Decacorn dreams—The bull case for CRED

With credit card payments startup CRED verging on a US$2 billion valuation, investors are banking on the business growing to at least 5X that. Can CRED get there? The answer may have more to do with VC calculus than its current business metrics

With every fundraise and subsequent increase in valuation, the burden of a blockbuster exit weighs heavier on CRED

While its latest fundraise indicates that investors see decacorn potential, it’s unclear exactly what the calculations are

CRED’s current revenue figures certainly don’t lend themselves to such ambitions—CRED lost ~US$50 million to earn US$71,700 in FY20

VC calculus, however, is more complicated—marrying the willing suspension of disbelief with factors beyond simple business metrics

Seemingly since its inception, credit card payment business CRED has been subject to heated debates on the company’s business model or seeming lack thereof.

“What is CRED’s business model? How will it make money?” has been the questions du jour in startup circles for a while.

But those may be the wrong questions to ask.

The actual question should be, “Why is CRED valued as highly as it is?”

Even before starting the company, CRED founder Kunal Shah raised a seed round of US$25 million. He then followed it up with multiple funding rounds totalling more than US$200 million, with the last publicly disclosed round of US$80 million reported in January 2021 at a valuation of US$800 million.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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