?? Betting on top 0.01%

When Kunal Shah founded CRED in 2018, he went after credit card users who constitute the top 0.1% of India’s enormous consumer base. This approach defied the prevailing investor sentiment, which favoured startups focused on large total addressable markets rather than niches.

Fast forward five years, and several early-stage companies are following Cred’s initial path, focusing on a relatively limited segment of customers who can deliver higher revenues. Crucially, they are securing funding.

• Flash.co , a personalised email service aimed at 25 million online shoppers, raised an additional $6.7 million from PeerCapital and Blume Ventures .
• Offline , a startup trying to build a networking community for top tech founders in India, raised $2 million from a clutch of angels.?
• Options-trading app Punch, a part of Market Pulse Technology, is in advanced talks to collect $5 million from Stellaris, Prime Ventures and SIG.?

“It’s all about how deep the revenue pool is, and not about projections around the market size,” said a venture investor who backs one such startup.

?According to venture capitalists, three broad themes are driving this change. One, large sectors such as ecommerce, mobility and payments have matured, which means fresh investments flowing into these markets do not have the desired room to grow.

Two, the attention has shifted from the potential number of users for a product or service to their ability to spend. And lastly, investors believe businesses that lock in a specific category, establishing a defensible competitive advantage, will make tidy profits or become attractive acquisition targets.? ?

Aditi Shrivastava

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Peak XV plans to shed stake in HealthKart

Arc Notes

• Peak XV Partners , earlier known as Sequoia Capital India, has initiated a share sale process to fully exit nutrition-goods app HealthKart , The Arc understands.??
• The venture-capital firm first backed the startup in 2011, building up a 27% stake. It had exited HealthKart’s popular spinoff, 1mg, when Tata Digital acquired the latter in 2021.
• HealthKart is seeking a valuation of over $500 million for the stake sale, according to two people briefed on the deal. It last raised $135 million through a mix of primary and secondary transactions at a valuation of $350 million in December 2022.

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