Big Billion Startup: The Untold Flipkart Story

by Mihir Dalal

  After the first meeting itself, Abhishek decided to urge his bosses at Erasmic Venture to invest in Flipkart.

  Over the next few months, Abhishek, who also lived in Koramangala, spent many weekends with the Bansals. He became a friend and mentor to Sachin and Binny. When gauging entrepreneurs, Abhishek would look for small clues that pointed to their problem-solving abilities. Every time he met the Bansals, they would talk of a new trick learnt, a discovery made or a problem solved. It was clear that Flipkart was unceasingly moving forward. Even its website was well made and unusually fast for the time.

  During one meeting, the Bansals described their customer support email address to Abhishek. It was cs@flipkart.com, kept intentionally short. Many e-commerce sites featured long, complex email addresses, perhaps because they didn’t want to be assailed by customer complaints. Sachin didn’t see the point to this. His rationale was simple. He explained to Abhishek, ‘If you don’t want customers to write to you then don’t publish your email. If you want to actually help customers then make it easier for them to write to you.’ It was a continuous trickle of such cues over many months that strengthened Abhishek’s belief that these were uncommon, dedicated entrepreneurs, on to something big.

  Abhishek noticed that the Bansals would take a problem and break it down into ‘manageable pieces’. Other e-commerce firms would typically wait to source all the books that a customer had ordered and deliver them together to save costs. Almost always this caused long delays in deliveries because some books would inevitably be out of stock. But the Bansals split up orders, delivering instantly the books their suppliers had in stock, and shipping the rest when they became available. They would also promptly process refunds or order replacements. Abhishek recalls how ‘it was magical for that time. The benchmark was so low that when you saw a company do reasonably well at execution it compounded the impression that those guys are very capable. And they weren’t even losing money.’

  Sachin and Binny had realized that they would have to decide who between them should take on the role of CEO. It mattered to investors who was at a company’s helm. Too many startups had been broken up because their founders fought over who was more important. It had become clear that Sachin was the one with the vision – the big thinker. Binny’s contribution, however, was no less important. Managing operations was critical to Flipkart’s success, but it was inherently secondary to Sachin’s role. So, the Bansals agreed that Sachin would be Chief Executive Officer and Binny the Chief Operating Officer. When they met the higher-ups at Accel Partners, it was clear that Sachin was CEO and Binny the COO. This was reassuring. Abhishek tried to nudge them on the subject, but the Bansals didn’t seem to have any differences. They were very thick, very close. They would almost always meet Abhishek together. Abhishek noticed that Sachin and Binny could predict each other’s thoughts and opinions on any subject. Their chemistry was evident – they took trips together, ate out together – it almost seemed like they were brothers.

  Abhishek was also struck by the Bansals’ perseverance. They regularly worked more than twelve hours a day. Even on weekends, Sachin and Binny would be in the office until 8 p.m. Sachin liked going on long drives to unwind and eating dosa chicken and other Indian dishes at local restaurants. Both Bansals, along with Abhishek, would also go to the far-off Windsor Pub for beers. But the Bansals were particular about spending only so much time outside of work. After Abhishek had convinced Sachin to go out and take it easy one Sunday afternoon, the Flipkart CEO had relented, only to come back to Abhishek later half-jokingly, ‘Yaar, chaar ghante barbaad ho gaye. Main tere saath nahin aaonga phir se!’ Man, you wasted four hours of my time. I’m not going out with you again!

