) in India is still being discussed, and he may execute it within the next three years.

“The good piece of Capillary is it’s profitable. With this fundraise, we have a lot of excess cash also on the balance sheet. So, it’s not like I have a gun to my head to list,” he said.

Apart from India and the U.S., Capillary employs around 750 employees, including 200 contractors, and operates in Dubai, Indonesia, Malaysia, and Singapore. Among its existing backers are Sequoia Capital and Warburg Pincus.

“It has been truly remarkable witnessing Capillary’s business transformation over the past four years,” said Mohan Kumar, Managing Partner at Avataar Ventures, in a statement.

“The strategic decision to diversify from Asia into the US and Europe, encompassing various consumer verticals beyond retail, has been nothing short of impressive. This move has catapulted Capillary into a leadership position in Loyalty software and this has been recognized by external mentions like the Forrester Wave. Given the expanded addressable market and the immense potential that lies ahead, Avataar is wholeheartedly committed to supporting Capillary in its pursuit to become a global market leader.”