ENTREPRENURSHIP & INNOVATION CELL

ISSUE 1, JULY 2021

E-NOVATE
A NEWSLETTER FOR ALL START-UP ENTHUSIAST
 ISSUE 1, JULY 2021

E-NOVATE
A NEWSLETTER FOR ALL START-UP ENTHUSIAST

THE RISE OF CRED - PART 1 OF 2

WRITTEN BY SHUBHAM AGARWAL

Introduction
Imagine you are the founder of a startup that spends Rupees 727 for

every Rupee earned. Despite these losses, you are conferred upon

the status of a Unicorn (a startup that is valued at or above one

billion dollars) within two and a half years of starting the business.

Such is the trust placed on the vision of a serial entrepreneur, Kunal

Shah, and his new startup CRED by its investors.

History of Kunal Shah – The Founder

Kunal Shah is a philosophy graduate from Wilson college of Mumbai.

He tried pursuing a part-time MBA from NMIMS (Narsee Monjee

Institute of Management Studies) but dropped out of it soon due to a

lack of interest in what was being taught at the Business School. By

that time, he was already running a BPO

(business process outsourcing) company and soon started his first own startup PaisaBack, a

cashback promotions company that would help retailers give cashback rewards in their

stores, in 2009. He closed this startup due to a fragmented market in India and started

FreeCharge in August 2010 alongside Sandeep Tandon which initially concentrated on

mobile prepaid recharges and awarded rewards in doing so. They sold FreeCharge to

Snapdeal in 2015 and since then has been a part of the advisory board of Y Combinator,

Bennett Coleman and Co Limited and Sequoia Capital India.

Why and How CRED

Being from a Gujarati family, business is not just any other field but a quality that runs

through their blood as it is being said. He recognized that when every new startup is trying to

cater to the masses, he should be looking for something niche and reliable. And what better

than having the top 1% of Indians (by net worth) as your customers. The logic behind this was

simple; if a company/ bank penalizes an individual for not paying their debt on time, why

shouldn’t an individual who fulfils all its dues well within the credit period provided with some

rewards. This is how CRED started a member-based community that can have access to its

services if it possesses a credit score of 750 or above.

After the successful venture of FreeCharge, he spent a great deal of time travelling in

developed countries and learning the simple businesses in the process. He observed that

people placed a lot of trust in the systems developed by these nations for transactions such

as the absence of cashiers on the counters in supermarkets and self-catering petrol pumps.

This made him acknowledge the advantages of a frictionless environment present in these

countries and followed suit.

THE MOST RECENT Funding received by CRED

FUNDING RECEIVED BY
CRED AT SERIED D The most recent funding received by CRED at the Series D

ROUND INCREASED ITS round increased its valuation from 806 million US dollars to 2.2

VALUATION FROM $ 806 billion US dollars, making it the sixth Indian startup to enter the

MN TO $ 2.2 BN unicorn club in 2021 alone. CRED is one of those legendary

startups that received funding even before its execution and

this was made possible by the brilliance and trust placed by the

investors in Kunal Shah. Currently, the company has around 28

investors and 7 lead investors. Lead investors are the ones that

will fund a company at the start of the round and are given

chances ahead of other investors to have favourable terms by

issuing or signing a term sheet. Some of the lead investors of

CRED include Tiger Global Management, Falcon Edge Capital,

and Insight Partners among others.

 DECODING STARTUPS - RAZORPAY
WRITTEN BY NIKITA AGGARWAL & KOMAL KUMARI

What do you understand by the term 'Fintech'?

Intuitively, Fintech (Financial technology) comes across as Fin

powered with Tech. Well, that's true. Fintech is an industry that uses

technology in finance to improve and automate the delivery and use

of financial services. A revolution to democratize financial services.

A leading fintech startup that emerged back in 2013 was Razorpay.

Though the current pandemic has been a massive dread for all of us,

it accelerated the journey of Razorpay, making it one of the startups

in 2020 to join the coveted Unicorn Club.

How did Razorpay carve out its way? How did the co-founders

stumble upon the idea? What did they do to stand out among

competitors?

In this series of Decoding Startups, we will discuss some of these

prominent questions and how the co-founders Harshil Mathur and

Shashank Kumar went ahead to build an amazing product, 'Razorpay.'

Razorpay – Episode 1

The story started when both Harshil and Shashank, IIT Roorkee alumni, were
working on a side project of building a crowdfunding platform. They, then
realized that there were a lot of difficulties faced by Small Medium Enterprises
(SMEs) and Startups in accepting online payments.
Startups and SMEs needed an easy way to integrate payment gateway platforms in their

online business. The existing payment gateways required a lot of paperwork and were

quite expensive, a privilege only available to big companies. Before proceeding, it is

imperative to understand the role of a payment gateway in facilitating online payments.

