Credit card payment service Cred Monday has raised $81 million in a Series C round at a post-money valuation of $806 million and bought shares worth $1.2 million (about Rs 9 crore) from employees, just two years after it was founded.
This is the first employee stock ownership plan (Esop) liquidity program by Cred, which was founded two years ago, that possibly ushers a trend of Indian founders thinking of adding employees to their capital table right from the time of incorporation.
The employee stock ownership plan (Esop) buyback was completed on 1 January. Employees holding vested stocks were eligible to sell up to half of it.
Cred’s fundraise was led by existing investors DST Global along with Sequoia Capital, Ribbit Capital, Tiger Global, and General Catalyst. Sofina, Coatue and Satyan Gajwani of Times Internet also participated in this round.
“As we raise funds to support our next phase of growth, it’s important to acknowledge the role that employees have played in our success. We are committed to enabling wealth-creation opportunities for them and have allocated 10% of our cap table allocated for Esops even at the Series C stage. I am grateful for their conviction, as well as that of our investors, and am focused on creating value for them as the product and business evolves,” said Kunal Shah, founder, Cred.
The creation of ESOPs at the time of incorporation will lead to shrinkage in wealth creation time for employees through stocks, Santosh N., managing partner at D and P India Advisory LLP, a consultancy. With startups now thinking of ESOPs early will also usher multiple liquidity events and opportunities for startup employees to create wealth.
“Seasoned founders definitely understand the importance of ESOPs on the cap table. Contrary to the West, Indian startups earlier used to create ESOPs during the late stage of the company and were often pushed by investors to do so. Now this has changed to early-stage startups creating space for ESOPs on their cap table right from the time of incorporation. This will lead to not just better wealth creation but also attracting robust talent towards Indian startups,” said Santosh.
Cred said it now has over 5.9 million “high-trust” individuals with a median credit score of 830 and processed 20% of all credit card bill payments in India.
Over 35% of premium credit card holders in India are on Cred, with members spending 2X of the average credit card user in the country, the company said.
Several startups including Unacademy, Zerodha, CarDekho, BharatPe, Meesho, and Swiggy, announced Esop buybacks last year. In November, foodtech unicorn Swiggy initiated an Esop liquidation program of $7-9 million to reward its employees as the food delivery business recovers to pre-covid levels.
Esops assume more significance when they happen after many startups have witnessed a financial crunch amid the pandemic and has cut jobs and slashed salaries. This continues to be a strong tool for founders to retain employees as they emerge from the crisis.
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