After raising a $120-million Series A round, unprecedented for an early-stage startup in India, Kunal Shah, founder and CEO of Dreamplug Technologies Pvt Ltd-owned Cred, spoke to Mint about the company’s plans to enter overseas markets, expand its service offerings with personal loans and the pressures of raising a large sum at an early stage. Edited excerpts from an interview:
You have raised a large amount within a very short time. How would you exercise prudence to avoid excessive cash burn?
Burning money on stupid things is always the number one challenge for any funded founder. I think the advantage of being a 40-year-old helps.
But, on a serious note, it is our number one challenge to stay extremely frugal in our approach, on doing multiple things and having a more creative approach to growth versus capital-intensive, as a key principle. But capital gives us an opportunity to experiment with new categories, with new markets and, potentially, even gives us a chance for mergers and acquisitions—to acquire some good teams, instead of building everything on our own.
What would you use the funds for?
We are looking at growing to international markets and, obviously, we are looking at growing what we built and are building multiple-use cases. The primary thing we are going to do is work with banks and allow them—merchants and banks— to offer more services to our customers.
Another thing we will do is to allow personal loan offers—wherein consumers will be able to avail of a loan from a bank in a seamless manner on our platform.
What will the loan size be, and what role will Cred play here?
Well, I don’t know what the ticket size of personal loans would be, but we would probably be doing ₹3-4 lakh per customer as personal loans. Our role would be as a distribution platform, where people think about their finances, paying bills, etc., and is likely to trigger a need for loan. So, we want to tie up with banks to make loans available in one click, and at the best possible price. We won’t underwrite loans because that is not a skill set we bring to the table.
Considering Cred is still quite new, wouldn’t it be better to learn from the Indian market before going global?
We are entering a phase wherein companies start thinking about these things early on. It will take months to even get to the stage of actually being able to do that, but when you have to evaluate the market, especially in our category, where we are focusing on a certain segment of customers, it makes sense to do it sooner rather than later.
Why are you looking at overseas expansion?
I think our model, by design, is for limited customers. For example, if you’re going for credit card customers, there are only 25 million in India.
And, if you’re going for 750+ (credit rating), which is a criteria on our platform, the market is limited here, but it automatically allows us to go to other markets and get more customers.
We don’t know right now whether it will be Asia or other regions. We are still evaluating. But, both developed and developing markets look like a strong potential for us, because credit card is one product that is super standardised across countries. The banks may be different, but the standard—Master, Visa, Amex— makes the products standardized enough in their offering for Cred as a platform to make sense.
How do you make money right now?
At this point in time, we earn revenue from our partners— both merchants and banks. Banks are going to start very soon. Merchants pay us commission for listing and sometimes getting the awareness up, or sometimes they just pay for redemptions that we drive for them through the offerings of rewards that we offer on the platform.