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Shubhram Bhattacharya went from a Product manager → Founding an AI startup that solves the engineering bottleneck he faced while shipping products. Although he solved his own itch, speaking to fellow GrowthX members helped him nail down on his problem statement and startup that raised $250K this month.
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Last week, a debt-relief Indian startup, FREED, raised ₹60 Cr. Now you might ask - “What is debt relief & why are VCs investing their money?”. Here’s the full story 👇🏼
If you haven’t heard, the RBI is making lending business even more regulated. It is ensuring we as a country don’t have a debt crisis like China did in the last few years. And there is a clear bigger problem - managing a bad loan. Now, a bad loan is - something that the lender (bank/ NBFC) is writing off & booking a loss.
₹93,240 Crore of stressed unsecured loans in bank portfolios at the end of 2022.
Credit card spending is on a high.
Over 70% of iPhones are bought on EMI. Every 3 in 4 products on Amazon sale is on EMIs. 1 in 5 personal loans are taken to fund travel.
Indians are using credit (unsecured) as much as they can get. This is the first step to unsecured loan nightmares if not managed well.
This is creating two kinds of debt problems. First, the debt-trapped folks who want to consolidate their debt into one single loan by paying off their lenders. Second, the delinquent folks who want to renegotiate the loan and pay at max the principal amount than nothing.
That’s exactly where debt relief comes in - similar to what FREED is doing.
It has a debt resolution & debt consolidation offering program that solves debt settlement, creditor call handling & few more things. It charges a monthly subscription of ₹649 plus percentage - unsure what they are charging but will be 10% to 15% of debt enrolled for settlement.
For NBFCs, this makes sense. They don’t have to keep their Vasuli team to do this.
So what makes FREED VC investible?
First, the technology integration is defensible. You see most NBFCs will need to integrate into FREED and it will be hard to build this for the next player entering the market. Today, most conventional players still use Excel sheets and manual paperwork.
Second, the tailwind on bad loans will keep growing. The India story relies heavily on access to credit to run towards the $7/$10 Trillion goal in the next 6 to 10 years. This also means bad loans as the volume will keep growing even if the % of bad loans of total loans disbursed remains flat. Third, this model has proven itself. If you look at a matured economy like the US, you have “Freedom Debt Relief” which does credit card debt relief and made over $1 Billion in revenues last year. The settlement fees are key to this model which will find adoption in India.
It’s interesting how this whole ecosystem around lending is getting built brick by brick. We will look back at these times in a few years and will realise these were the defining moments for access to credit for Indians.
