by Mihir Dalal
Ankit Agarwal, Sujeet’s junior and a resident of Jwala, confirms that Sujeet was ‘really good at managing people’, but both he and his hostel were notorious as every year Jwala would ‘ditch other hostels and try and win all the elections for itself’.
After graduating from IIT, Sujeet wanted to join the Indian Administrative Service. But two failed attempts later, he gave up and started working for an offshoring firm in Delhi in 2006. In 2008, the company went out of business owing to the global financial crisis following the bankruptcy of Lehman Brothers in the US.
Sujeet had kept in touch with Sachin after college. In the period when the offshoring business was unravelling, Sujeet noticed that Sachin’s status message on an internet messaging service indicated that he was hiring engineers at Flipkart. Sujeet wasn’t interested in a tech job, nor was he equipped for it, but he offered to help Sachin find coders. A few weeks later, Sachin told Sujeet that Flipkart wanted someone to run operations, inviting him to join them. This piqued Sujeet, as in this role he could put to use his hyper-energetic personality and intuitive ability to read people and get work done. ‘I’ll come to Bangalore and talk to you,’ he said to Sachin.
In November 2008, Sujeet visited the Bansals in Bangalore. He wanted to see for himself how Flipkart worked and size up the co-founders. He didn’t know Binny, and it was important to get a sense of the COO’s personality if they were to work together. They went out for drinks, reminisced about their IIT years, discussed their common friends. He found Binny to be a pleasant fellow, with whom it would be easy to get along.
Sachin, on the other hand, had changed a little from the guy Sujeet had known in college. He didn’t even seem to exactly be the man he had spoken to at the beginning of the year. The new Sachin sounded very enthusiastic about Flipkart. It was clear that he thought Flipkart could become big. His confidence was striking, a significant transformation from Sachin the IIT student. He also seemed careful about what and how much information was to be shared with someone else.
Encouraged by his observations, Sujeet decided to give the job a try. He decided to spend the next few months working with the Bansals. If it worked out, he would stay on at Flipkart.
When he agreed to join them, Sachin and Binny brought up the matter of compensation. Sujeet told them, ‘Comp-womp chhod yaar. Let’s see if I’m comfortable working with you and if you are comfortable working with me. We’ll talk after six months.’ Sujeet had enough money. What he wanted was to ‘build something’, to prove himself. His salary was finalized only in June 2009. After that, they never again spoke about it.
As soon as he started at Flipkart, Sujeet began focusing on establishing relationships with book suppliers. Until then, Flipkart had built partnerships with a few book distributors but had no relationships with publishers. It still sourced at least some of its orders from bookstores. This mode of operations had been necessary in the beginning, but it wasn’t sustainable. Flipkart’s raison d’être, as is that of most internet businesses, was to replace the offline stores rather than depend on them. Even though the Bansals worked with a few middlemen, Flipkart now needed to move up the chain and establish direct connections with the businesses that controlled the supply of books.
SUJEET WAS A mirror image of Sachin and Binny. Sujeet’s inability to write code was complemented by the Bansals’ lack of interpersonal skills which had made it difficult for them to break into the closed world of publishing. Sachin and Binny were introverted coders; Sujeet was an extroverted, all-action hustler. It was an ideal combination, one that worked in a symbiotic manner to catapult Flipkart into an explosive startup. From the day he went to work there, Sujeet was given complete independence to run his function. His role at Flipkart grew as fast as the company’s business. Sujeet became the engine of the company. Outside the technology and marketing functions, it was his word that became the writ in the key functions of sales and supply chain. Sujeet would quickly become the most powerful man at the company, after the Bansals. During his first four years, the Bansals rarely questioned any of his decisions, even though they didn’t always approve of his unconventional methods and aggressive tactics.
This became Flipkart’s guiding philosophy with respect to its employees: hire smart people and don’t tell them what to do. It was applied to Sujeet, and to most of the senior employees the Bansals brought into Flipkart.