  As impressed as Abhishek was with the Bansals, he couldn’t convince his fund to back Flipkart. The Erasmic Venture partners weren’t even alone in their scepticism towards the company. The Bansals had approached every venture fund in India for capital. They met partners and associates at all the marquee funds, from Sequoia Capital, NEA-Indo US, Matrix Partners, IDG Ventures to Nexus Venture Partners. Not one of them showed serious interest. Some fund managers scoffed at them. Others didn’t like the name ‘Flipkart’. Why was it spelt kart, not cart? The Bansals considered renaming Flipkart to WSpot but finally decided against it. One investor even asked the Bansals if their operations had Six Sigma certification. Six Sigma is a complex mechanism of business processes made famous by General Electric, a giant manufacturing company. Operating out of an apartment office in Koramangala, Flipkart managed its supply chain using Excel sheets, printouts and the human ERP, Iyyappa. The Bansals had, of course, not even heard of Six Sigma. To add to their woes, there were venture capitalists who even offered unsoliticed career advice, ‘You guys are educated – why are you trying to do this?’9

  These reactions were in keeping with the times. Venture capitalists were considered lords, and their sense of self-importance matched this stature. Entrepreneurs were expected to be in their thrall, grateful that they were given a few minutes to pitch their unconvincing ideas to the masters whose gyan, wisdom and aura were to be absorbed and admired. This equation would change over the next decade; VCs now compete to prove who is the most humble servant to star founders. In 2008, however, it was the venture lords whose egos had to be massaged by startup founders, who had to be courted and coaxed diligently into writing cheques, never mind that these lords were paid crores in management fees to do so. When it came to e-commerce, the verdict of the pantheon was unanimous: it wasn’t going to work in India, and even if it did, two software engineers would be the least likely to make it happen.

  In those days, no e-commerce website worked smoothly. This was primarily because of the founders’ ineptitude in running operations. ‘E-commerce is all about warehouses, factories, moving goods – the website is the easiest part,’ says Abhishek. ‘If you’re doing millions of transactions, how would you maintain quality? ... How would two software engineers succeed in such an operations-heavy business?’

  Books also allowed very low margins, which made profitability in an e-commerce set-up dubious. It didn’t matter that the Bansals eventually wanted to sell all kinds of products. The VCs remained unmoved. To them, the numbers still didn’t add up. Even if a business such as Flipkart were to grow very fast, it would still not amount to much. If somehow the startup defied the odds and achieved significant scale, it would require at least $20 to $25 million in capital. And no one was willing to risk that kind of cash.

  IN 2007, APART from Flipkart, two other e-commerce startups had emerged from the detritus of Amazon India. One was Anand Rao’s Pustak, which focused solely on selling international books unavailable in the country to domestic customers. The other was Infibeam, founded by Vishal Mehta, who came from a wealthy Gujarati business family that owned a large Toyota dealership. After working in Amazon’s acquisitions team in Seattle for five years, Vishal had moved back to India in 2007. He sensed that there was an attractive opportunity to build an e-commerce firm as Amazon had cancelled its plan to launch in the country. He gathered a stellar founding team to start Infibeam, persuading Ajay Chandra and Vijay Subramanian, two among Amazon India’s brightest engineers, to join forces with him. A month before Flipkart started, Vishal launched Infibeam in September 2007, selling cars online with help from his family business. Like Flipkart, Infibeam wanted to become the Amazon of India. Unlike the Bansals, however, Vishal had no shortage of startup capital. After its launch, Infibeam quickly expanded into other categories such as books, mobile phones and laptops.

  Sometime in the middle of 2008, Vishal approached the Bansals. Flipkart was doing well with books, but it was still very small. He had heard of the Bansals from Ajay Chandra and Vijay Subramanian, who had been their colleagues at Amazon. Vishal invited Sachin and Binny to Ahmedabad for a meeting.

  In Ahmedabad, Vishal made his proposal: he wanted the Bansals to sell their website to Infibeam. Flipkart would complement Infibeam’s book selection, and Vishal would, in tur
n, acquire the services of two young, talented engineers who had limited but intimate experience of running an e-commerce business. It would be a great deal for Infibeam. Vishal convinced the Bansals that e-commerce was a complex business that required years of arduous work and massive quantities of capital, that all this was beyond the Bansals – they would surely get crushed. The Bansals could join Infibeam instead and they could all create something big together.

