Flipkart #4: Sold

The second Big Billion Day went off far better than the first one, writes Mihir Dalal in The Big Billion Startup. But sales could have been even higher if not for Sachin’s decision to close the website and support only the app. Fixel, the biggest investor, forced Sachin to step down as CEO - he wanted someone who would care about the present. Binny Bansal became the new CEO.

 

Amazon announced it would invest $3 billion in India, on top of the $2 billion already spent. Having lost China, Amazon seemed determined to win India. They launched their famed Prime membership in India. This was war. A worried Fixel insisted on bringing Kalyan back – Flipkart, he felt, needed a “professional CEO”. They need a war chest to fight Amazon. And so they sought and got $1.4 billion from Microsoft, Tencent and eBay; and another $2.5 billion from Softbank.

 

While Flipkart could fight Amazon, Fixel was not sure if/when Flipkart would ever be profitable at this rate. Which meant investors would need to keep pouring money to keep it afloat. There was only one way out for investors like Fixel – Flipkart must be sold off. They approached Amazon, and Walmart. Walmart was attracted because this felt like a way in at least one major world market. Amazon, while interested, was worried whether anti-monopoly agencies in India would scuttle an acquisition. With the major American players interested, Alibaba joined in talks but dropped out soon.

 

Eventually, Walmart would buy 77% Flipkart for $16 billion, thus valuing the company at $21 billion – all kinds of records. It got quite ugly with Sachin being left out of the final negotiations, and Binny annoyed that Kalyan was centerstage. Both Sachin and Binny resigned soon after the deal, billionaires by then.

 

While Flipkart continued to increase its lead over Amazon a year after the acquisition, it still bled $1 billion a year. So was this a bad deal for Walmart? Not necessarily, because PhonePe alone is valued at over $5 billion and the UPI market is only growing. Where Flipkart will go next, time will tell.

 

Some dismiss Flipkart as a copycat of Amazon, but that’s not fair. They had to struggle in a country with no record of startups, where Internet penetration was still low, few had credit cards, and trust in online transactions was non-existent. And yet, they had created the entire e-commerce industry in India from scratch. No wonder Sachin once snapped back at the Amazon-clone remark:

“Haan, theek hai. Tu kar ke dikha de. (Yeah, sure. You show us how it’s done)”

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