by Mihir Dalal
A MAJORITY OF Flipkart’s sales came from Bangalore and Delhi simply because the company could deliver quickest to these cities. The financial capital Bombay was an obvious gap on both the demand and supply sides. The city had many book buyers as well as a number of book distributors that stocked important works of fiction and non-fiction. With the Delhi office up and running, Sujeet now set his sights on Bombay. In October 2009, he rented a small room in the western suburb of Andheri. It was one of the few places he could afford. There he once again settled into the routine he had devised in Delhi. Every morning, in the rush-hour madness, he would take a local train to Churchgate, the southern tip of the city. He would interview potential employees and have his lunch before paying visits to distributors’ offices.
A few weeks after Sujeet moved to Bombay, a recruiter reached out to Indranil Dutta, a young sales executive at Berger Paints. The recruiter told Indranil that an exciting new e-commerce startup was looking to hire a head for its newly launched Bombay office. When Indranil heard the name of the startup, his immediate reaction was, ‘Flip-what?’ Soon, he interviewed with Sujeet and Binny who promised to give him complete control over the western operations. Indranil was excited – after all, how many twenty-five-year-olds, just eighteen months into the corporate world, would even be considered for such positions? Indranil had wanted to launch a startup of his own, but the Flipkart offer was compelling. And Binny and Sujeet had seemed sincere. They were also offering a sizeable increase in salary. All options weighed, Indranil decided to join Flipkart as the head of its Bombay operations, which included Pune, Ahmedabad and a few other western cities.
After hiring Indranil, Sujeet moved east to set up Flipkart’s operations in Calcutta in early 2010. Yet again he repeated his bait-and-switch trick with book distributors as he launched Flipkart’s office and hired people. The company had now established its presence in all the four major regions of India.
MEANWHILE IN BANGALORE, the Bansals had hired a few coders. In July 2009, they also recruited Flipkart’s first head of product, Shivakumar Ganesan. They were now on the lookout for an engineering chief. Accel’s investment in Flipkart had strengthened the bond between Abhishek Goyal and the Bansals. Abhishek was the lone man in the venture capital world who had believed in them. He had even been willing to put his personal money into Flipkart. Abhishek empathized with the Bansals and saw the world as much as an entrepreneur as he did as a venture capitalist. He had become a valuable advisor to Sachin and Binny. When the Bansals told him they were looking for an engineering head, he introduced them to Mekin Maheshwari. Abhishek and Mekin had worked at Yahoo and had considered starting a company together. When that didn’t pan out, Mekin joined Ugenie, the startup that had been launched by former Amazon India employee Krishna Motukuri. After a two-year stint, Mekin quit Ugenie. Now in his late twenties, he wanted to be an entrepreneur. Neverthless, Abhishek urged him to meet Sachin and Binny.
Their meeting lasted more than three hours, after which Sachin offered Mekin a job as Flipkart’s chief of engineers. But Mekin wasn’t sure and asked for a week to consider his options. In that week, he placed an order from Flipkart – he had never used the website before. He sought advice from his friends and conducted a quick investigation of Flipkart online. Of the dozen or so people he asked for advice, most warned him against joining an unknown startup. They were also convinced that e-commerce wouldn’t work in India. Still, Mekin felt drawn to Flipkart – customers were raving about it on social media:
‘Finally found the book on Flipkart!’
‘Got the book in two days flat!’
Mekin could tell that customers loved Flipkart’s service.
A week later, he had another long conversation with the Bansals. He also visited Flipkart’s small headquarters to observe how the company handled its operations and figure out if Sachin and Binny’s spiel about customer obsession had been genuine. It didn’t take him long to notice that the entire company was designed to deliver books fast. A packaging worker coming back after picking up books from suppliers would first put aside current orders even though the more efficient move would have been to record all the books in the system together. He was also taken by the manner of the Bansals; they weren’t very talkative, neither did they try to hardsell Flipkart to him. Instead, they came across as two serious engineers who were absorbed by the challenge they had taken up. Mekin decided his startup could wait.