  Vishal’s pedigree and his family’s standing lent him an imposing aura. Before Amazon, Vishal had studied at Cornell University and the Massachusetts Institute of Technology. He was well spoken and the Bansals found him impressive. They had been rejected and ridiculed by the venture lords. They had failed to convince their friends and IIT-mates to join Flipkart. Their former flatmates had advised them against entrepreneurship. On the other hand, here was Infibeam. The Bansals were not just convinced by Vishal’s stature and wealth, they also knew how good Ajay Chandra and Vijay Subramanian were. On their own, the Bansals didn’t stand much chance against such excellent engineers and Vishal’s personal financial strength. Flipkart was yet to be incorporated as a company. Sachin had recently got married – it was perhaps time to cut his losses. Selling out didn’t seem like a bad idea.

  Thinking they were out of options, the Bansals agreed to sell Flipkart. The paperwork for the buyout was prepared. Vishal was offering the Bansals less than 5 per cent of Infibeam in exchange for all of Flipkart. The compensation would be paid entirely in Infibeam shares, and they were to move to Ahmedabad.

  Vishal sent them the paperwork for the sale. When he saw the employment letter, Sachin was shocked: Infibeam was offering him and Binny less than ₹15,000 each as monthly salary. It was a humiliating proposal. Sachin asked Vishal for a higher amount over the phone, only to be told haughtily that it was a fair offer. Now, Sachin was truly offended. He told Vishal that they would get back to him in a few days, and hung up.

  That conversation helped the Bansals recover their senses. Vishal’s spell was broken. They realized that Flipkart’s progress may not seem impressive to an outsider but it was, in fact, substantial. They were growing rapidly, learning new things, improvising and improving every week. And they had done it all by themselves, with help from a human ERP. The VCs hadn’t been kind to them, but they were hardly the only ones to receive such treatment. In those days, not many startup deals materialized. And they were certainly not going to sell out in such a demeaning fashion. All things considered, they would continue to persevere with Flipkart. Though Vishal kept following up for weeks, eager to wrap up the deal, he was carefully fended off every time.

  By now, Flipkart had met most of the VCs in India, including one Shailendra Singh of Sequoia Capital. Shailendra had acquired a reputation among some entrepreneurs as someone ‘who dated but never committed’. During a meeting with him, the Bansals discussed the hypothetical prospect of selling Flipkart, without mentioning that they had a standing offer from Infibeam. Shailendra instantly dismissed the idea, ‘You’ve only been working at it for a few months. Are you mad to be thinking of selling right now? Give it a few months more at least.’

  They had already decided to refuse Infibeam by now; the validation by a venture lord, even one whom they didn’t particularly like or respect, gave them comfort. Once again, the Bansals uncovered reserves of steel and confidence that would have surprised people who knew them. The setbacks they had faced – deserted by a co-founder, rejected and ridiculed by friends and investors – would have drained the confidence and drive of many a strong-willed, experienced entrepreneur. Selling out to a bigger, pedigreed company would have allowed them an honourable exit and mitigated their financial risk. But they dug deep, holding firm, with a venture lord as an unwitting prop.

  A few weeks later, Sachin told a friend over beer, ‘Yaar, bach gaye. Vishal had completely brainwashed us. What a crazy thing we were going to do!’

  6

  THE KART GETS ROLLING

  In the second half of 2008, a few months after the Infibeam episode, Sachin and Binny received an email from a stranger. It was addressed to ‘Bansal and Bansal (not in a particular order).’ The sender, Tapas Rudrapatna, was familiar with Flipkart. He liked to read and had ordered books on the website. His family had recently moved back from Bombay to their home in Mysore. Tapas had come to Bangalore to look for a job and had found temporary accommodation at a friend’s place in the same Wilson Garden neighbourhood where the Bansals worked. He had noticed a Flipkart signboard and, on a whim, written to the Bansals asking if they were hiring. Sachin and Binny responded; a meeting was set up.