Payment Gateway is just like a cash counter – except the fact that instead of cash

payment, it facilitates online payments through modes like debit cards, credit cards, UPI,

and other wallets available these days.

Crossing the bridge

Banking and in specific payments is a highly regulated and compliance-driven market.

Most of the existing products in this industry was built by finance, investment, or banking

guys. Venturing into the fintech industry with no finance background in a Tier-II city like

Jaipur was not an easy exercise. But the co-founders knew that digital payments in India

are set to grow in coming times, so with the knack for solving payments problems for SMEs

and Startups, they started building Razorpay.

Now the first step was to onboard a bank as a partner to facilitate online payments. They

knocked on the door of every other bank in Jaipur, but no bank appreciated their idea. But

they were adamant enough not to give up. They changed their strategy. Since Jaipur was a

small city, they thought to give it a try in Tier I cities like Delhi and Mumbai, where people

are more receptive to startups.

Finally, one fine day, they came across a guy in HDFC who was ready to onboard them.

(Kehte hain ki, agar kisi cheez ko dil se chaaho, toh puri kayanat usey tumse milane ki

koshish mein lag jaati hai:P)

The Y-Factor
The day Razorpay was launched, 300+ businesses signed up on their platform. Not to

wonder that in 2015, Razorpay got selected for Y Combinator, which further bolstered

their idea and helped them gain global recognition.

MOMENT OF PERSEVERANCE Product-Vision

During their initial phases, they clearly defined their target

THE CO-FOUNDER, HARSHIL segments and focused on building a Payment Gateway for

MATHUR, STATED THAT SMEs and Startups. Though it's hard to believe, they denied

THEY VISITED ALMOST 80-100 serving Flipkart in the initial phase, only because they knew

BANKS, AND NONE OF THEM that's not the segment they were looking to cater to.

WERE READY TO ONBOARD Imagine if they hadn't done it, their destiny would have

RAZORPAY AS A PAYMENT been tied with Flipkart. The company would have ended up

GATEWAY. as Flipkart's tail, becoming an outsource store for them and

would have lost its essence.

But did they stop with just small players?

If yes, how come Airtel, Swiggy are their clients?

As we all know, change is the only constant, and the one

thing the co-founders always strived for is to keep

innovating and evolving. How did they do it? We'll cover all

these in the next episode.

😊
DESIGNING A PRODUCT VISION
Until then, stay tuned!

FOR A COMPANY GIVES A

REASON FOR THE EXISTENCE
If Startup stories excite you, do read our other episodes on

OF THE PRODUCT. IT
Udaan and Dream11 on:

CONVEYS PURPOSE AND

https://decodingsuccessfulstart-ups.blogspot.com

TELLS THE STORY OF THE

Why are we doing this?
COMPANY. IT IS NOT JUST
FOR THE CUSTOMERS; IT IS
As business management students, we keep reading

FOR THE EMPLOYEES TOO. IT

theories, principles, and General Gyan about businesses.

SERVES AS A MOTIVATOR
But all this comes with caution! Caution of copy-paste,

AND A METRIC WHEN MAKING

'pick and apply' because businesses do not work like that.

BIG AND SMALL DECISIONS

So, to connect our learnings with the business world, we

FOR THE COMPANY.

came up with a simple vision of Decoding Successful Start-

ups and their Strategies.

ENTREPRENEURSHIP IN THE TIMES OF
COVID-19
WRITTEN BY DHIVYA G

India is home to around 79000 registered start-ups, and among this

only, 8% received seed funding in the last decade. India's start-up

eco-system is fueled by the growing income level of the people,

young population, supportive business environment, and high GDP

growth rate. COVID 19 has created a whole new environment in the

market, and the pandemic is very different from dot-cum bust, 2008

financial crisis, or any other previous disasters. COVID 19 created a

volatile atmosphere in the seed funding, and thus investors took a

conservative stand in their investment decisions. But the effect of

COVID 19 on Indian start-ups was non-uniform, and thus, the

consequences should not be generalized.

Early-Stage Start-ups: Investors were not willing to make new

investments during this pandemic situation. There are two reasons for

their stand – 1) Their existing portfolio of companies needed cash to

sustain the pandemic and thus investors were saving cash to rescue

their current bet 2) Investors were also saving the cash for the future

to invest more on start-ups which has survived the COVID 19

pandemic. Few early-stage start-ups backed by small investors shut

their shop as they could not raise funds to survive the pandemic. As

an exception big investor such as Matrix, Accel and Sequoia made

new investments in early-stage start-ups.