In the early years, the Bansals also openly admitted to their weaknesses. After Sujeet joined them, he asked the Bansals for the contact details of Indian publishers. But they didn’t know any. They had struggled to establish contact with publishers, who showed little interest in engaging with two anonymous software engineers. The Bansals were happy to leave it to Sujeet to build relationships with publishing firms. ‘It [was] a great thing. Many others would have wasted time lying,’ says Sujeet.
Meanwhile, at Infibeam, Vishal Mehta still hadn’t given up hope of convincing the Bansals to sell Flipkart. In early 2009, Vishal flew to Bangalore. At a Café Coffee Day outlet in the eastern part of the city, he met Sachin, who had brought Sujeet along for the meeting. It was here that they politely but firmly told Vishal that Flipkart, with its five employees and a-few-dozen-orders-a-day business, wasn’t up for sale.
By April 2009, the few dozen orders shot up to more than 200 as the company began working directly with more book distributors in Bangalore. But Bangalore represented a minuscule part of the publishing world, the centre of which was Delhi. To become a force in the books business, Flipkart would have to cultivate relationships with the publishing houses and distributors in the capital. In the summer of 2009, Sujeet and Tapas travelled north to set up Flipkart’s first office outside Bangalore. This office properly complemented the company’s headquarters located inside a two-bedroom apartment. Situated in Daryaganj, the Delhi office was a single room of twenty square footage on the first floor of a dingy building. A few minutes’ walk from Jama Masjid in Old Delhi, Daryaganj is home to many large and small book distributors and hosts regular kitab bazaars that attract thousands of thrifty book buyers.
In the summer heat, the poorly ventilated room which lacked air-conditioning and had just one small window, felt suffocating. But it was here, amidst the blaze of the madly cramped lane, that Flipkart established itself as a major force in the books world. Sujeet used all his sociability and cunning to jostle, charm and manipulate distributors, who agreed, one after another, like fish taking bait. He immersed himself in every aspect of the books business. After it became evident to Sujeet that he would have to be stationed in Delhi for a while, he installed an old used air-conditioner in his tiny office.
Within three months, Flipkart’s assortment of books widened considerably as it signed up dozens of small distributors in Delhi. ‘You had to figure out how the local networks worked. Distributors needed permission from publishing houses, which controlled the pricing of books,’ Sujeet says. He built relationships with the decision-makers at the distribution firms, activated their fear of missing out on an unknown yet promising new source of business and played one against another.
AS 2009 DAWNED, the world found itself drowning in a post-Lehman Brothers era. The financial markets had collapsed, banks had stopped lending and businesses of all kinds were cutting jobs and curtailing investments. India would recover quickly from the recession, but at that time the economic environment looked dire.
Inside Flipkart, however, things were better than ever. Yet, funding remained elusive. The financial crisis rendered e-commerce ventures even less appealing to the venture capitalists. In that bleak climate, only the safest of investments were entertained.
Previously a proprietorship, Flipkart incorporated itself as a limited liability company in October 2008. This newly registered entity was called Flipkart Online Services Private Limited.1 By the end of 2008, Erasmic Venture, the funding company Abhishek Goyal worked for, was showing serious interest in Flipkart. Erasmic had recently been bought by Accel Partners, an elite venture capital firm headq
uartered in the Silicon Valley. Erasmic would be renamed Accel Partners India but allowed to retain its team.
Accel was unlike most other venture capital firms in India. To begin with, the fund invested in very young startups. Other funds at that time had adopted the models of their prototypes in the US. The ones in India had raised large amounts of capital, anywhere between $150 million to $200 million, and they looked for relatively mature startups that could absorb a cheque of $5 million to $10 million. But the paradox was that such companies were extremely rare. Most startups were young and needed capital to take off, but most funds were unwilling to invest in these ventures. The venture lords would take several years to realize that the US model wouldn’t work in India, ironic for a community that criticized many local startups for being copycats of American companies. Accel was one of the few funds that backed very young companies. The partners at Accel were also generally more friendly and considerate towards entrepreneurs. What also set Accel apart was the kind of startups it invested in; its portfolio largely comprised internet and software companies, whereas most other funds preferred traditional businesses, making room for only a handful of internet firms. One well-known VC even declared that the ‘internet is dead in India’. Accel, whose partners had previously worked at software firms, had funded companies like Chakpak, the software firm Mu Sigma, the travel portal HolidayIQ, and Myntra, a gift-selling website.
