Twitter war erupts in India over an $800m startup

In the age of a reactive social media, fiery debates over the most trivial issues are not uncommon. But every so often, along comes a subject that actually requires greater introspection than what Twitter’s 280-character-limit allows.

Earlier this month, a media report caused India’s tech and startup community to be split on social media over the topic of judging a startup’s performance.

Photo credit: Cred website

The report was on two-year old Indian startup Cred’s high losses owing to its large spend on advertisements and marketing, even though its revenues were minuscule.

What is Cred?

Cred allows users to pay multiple credit card bills conveniently through its app and incentivizes timely bill payments with its own reward points. However, users need to have a credit score of at least 750 to be able to join the app.

Barely into its third year of operations, the app is already valued at over US$800 million and boasts having investors such as Sequoia Capital, DST Global, Tiger Global, and others.

Apart from its high-profile investors, Cred is also well-known in India because of its founder Kunal Shah. Shah had sold his first venture Freecharge for US$400 million, which is still regarded as one of the highest-valued deals in the Indian startup space.

In 2020, Cred also ramped up its marketing activities and significantly increased its visibility. According to media reports, it paid as much as 1.2 billion rupees (US$16.5 million) to become a sponsor for the popular Indian Premier League cricket tournament for 2020.

The moves appear to have paid off. In January 2021, after raising US$81 million in series C funding, the company said that it has 5.9 million users, nearly double of last year’s figure.

It also claimed that 20% of credit card bill payments in India are done through Cred.

Old wine, new bottle

The social media debate over Cred’s financials puts the spotlight on the long-running debate between investors and the media on how to report on and judge a startup’s performance.

The media invariably writes about the losses of highly valued startups, even as investors implore the media to look beyond the bottom-line figures in its reportage.

Soon after the report about Cred was released, Sajith Pai, director at Blume Ventures, tweeted that it was “clickbait.” Pai’s argument was that accounting metrics developed in the early 20th century to measure capex-heavy analog companies should not be applied to 21st century digital companies that are capex-light and data- or IP-heavy.

Cred’s business model questioned