CRED — Valued at USD 4.01 billion against a miniscule revenue of USD 72,000
CRED was found by Kunal Shah, also the founder of Freecharge — a financial service company. After selling Freecharge in 2015, Kunal had the compelling urge to make people’s lives better. While researching for another idea, he found automation at the crux of everything in most developed nations, super markets with self-checkout lanes, self-pump gas stations, automated ticketing machines, etc. yet there wasn’t any trustworthy system that helped to pay the right amount of credit card bill on time with zero additional charges.
Based on his research, under the current system there were over 30 hidden fees and exorbitant interest charges that haunted a credit card user even if they paid just shy of the full bill. That payment model thrived on human errors and anticipated the customer to default. The system took timely paying customers for granted. Kunal felt that creditworthy individuals deserved better which gave birth to the concept of CRED.
It started with a vision to create an exclusive community for India’s most trustworthy and creditworthy individuals. CRED was conceptualized to digitally store, manage and pay all your credit cards from one place and help monitor your spending. Although, his biggest hurdle was, why would a customer use his App to pay their credit card bills? To incentivize the whole idea, he thought of rewarding the trustworthy users who paid their credit card bills on time. With this strategy to attract users, CRED was launched in April 2018 as India’s first reward based system that awarded its users for paying their credit card bills on time.
Currently, there is no business model of CRED. It’s purely focused on expanding its user base without worrying about making any profits. The app creates a database of users and logs their bank details, payment history, rewards used and interest but does not share this data with any third party. In the long run however, it can potentially use the data its gathering to monetize the business. As of now, it aims to attract more and more customers and thus they are spending a lot on customer acquisition cost.
As any other start-up, they rely on investor funds for growth. CRED managed to raise USD 251 million in its last venture round in October 2021 based on below merits under its belt:
⦁ Raised ~USD 750+ million
⦁ A user base of 6 million users (30% Premium users)
⦁ Valued at USD 4.01 billion
One rather important factor for such staggering growth is investor’s faith in the company’s founder — Kunal Shah. His track record and reputation preceded him. As a serial entrepreneur with a successful former startup FreeCharge under his belt certainly adds to his credibility, which was acquired by SnapDeal and later by Axis Bank. His entrepreneurial history helps draw other investors, clientele and customer base for current and future ventures.
Another factor that appeals to the masses — a huge customer base, which means quick growth. To date, they have loaned over USD 150 million and earn close to 1–2% on all disbursed loans from their banking partner. With all above factors, the company is projected at USD 4+ billion valuation, and rightly deserves so. Such projection for Indian startups might be a harbinger of progress for the country.
He identified a gap in the system, turned into an opportunity and catered to the quality customer elite and made it appealing to the masses — voila! You have a multi-million-dollar business! With future potential to cross sell products, data, etc. has helped CRED achieve USD 4+ billion dollar valuation even though the current revenue stream is not to scale.
A strong, positive self-image is the best possible preparation for success.
― Joyce Brothers
Sources:
https://aryanjalan.com/cred-case-study/
https://yourstory.com/2018/11/kunal-shah-how-cred-started-backstory/amp