But when it came to e-commerce, even the partners at Accel had serious doubts. For nearly a year, Abhishek had tried to persuade his colleagues Subrata Mitra and Prashanth Prakash to invest in Flipkart. They had felt impressed by the Bansals, but their conviction about the futility of e-commerce could not be shaken. It was, in turn, strengthened as they considered the example of eBay. The American online marketplace, which was regarded as one of the more wisely run internet companies, had bought the Indian e-commerce startup Bazee in 2004. Five years since, eBay had failed to make its mark in India.
The partners at Accel had long debates regarding India’s ability to sustain large internet businesses. Many firms were trying but not one offered hope. Of all niches, e-commerce seemed to have the bleakest prospects. It required huge quantities of cash, but who would supply so much capital in India? Then there was the immense problem of operations. Even eBay was struggling in that respect. These were all sensible arguments against investing in an e-commerce startup. But there were still many more. Accel had even begun to have doubts about its own strategy of betting on internet startups. Many of the internet companies in Accel’s portfolio, including HolidayIQ and Myntra, were growing slowly. Chakpak was popular with users but its revenues were meagre. Most funds were investing sparingly in internet startups. Only a few search engines, travel sites and social networks received funding. Accel already had significant internet holdings; it seemed too risky to add an e-commerce venture.
But Abhishek kept prodding his superiors. His thesis was simple: if people are funding the Googles and Facebooks of India, why not fund the Amazon of India? Obviously, that didn’t convince his bosses at Accel.
Yet again, the Bansals’ resilience in the face of such resistance was remarkable. Despite being turned down by every fund they had approached, the Bansals took the rejections in their stride. After so many months of discussions, they were understandably desperate, but they did not let it derail their objective of building a high-quality e-commerce site.
It wasn’t just Abhishek who wanted Accel to invest in Flipkart. Gaurav Kushwaha of Chakpak had also pushed Flipkart’s case with Subrata and Prashanth, the two leading partners at Accel. Even Mukesh Bansal, co-founder of Myntra, had spoken highly of Flipkart. At one point, Abhishek and Gaurav separately considered financing Flipkart with their personal cash. In spring 2009, Abhishek told his superiors that he wished to invest in Flipkart out of pocket. At this, Subrata and Prashanth finally gave in. ‘We’d rather put [in] a bit more and do it from the fund.’
Thus, in the end, all logic was defeated. This is how many deals are struck, as feelings, intuition, persistence and luck come together to influence a decision. ‘Exact math doesn’t work. If you did a lot of math you wouldn’t end up doing any investment because almost always there’s nothing at the start,’ reasons Abhishek.
In the summer of 2009, Accel agreed to invest $1 million in tranches into Flipkart. Accel was to have a twenty-five per cent stake in the company. It was a raw deal for the Bansals. But in that moment, after being rejected for more than a year, all they felt was relief.