Along with Sujeet, Mekin became one of the two seniormost executives at Flipkart for the next three years.
By September 2009, when the Bansals hired Mekin, Flipkart was in pursuit of serious expansion. It adopted the famous Amazon motto: Get Big Fast. Before the Accel round was finalized in the summer, Flipkart had been marked by a series of setbacks and near-blunders, the Infibeam episode being just one of them. It got off to a painfully slow start due to shortages of capital and employees. The travails had strengthened the Bansals, turned them into shrewd business-boys. Now with dedicated, energetic employees on their side, their ambition was soaring. Even the venture lords had started to relent. The astonishing jump in Flipkart’s revenue had turned the heads of a few in the pantheon, who were finally ready to move past their scepticism about Flipkart and e-commerce in general. Around this time, firms such as Nexus Venture Partners entered into investment discussions with the Bansals.
Sachin, in particular, was charged up. From this period until the start of 2012, he would take centre stage at Flipkart. The dynamic between the Bansals that had developed in the early years would consolidate. It was already becoming apparent that Sachin defined Flipkart’s vision and ambition while Binny designed the blueprint to realize it all. To their colleagues Sujeet, Mekin and several others, the partnership seemed ideal. ‘Taking courageous calls and thinking bigger – that was always Sachin. Binny wouldn’t take the lead, but he used to go along with Sachin’s calls one hundred per cent. Sachin was super aggressive, and Binny would say, “Haan, dekh lenge kaise karna hai – we’ll figure it out.” It worked wonderfully,’ recalls Sujeet.
SINCE FLIPKART’S LAUNCH in October 2007, Sachin had become an expert at manipulating Google. The thousands of hours Sachin had spent on Quake and Age of Empires were finally coming in handy. Fixing a search engine, of course, wasn’t strictly like gaming. But their mechanisms weren’t entirely dissimilar. Deploying dozens of tricks, such as displaying the Indian flag on the website, Sachin made Flipkart into a prominent shopping destination without spending on marketing. In fact, Sachin’s excellence in coming up with these fixes in Flipkart’s early years not only made the website popular, it even ensured the company’s survival. By attracting large numbers of users to the site, Sachin helped bring in significant advertising revenues which provided the cash Flipkart needed to spend freely on pleasing customers.
From the second half of 2008, Flipkart was pulling in lakhs of rupees every month as the website appeared prominently on Google searches. If someone searched for a mobile phone they were likely to see Flipkart at the top of their search results, even though the company didn’t sell phones. As people converged on the website, it became an attractive advertisement platform. The Bansals even made money from their old employer. At the time, a small number of wealthy Indians were ordering products from Amazon.com. Amazon had a scheme which rewarded other internet firms that directed users to its site, and one of the participants in this scheme was Flipkart.
The Bansals had started out in October 2007 with a capital investment of four lakh rupees. That meagre sum couldn’t have sustained the company for the twenty months that it survived before its first successful financing round. The money from the sales of books wasn’t sufficient either. It was the advertising revenue that turned out to be crucial for the company’s sustenance. In essence, Google and Amazon bankrolled Flipkart’s early years. These three ingredients – Sachin’s search engine mastery, and internet giants Amazon and Google – would soon come together to serve up many other benefits to Flipkart.
I
N NEW YORK, Lee Fixel, a Jewish-American fund manager, was looking to make investments in emerging international markets. Born in 1980, Lee was the eldest of three children. His father was a lawyer and his mother a fashion designer. After becoming a chartered financial analyst (CFA) and obtaining a management degree, Lee had joined an investment firm, Alkeon Capital, where he examined internet companies as an analyst. In 2006, he was lured to Tiger Global, which wanted to increase its investments in internet firms, especially in emerging markets such as India, China and Eastern Europe. Lee was peripatetic. He had investments in many countries, and he spent much of his time in aeroplanes.
