Bengaluru-based CRED is starting the new year on a high note.
A two-year-old startup led by high-profile entrepreneur Kunal Shah, It said on Monday that it has raised $ 81 million in a new financing round and bought shares worth $ 1.2 million (about 90 million Indian rupees) from employees.
The C Series C financing round, first reported by ClearTips in late November, was led by DST Global. Existing investors Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst also participated in the round, and so included some new names, including Indian conglomerate Times Internet, Sofina, and Satyan Gajwani of Kotyu.
Round gave CRED – which operates an eponymous app to reward customers for paying their credit card bills on time and offers deals from interesting online brands – a post-money valuation of $ 806 million.
In an interview with ClearTips, Shah said that currently around 10 percent of CRED’s captables have been allocated to employees and those who held vested stock were able to sell up to 50 percent of their shares to startups in their first ESOP liquidity program Were eligible for. “We believe that startups should think about creating wealth for every shareholder, including employees.”
CRED has grown its customer base to around 5.9 million in the last year, or about 20 percent of the credit card holder base in India. The startup said its customer had an average credit score of about 830, and about 30 percent of its customer base today is a premium credit card. (On a side note, more than 50 percent of CRED customers pay their bills using UPI.)
CRED is one of the most talked about startups in India, as it has grown in value on this scale and is able to increase the amount of capital in such a short period of time.
One of the biggest questions around CRED today is how it makes money, given how the most fintech startups in the country today – and many of them are – are struggling to find a business model.
Shah said CRED makes money by selling financed products – for which there is a revenue-sharing arrangement with banks and other financial institutions – and a similar deduction is made from merchants who visit the platform today. More than 1,300 brands including big-name Starbucks, TAGG, Eat.Fit, Nyika, and emerging premium direct-to-consumer brands such as The Man Company, Sleepy Cat, and Crossbeats have joined the platform in recent years.
The direct-to-consumer market in India is still in its nascent stage, although some estimates say it could be $ 100 billion by 2025.
“I don’t think we were too intentional to be D2C. It just happened that in the early days when we offered awards for D2C brands, they started seeing huge traction,” he said. Some CREDs sold over 30 percent for brands.
“We realized that we were able to solve the search problem for customers. We are taking it with a theme – work-from home and coffee – and it is working well. We are now playing a matchmaking role between customers and brands, otherwise marketing would have cost a lot of money. “
One of the biggest proposals of CRED is that it is able to court for some of the most in-demand customers in India. Unlike many other startups and giants like Google and Facebook, CRED is not going after the next billion users.
“About 20 million customers in India account for 90 percent of online consumption. These are the customers we are focusing on, ”said Shah, who first ran the financial services firm Freecharge and delivered one of the rare successful exits in the country. Shah said that the main challenge in chasing customers in small cities and towns in India is that very few people have the financial capacity to buy things.
For that model to work, India’s GDP – where the average annual income of an individual is about $ 2,000 – needs to increase. Shah said that for this we need more participation from women. India currently has less than 10 percent of the female population as compared to more than 90 percent in China.
One Interesting use case Today for CRED it could potentially license data about how D2C brands are looking at venture firms on their platforms, who can use it as a signal to inform their investment decisions.
Shah cautioned that the startup is “exceptionally sensitive about data” but said the team is thinking of ways to help these firms find it. “We plan to create a newspaper to showcase many of these brands to the investor world,” he said.
And finally, will Cred launch credit cards? “Will we sell every product that banks offer today? The answer is yes, ”said Shah, although he cautioned that the startup is not in a hurry to supercharge its offerings and will likely engage with other players in the industry to enable these services.