Over the last couple of days the buzz has been about the recent fund raise for CRED by Kunal. The most obvious question seemed to what is the business model? With twitter going wild with guesses; is this a data selling business model.
Even I’m curious to find out what exactly is the business model, given I have been an early adopter of his start-up FreeCharge in the past as marketing head at Justbooks, when we worked with FreeCharge to distribute coupons and now as one of the first beta users for CRED.
I spent more than a couple of hours reading all the recent interviews/video/articles on/by Kunal shah to get to an answer.
Trust. Trust. Test. Decide. Repeat.
Build a community of individuals of high credit worthiness. Highly trustable folks who value status over just convenience/functionality of a product/service. Eg. Coffee at StarBucks - INR 300 vs Coffee at elsewhere at INR 100.
Credit card penetration at 45 million cards, average no. Cards/user ~ 2.5, Unique users ~ 18-20 Million. Largely urban. Drive 45-50% of India consumption. Aspire to buy from Nicobar etc. Will surely visit Chickpet Donne biryani or Khau Galli once a year to brag how they are still connected to the mass market India, even though they are not.
Get distribution through discounting/coupons/deals to reach critical mass. What is critical mass is subjective, depends on the monetisation use cases. Eg. For an high flying CRED cooking session with a chef requires no more than 100 people in from Indiranagar. For a CRED Goa carnival you require 5000 people. This range will be workable based on use cases. Basis current public data CRED is roughly at about ~ 0.5 M users. Critical numbers could be largely in Blr, Del, Mum, expect a long tail given Kunal is a marketing machine and aspirational trusted founder brand across the country. CRED is like kunal - Aspirational Trusted Brand (ATB). Tata - Trusted Brand not aspirational given the spectrum to Tata brands. Brand dilution as you spread thin across horizontals.
Monetise trusted community - Cross sell and Upsell - Lending, visa, travel services. Cross sell and Upsell are easy to say, but difficult to execute. At Justbooks, a lifestyle low frequency library service for books, attempted cross sell monetisation via other such similar lifestyle services like travel and music but turned out difficult. Need to respect and analyse what constitues adjacencies for upsell and cross sell for your existing customers. Cure.fit has so far go it right with the vertical they have picked up for upsell and cross sell given overarching umbrella of healthcare. Crude analogy not exact - Cure.fit target segment is a sub-group of the CRED’s credit worthy users.
Allowing P2P networking with Cred will be an interesting use case. Pay to get access to other CRED’s user ( like credits on dating apps), knowing they are trust worthy. Establish a closed loop trusted verified high value social network, traditional networks have been based on knowing a common connect or friend. The credit score is my common connect on CRED.
The revenue model and use cases are not fully flushed out, but the broad framework is in place and kunal seems to be absolutely clear if he can’t make money with top 25 million high earning Indians, we all better pack-up and take the next flight to China.
Curious bits:
Kunal has hired interns in China, who feed him information about the Chinese ecosystem
Building trust -Employees are paid salary at CRED at the start of month. Laptops are given along with the offer letter
Employees need to have 800 plus credit score + second soul in a creative field and no uncles allowed, I’m assuming aunties also!
For the more curious. Link below all the articles/videos
Interview with Shraddha Sharma
Talk/QnA at CFA