Lee had travelled to India a few times and, in 2007, had invested in the online travel company MakeMyTrip. He was eager to add to his portfolio. India’s economy was booming, lifting middle-class incomes. Its retail sector was one of the largest in the world, and one of the least modern. This created a lot of room for new retail companies. The poor infrastructure, India’s infamous traffic in urban areas, especially in Bangalore, along with the fact that real-estate costs there were unusually high, had convinced Lee that offline retail would have limited reach in the country. The corollary was that the same forces would make for a hospitable environment for e-commerce. In 2009, Lee hired the consultancy firm McKinsey to conduct market research on the internet space in India.
The firms mentioned in McKinsey’s report did not impress Lee. He considered online retailers such as Infibeam and Indiaplaza but passed up on them. One day, restless in his New York office, he ventured online to conduct some armchair research of his own. On Amazon.com, he started looking up popular books that he thought an Indian might want to read. From there he transposed the book titles onto Google to see which Indian websites were selling them. Every search threw up Flipkart in the top results. Lee was surprised; the McKinsey report hadn’t mentioned Flipkart. Yet it seemed to be a popular search destination with a large assortment of books. On an impulse, Lee emailed Flipkart’s customer service team asking to speak with the company’s founders. But no one responded. He then called the customer service number mentioned on the Flipkart website. He introduced himself and asked to be put through to the Bansals. An employee told him that they weren’t available and hung up after assuring Lee that they would call back.
When Sachin and Binny were informed about Lee’s call, they were incredulous. In those days, venture lords didn’t call on fledgling entrepreneurs; entrepreneurs went to them. And even if they wanted to speak with a promising startup founder, no venture lord would demean himself by calling up customer care. And why would someone call Flipkart from New York anyway? All the US venture firms had Indian arms. The Bansals’ suspicions deepened after they looked up Lee and Tiger Global online and found little. In the US, Tiger Global was a famous name in the investment world. It traced its origins to Julian Robertson, one of the most successful investors on Wall Street in the eighties and nineties. The outstanding performance of Robertson’s firm, Tiger Management, had once earned him the nickname ‘The Wizard of Wall Street’.3 Even though Tiger Management shut shop in 2000, many of Robertson’s acolytes started investment firms of their own. One of these was Tiger Global. It was such a secretive and elite firm that it didn’t need a website. Of course the Bansals weren’t aware of this. To them, the name Lee Fixel didn’t even sound very American. Amused, they concluded it was a prank call and moved on.
A few days later, Lee emailed Flipkart’s customer service team again. Feeling intrigued, the Bansals decided to call this persistent man to ascertain once and for all if he was indeed a prankster. But they couldn’t even make the call because their phone connection lacked an international calling feature. His pursuit still fruitless, Lee now asked Deep Kalra, founder and CEO of MakeMyTrip, to speak with the Bansals on his behalf. Deep was a well-known and respected entrepreneur and the Bansals saw him as a mentor of sorts. Only after Deep spoke to them did they start taking Lee seriously. In early September, they spoke to Lee for the first time. After a few more phone conversations, Lee flew to Bangalore to meet the Bansals. Immediately he was impressed. Sachin and Binny were young but Lee could see that they were very sharp and thoughtful about payments, logistics, and various other matters that needed to be sorted out in order for e-commerce to expand in India. The Bansals’ obsession with pleasing customers pleased Lee, too; he had seen Amazon apply that principle to great effect in the US. His conversation with the Bansals turned out to be very different from the ones he had had with other Indian e-commerce startups. Not only were the Bansals far more ambitious, they also seemed to know how their vision could be accomplished.
In later years, the speed at which Lee made investment decisions would become legendary. He displayed the first instance of this speed when he decided to invest in Flipkart. Less than six weeks after his first call with the Bansals, Lee made his offer. The amount was astronomical: $9 million. Flipkart’s first round of funding from Accel had come after more than a year of talks, and after the company had been passed up by every other venture capitalist. Now, just a few months after Accel finally agreed to put up a grand sum of $1 million, and that too in tranches, Flipkart was on the cusp of securing a funding that was ten times as large and negotiated in less than forty days.