  The Bansals were startled by Tapas. He was an unlikely startup employee, and would probably have made an unlikely employee anywhere. He was around the same age as Sachin and Binny, but seemed to have lived many lives. After studying commerce at Sydenham college in Bombay, Tapas had worked in advertising, helped run a shack in Goa, and played a clown – an actual clown – in a circus act. He was a talented musician, having played bass guitar in a metal band in Bombay; he could even handle a rhythm guitar and drums. He had tattoos all over his body, wore his hair long over a thin, bearded face. He loved his chai-and-sutta. The Bansals were fascinated by him, but they weren’t sure what Tapas could do for them. He wasn’t a coder or an operations man, and they couldn’t imagine how couriers and distributors would react to his unusual personality. What sealed the decision was Tapas’ prized possession: a laptop. Tapas also admitted that he needed only enough money to cover his rent and chai–sutta needs. This came to less than what the Bansals were paying Iyyappa. They hired Tapas and asked him to work in customer service and do a variety of odd jobs.

  Unexpectedly, Tapas became an integral part of Flipkart for the next four years. He performed the widest range of duties out of all its employees. He helped set up new offices, wrote Flipkart’s blog, oversaw social media marketing and became the most important member of the customer support team. Most of all, along with Sachin, he was the strongest advocate of the customer at Flipkart, ensuring that the company never veered from its motto of keeping shoppers happy. Whenever there was a prickly user issue or a call from an angry shopper, Tapas would handle it, pacifying them with apologies, jokes, conversation. He spoke to Flipkart users in an informal, friendly, almost-irreverent manner and wrote blogs and Twitter posts that charmed them. He handed out free books and offered additional discounts. While within Flipkart, employees in charge of any mishandled order would be treated with swear words, scorn and contempt. In these moments, the funny, friendly Tapas would transform into a raging bully. Without an official role, Tapas was simply seen as Flipkart’s conscience-keeper in the early years, ready to help wherever there was a crisis.

  Tapas’ presence diminished quickly after 2011 as Flipkart exploded into a mid-sized firm and then into a huge company. During the company’s first three years, however, Tapas played a crucial role in building Flipkart’s cult-like brand. He also became a confidant to the Bansals, who found it easy to trust Tapas as he was singularly uninterested in acquiring power. In Flipkart’s final years of independence, he was perhaps the only employee, out of all former or existing Flipkart employees, who was close to both Sachin and Binny.

  BY THE TIME Tapas joined Flipkart, the company had completed a year. It was handling a few dozen orders every day and word about the website was spreading. Flipkart needed more employees; there was a lot of work to be done. The website itself had to be upgraded. Until then, Flipkart’s use of technology had been rudimentary. Now, it needed engineers who could build sophisticated tech systems. But more importantly, it needed someone to do the dirty work of dealing with suppliers and courier partners whose cooperation was vital for the company’s survival. Binny had a knack for designing supply chain processes, not so much for the daily grind of negotiations with stubborn partners.

  Despite the multiple rejections from his friends, Sachin had kept in touch with some of his former IIT-mates. One of these people was Sujeet Kumar, Sachin’s sen
ior at the Jwala hostel whose ‘interviews’ Sachin had resented when he had first started at IIT. After some initial awkwardness, Sujeet and Sachin had become friends. Like Sachin, Sujeet had also not secured passing grades in the first attempt and had to stay back on campus to obtain his degree. During those six additional months in 2003, the two of them spent a considerable amount of time with each other over teen patti and chai–sutta.

  The youngest of three children, Sujeet was born into a land-owning family in Bhabua, a small city in Bihar. His father and grandfather were lawyers. In college, Sujeet had been a mediocre civil engineering student, but his boisterous personality had made him one of the best-known people on campus. Sujeet was dark, of average height, his hair was always dishevelled, and he wielded an earthy, raucous sense of humour. He immersed himself in college life, participating in cultural events and joining several clubs. At once, he was on the committee to prevent ragging as well as the organizer-in-chief of the ragging at Jwala. Sujeet was the big bully of the hostel but also its most popular resident. He also organized hostel activities and was an energetic participant in hostel politics. He lost an election for the post of the college’s cultural secretary but played a key canvassing role in the victory of a Jwala candidate.