Get full access to one story every week, and to summaries of all other stories. Just create a free account

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.

If that wasn’t enough, there are now reports reports TechCrunch India’s CRED in talks to raise $200 million at $2 billion valuation Read more that it is set to raise a new funding round of US$200 million at a US$2 billion valuation—a unicorn twice over. All this, barely three years since it was founded and with precious little to show for revenue. In the year ending March 2020, the company reported an operating revenue of Rs 52 lakh (US$71,700) with a loss of Rs 360 crore (US$49.6 million).

To the lay observer, these numbers might seem outlandish. A company with less than US$100,000 in revenue in the last reported financial year being valued at US$2 billion.

But there is some serious money behind this venture. CRED’s investors include marquee names such as Sequoia Capital, Tiger Global, and DST Global.

These VCs are canny operators and some of the shrewdest investors in the globe. So, there has to be some VC calculus wherein these numbers make sense.

The core belief of this calculus is that CRED delivers a decacorn exit. US$10 billion is the magic number for CRED’s investors for a couple of reasons.

If the upcoming funding round values CRED at US$2 billion, the expected payoff would be 5X from this base—a US$10 billion exit.

At a US$10 billion exit, major investors like Sequoia Capital would own roughly 10% each and would therefore get around US$1 billion each. A unicorn exit but also one that would return an entire fund by itself.

The big question then becomes: How does CRED get to a US$10 billion exit? Is there a best case scenario where such a valuation is possible?

Parsing this bull case for CRED requires us to analyse a few key aspects of the VC calculus.

Mindset—No business like show business

The first aspect that we need to grok is the investor mindset. This mindset closely resembles that of a movie producer.

Producing movies and funding startups are more alike than one would imagine.

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.

View Full Profile

Read this story. Subscribe Now

This story is available across both editions. Subscribe to the one that’s most relevant for you. Questions?

 

Premium

  • 5 original and reported longform business stories every week
  • Access to ONLY India edition
  • Close to 250 exclusive stories every year
  • Full access to over 6 years of paywalled stories
  • Pick up to 5 premium subscriber newsletters
  • 4 original and reported longform business stories each week
  • Access to ONLY Southeast Asia edition
  • Close to 200 exclusive stories every year
  • Full access to all paywalled stories since March 2020
  • Pick up to 5 premium subscriber newsletters

Rs. 2,750 /year

$ 120 /year

India Edition
Subscribe Subscribe
Most Asked For

Borderless

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 6 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories

Rs. 4,200 /year

Subscribe
 

Echelon

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 6 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories
  • Bonus annual gift subscription
  • Priority access to all new products and features

Rs. 8,474 /year

Subscribe
Or

Questions?

What kind of subscription plans do you offer?

We have three types of subscriptions
- Premium which gives you access to either the India or the Southeast Asia edition.
- Borderless which gives you complete access to The Ken across both editions
- Echelon which gives you complete access to The Ken across both editions along with a bonus gift subscription

What do I get if I subscribe?

The Premium edition gives you access to stories in that edition along with any five subscriber-only newsletters of your choice.

The Borderless and Echelon subscription gives you complete access to The Ken across editions and unlimited access to as many newsletters as you like.

What topics do you usually write about?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics. We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

Our specialised subscriber-only newsletters are written by our expert, award-winning journalists and cover a range of topics across finance, retail, clean energy, cryptocurrency, ed-tech and many more.

How many newsletters do you have?

We are constantly adding specialised subscriber-only newsletters all the time. All of these are written by our team of award-winning journalists on a specialised topic.

You can see the list of newsletters that we publish over here.

Does a Premium subscription to your Indian edition get me access to the Southeast Asia edition? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

We recommend the Borderless or the Echelon Plan which will give you access to stories across both editions.

Do you have a mobile app?

Yes! We have a top-rated mobile app on both iOS and Android which allows you to read on-the-go and has some amazing features like the ability to bookmark stories, save on your device, dark mode, and much more. It’s really the best way to read The Ken.

Is there a free trial?

You can sign up for a free account to experience The Ken and understand our products better. We’ll send you some free stories and newsletters occasionally, and you can access our archive of previously published free stories. You can stay on the free account as long as you’d like.

The vast majority of our stories, articles and newsletters can be accessed only by a paid subscription.

Do you offer any discounts?

Sorry, no. Our journalism is funded completely by our subscribers. We believe that quality journalism comes at a price, and readers trust and pay us so that we can remain independent.

Do you offer refunds?

No. We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Just write to us at [email protected] with details. We’ll help you out.

I have a few more questions. How can I reach out to you?

Sure. Just email us at [email protected] or follow us on Twitter.