The talks with Tiger Global moved so fast that Flipkart had by then not even received all the Accel tranches. Accel would now have to renegotiate its investment terms. In October 2009, Flipkart signed a term sheet, also known as a preliminary investment agreement, with Tiger Global. In early 2010, after completing all financial diligence, the deal was signed. The total investment came up to $10 million, of which $9 million was contributed by Tiger Global and $1 million by Accel. Flipkart’s valuation soared to nearly $40 million.4
Tiger Global’s investment was just the vindication for which Sachin and Binny had been so desperate. Finally they had found an investor who understood their vision and was willing to fund it. While they were relieved when Accel had invested in Flipkart, the Bansals had been unhappy with the terms. Flipkart had been valued at less than $5 million and the Bansals had felt shortchanged. But in this new round of investments, they would call the shots and Accel would have to acquiesce to their terms. Sachin pushed especially hard, seeking a valuation of $50 million. He seemed to be a man transformed. The previous year, he had felt overawed by Infibeam’s Vishal Mehta, grateful that someone was offering to put him and Binny out of their misery. Now he had the brazenness to ask for a valuation of $50 million, and the skill it took to be granted as much as $40 million. There was no science behind this – it was a matter of demand and supply, a confluence of similar sensibilities.
When Lee had made the decision to invest in Flipkart, he hadn’t spoken to the other venture lords in India, most of whom were sceptical about the company’s prospects. His decision had been simple. It wasn’t as if he could foresee the Bansals’ success in running a large e-commerce operation. It was futile to make that kind of judgment at this early stage. Instead, what he could see were two serious entrepreneurs who had studied the retail market deeply and had bright ideas about unlocking it using technology. And he was getting a chance to pick up a large stake in a promising venture for a relatively small sum. This was all the evidence he needed.
It was one of the biggest startup deals of the time, but for Flipkart employees such as Mekin and Sujeet, the only surprise was the speed at which it happened. Even before Lee’s endorsement, they had little doubt that Flipkart was going to become something special. Business was doubling and tripling in size every quarter. They were assembling a stellar team. For anyone who had seen Flipkart from the inside, one thing was clear: you did not want to miss this journey.
Those were happy days for the Bansals. In November 2009, as the deal with Tiger Global was being finalized, Sachin became a father. His wife, Priya, had given birth to a boy. A few months later, in February 2010, Binny married his girlfriend Trisha, a young fashion designer. The two had serendipitously met nearly five years ago just before Binny
graduated from IIT Delhi. While Sachin’s decision to become a businessman had enhanced his marriageability, Binny had to work hard to bring around Trisha’s family who were initially unsure about the groom’s choice of career. But they had eventually relented. Binny’s wedding only added to the general feeling of positivity that had been permeating through Flipkart’s halls.
8
‘BINNY KE BATCH SE HO?’
Lee Fixel stressed the ‘Fast’ in Get Big Fast. By the time he had invested in Flipkart in early 2010, the company was already expanding at a frenetic pace. It generated revenues of ₹11.6 crore in the financial year 2009–2010.1 Lee’s entry redoubled Flipkart’s ambition and confidence and turbocharged its expansion efforts. The fresh capital allowed the company to spend more freely on launching new product categories, hiring employees and pursuing audacious experiments.
Sachin and Binny began to make preparations for a Flipkart that would be many, many times its current size. They had already established a foothold in books. Now the company hungrily entered new categories. In the second half of 2010, Flipkart started selling mobile phones, music and film CDs, DVDs, and cameras. To launch these categories and to move to the next stage in its evolution, the company needed a capable management team. When a startup receives venture capital, investors insist that the company hire experienced leaders. Its new executives are expected to have previously worked at larger companies so they are able to bring to the startup their subject matter expertise or general management abilities. They are seen as necessary for propelling the startup to the next level or two. The startup is thereby able to attract larger amounts of capital which is supposed to help it grow even bigger, which then necessitates the management to be replaced by a newer set of leaders. At Flipkart, this cycle began in 2010 and would continue for the next eight years, as the company would see ceaseless growth, churn, volatility and drama.