 Series round funding: Before

the pandemic, it was

expected that logistics

would raise the most capital,

but by the end of 2020,

EdTech start-ups raised $2.2

Bn dollars compared to $1 Bn

dollars raised by logistic

companies. As colleges and

schools closed due to

pandemic, the students were

driven to online tutoring sites

such as Byju's, UpGrad, and

Unacademy. Another trend

was that B2B start-ups like

Jumbotail,

Ninjacart, Dukan, Katabook, and Bikyani gained momentum in their business. Agri-tech B2B

start-ups showed higher investor confidence than their counterparts even though this pandemic

has significantly affected their sales. Gaming start-ups went mainstream as they witnessed a

massive jump in userbase during the lockdown. Dream 11 doubled its valuation and gained the

international spotlight by winning the bid for IPL title sponsor. Ludo King also increased its app

traffic and went on to become the most downloaded application in India. Fin-Tech start-ups

which enjoyed massive growth during funding rounds in 2019, suffered significantly in 2020.

Banks and NBFC's, which had lent to Fintech start-ups, started to take a conservative stand as

they feared rising NPA levels. Internet-based companies gained momentum in 2020 as they

saw a decade of consumer behavior shift happening in just one year.

The cost of customer acquisition for enterprise start-ups has also increased. As the disposable

income with people decreased during the pandemic, people started redefining their

purchasing priorities and scrutinized all their purchases. Enterprise start-ups such as

Freshworks, Zenoti, and Druva offered a unique set of solutions to their enterprise clients to set

up a virtual workspace. Thus, enterprise start-ups that adapted to the customer's changing

needs prospered, whereas the start-up that was rigid to adapt to the changes perished.

Consumer start-ups felt the heat during the initial months of lockdown. Due to lockdown, the

sales had almost halted for consumer start-ups. As a response to the lockdown conditions, the

consumer start-ups started looking into alternative channels for sales. They also faced logistic

and distribution challenges during the initial phases of lockdown. For example, Agri-tech B2C

start-ups faced difficulty in delivering to the end consumers. Thus, they partnered with food

aggregators such as Swiggy and Zomato for distribution. Consumer start-ups like OYO, which

had already been operating an unprofitable business before the pandemic, suffered

significantly due to a cash crunch. But unlike many small start-ups, OYO has a bigger war chest

of international investors, and thus they were able to sustain the business during this pandemic.

Investors are optimistic about OYO's future as this billion-dollar start-up will be the fastest to

recover from the pandemic.

Basic principles of entrepreneurship such as having a good core team, ensuring product-

market fit, and a clear business model remain the same. But COVID 19 has changed the

way the business should be conducted. It has accelerated the pace towards moving to an

eco-system driver.

Eco-system architecture drives the scale, speed, and scope. For Example, Companies such

as Airbnb, Etsy, Uber, and Netflix were built on the eco-system architecture. These

companies had positive cross-side effects in their eco-system, which was responsible for

the higher rate of customer acquisition. Retention of the customer is not only because of

their business design but because of their quality of experience which is possible due to

customer data. This is a self-reinforcing phenomenon.

The negative effect of COVID 19 was higher for modular companies compared to eco-

system companies. Eco-system companies will recover faster than modular companies from

the effect of COVID-19. For Example, OYO rooms showed better financials compared to

hotel chains. OYO rooms work based on the asset light model, and thus they burnt minimal

cash compared to hotel chains. As the hospitality sector demand recovers, OYO rooms will

be in a better position to acquire customers.

With vaccinations

out in the market,

the economy is in

the path of

recovery. Going

forward, we can

observe six trends

in the 2021 start-

up landscape:

Social is no longer just social media and online forums. Gaming will be the new social

platform for Gen Z and kids. More gaming start-ups are expected to gain unicorn

status, and mobile gaming start-ups will be the front runner in start-up funding

SaaS is said to go mainstream as the virtual workspace becomes new normal. As there

is an increase in the number of internet-based companies, SaaS start-ups is expected

to gain momentum in 2021

EdTech start-ups was clearly a breadwinner in 2020, and the trend is expected to

continue in 2021. But as the schools and colleges are reopened, the EdTech start-ups

will complement offline learning and thus finding their permanent place in the

education eco-system. Ed-Tech start-ups are also expected to consolidate due to

mergers and acquisitions.

Healthcare start-ups haven't got enough funding or infrastructure support since

independence. In 2021, we can expect healthcare start-ups to raise a huge amount of

funds and drive cutting-edge research activities.

Logistics start-ups had a windfall in 2020, but 2021 will be the rebound year for this

sector. Logistics start-ups will act as a platform on which the Indian economy is going

to ride.

Agriculture start-ups are set to get more funding from international investors. With a

huge market size, there will be more start-ups entering the agriculture sector offering

functional solutions. Few companies, such as Ninjacart and Jumbotail, will potentially

open their technology platform as APIs to create a platform architecture.

THE VIEWS, INFORMATION, OR OPINIONS EXPRESSED IN THIS NEWSLETTER ARE

SOLELY OF THOSE INDIVIDUALS INVOLVED AND DO NOT NECESSARILY
REPRESENT THOSE OF ENTREPRENEURSHIP CELL, IIM KOZHIKODE AND ITS
COMMITTEE MEMBERS