7
THE EYE OF THE TIGER
Flipkart received the first instalment of about $250,000 from Accel Partners in the first half of 2009. By now, the company had moved into a new office in a charming part of Koramangala. The new premises, on the first floor of a large, sunlit bungalow surrounded by trees, was an upgrade from the drab space that had so far housed the Bansals and their first few employees. Subrata Mitra from Accel joined Flipkart’s board as part of the funding round. But there had been a problem with wiring the money. For some reason, Accel was unable to send the entire amount to Flipkart. So, Subrata reached out to his friend Ashish Gupta, head of the venture capital firm Helion Venture Partners. This was the same Ashish who, along with his friends, had sold his price comparison site Junglee to Amazon in the late nineties. He later founded the IT services firm Tavant Technologies. In 2006, Ashish set up Helion to invest in Indian startups. Helion had looked into Flipkart but concluded an investment in the company was too risky. But Ashish didn’t mind investing in his personal capacity. In 2009, he wrote a cheque of about ten lakh rupees to Flipkart which was sent along with one of the Accel tranches. Less than nine years later, that bet would turn into one of the most lucrative startup investments in India, yielding Ashish more than a hundred crore rupees.1
With Accel’s funding, Flipkart finally had the cash to hire engineers and supply chain staff. By now, they desperately needed more support. Sales were beginning to soar as Sujeet signed up distributors in Delhi, expanding Flipkart’s assortment by thousands of books every month. In the mornings and afternoons, Sujeet would pitch Flipkart to both small and large distributors. In the evenings, he would meet with courier services and oversee the packaging and shipping of books. In all of this, Tapas played a key supporting role. Apart from accompanying Sujeet on some of the visits to distributors’ offices, he trained the packaging workers and courier personnel. Binny, too, spent a few months at the Delhi office, working closely with Sujeet as he designed Flipkart’s supply processes. It was areas such as this where Binny was gifted – he enjoyed setting up structures and systems. How does one upload the pricing and volume data of books onto the Flipkart system? How would the Bangalore and Delhi offices sync up? How could packaging workers make use of the systems? Binny had all the answers.
As business grew, Flipkart rushed to hire more people in Delhi. Sujeet got in touch with a few people from his IIT gang. He usually moved around with his troops. He had brought along some of his IIT friends even to his previous outsourcing startup. At Flipkart, Sujeet persuaded Maneesh Mittal and Anuj Chowdhary, his mates from IIT Delhi, to join him. It was a measure of Sujeet’s interpersonal abilities: Anuj had declined to join Flipkart in 2008 when he was approached by Sachin. Of course, the funding from Accel helped this time around. But it was Sujeet’s association with the company that had ultimately been reassuring. Maneesh joined in early September 2009, Anuj a few days later. They quickly settled into their new roles.
Maneesh and Sujeet had been batchmates at Delhi while Anuj had been in Sachin’s class. All four of them had stayed at the Jwala hostel, a detail that was presented as a toxic nexus in a controversial magazine story some years later.2 That story scarred Flipkart for years, but in the beginning, Maneesh and Anuj did turn out to be productive recruits in the operations function. Sujeet had the force of personality to bring together a driven, talented team and cultivate a spirit of kinship. But it was Maneesh and Anuj who had a head for details, for thinking up and implementing th
e day-to-day processes that allowed Flipkart to thrive. Maneesh oversaw warehousing activities while Anuj took up the responsibility for signing up publishers and distributors. Both men reported to Sujeet. Just as the Bansals had given Sujeet free rein, Sujeet, in turn, chose not to interfere in Maneesh and Anuj’s work.
Even though the orders for books were increasing by multitudes, Flipkart maintained its diligence in pleasing customers. Each order would be handled with the same rigour – every customer’s tweet would be taken seriously, customer complaints would be investigated with the seriousness of a murder inquiry, lessons learnt would be applied and processes improved. The company instilled this ‘customer obsession’ in all employees. Maneesh, who loved reading, would urge employees to treat books like heeras. It was even common for many of the company’s senior members to deliver books personally if orders piled up.
Sachin and Binny were also continuously refining the packaging and delivery processes. When they had started out, the two of them would gather books on the office floor, then organize them as per customer orders. As the orders increased, this process became untenable, so they moved to a shelf-based system. Books would be loaded onto shelves rather than stacked on the floor. Both these systems were designed for speed and efficiency; books had to be packed and shipped almost as soon as they would come in. But by October 2009, Flipkart was fulfilling a few hundred orders every day, up from just a few dozen a year ago. The shelf-based process had to be shelved. Sachin and Binny designed a new system which they called the ‘pigeonhole’. This system was based on orders rather than individual books. If a customer ordered three books and Flipkart had at least two or all of them in stock, it made little financial sense to ship them separately as orders increased manifold. The pigeonhole method thus allowed Flipkart to upgrade from a book-by-book delivery system to an order-based system.