Big Billion Startup: The Untold Flipkart Story

by Mihir Dalal

  In the second half of 2014, Sachin offered Punit the role of Flipkart’s product chief. He wanted a technologist to carry out his vision of turning Flipkart into a cutting-edge internet company. He thought he had found this pioneer in Punit. Not only was Punit looking to change jobs, like Sachin, he also intensely wanted to make history. Like Sachin, he was a believer in the supremacy of technology and possessed by the dream of creating The Great Indian Internet Company. Punit’s academic background and extensive career in Silicon Valley had greatly impressed Sachin. As a bonus, Punit, a bespectacled, observing sardar, was of Indian origin, which meant the cultural adaptation wouldn’t be as hard as it might have been for a foreigner. Sachin believed that Punit, with his bright turbans and energetic personality, would be a good fit at Flipkart.

  Along with Punit, Flipkart hired another senior engineer from Google. Peeyush Ranjan came in as Chief Technology Officer. Saikiran Krishnamurthy, a senior partner at McKinsey, was hired as Chief Operating Officer of Flipkart’s core e-commerce business. To lure these and other coveted executives away from their highly lucrative jobs at companies far bigger than Flipkart, the Bansals offered astonishing compensation packages worth millions of dollars (most of it in stock options). These hires were symbolic of the momentous cultural change that Flipkart had ushered into India’s corporate world. A few months ago, it would have been inconceivable for a partner at the world’s premier consultancy or senior engineers thriving at the world’s leading technology firm, to join an Indian company, much less Flipkart, a little-known startup. Now, it was a compelling proposition. Flipkart and a small number of other Indian internet startups had become exciting places to work, companies at the frontiers of the corporate world, led by technological geniuses reshaping the economy of the new India, set to create spectacular wealth for their investors, founders, employees.

  Concurrent to the entry of the new leaders at Flipkart was the departure of the old team. By the middle of 2015, within the space of three months, they exited, one after another. Sujeet Kumar, who had built the company’s sales and logistics functions; Amod Malviya, the chief technology officer; Sameer Nigam, the engineering head; Saran Chatterjee, the product chief; Vaibhav Gupta, the business finance leader – all of them left, bitter, angry, unwanted. The significant wealth they had earned notwithstanding, what rankled was that their association with the company had been cut short against their wishes. They may not have been fired, but it was made clear to them that they weren’t especially welcome – Vaibhav Gupta went on sabbatical, but on his return, he struggled to find a place for himself at Flipkart. There were only two survivors: Ankit Nagori, who had been promoted to Chief Business Officer, and Mekin Maheshwari, the HR head. Despite seeing many of his old teammates and mentors fall out with the Bansals, Ankit was keen to continue. Flipkart was thriving; its future had never seemed brighter. He had recently been rewarded with a lucrative pay hike, attractive stock options and a promotion. And he had formed a friendly working relationship with Mukesh Bansal. For his part, Mekin had always been close to Sachin. He saw no reason to leave at this opportune time. As HR chief, Mekin had even helped the Bansals find replacements for their old colleagues.

  Such an exodus of long-time senior leaders would have been alarming for any company. Jettisoning an entire leadership team that had delivered excellent performance for years in favour of a new group of untested leaders who had little knowledge of e-commerce would have drawn scrutiny, prompted anxious questions from board members and investors, and received criticism from the press. It wasn’t that all of them were leaving, it was that they were leaving all at once. But such was the aura around Flipkart and the Bansals that they encountered minimal resistance.

  In this regard, as with all the other changes at Flipkart, the decisive factor was the close relationship between Lee Fixel, the company’s all-powerful investor, and the Flipkart co-founders, Sachin, in particular. Lee was a hyper-rationalist investor who judged a business or an entrepreneur in a cold, dispassionate manner. Considered ruthless by those who fell out of favour with Lee, he had little personal affinity for entrepreneurs. Those who delivered were rewarded with more capital and higher valuations, while those who failed to meet targets were cut out. There was no place for emotion in his decisions. But with Sachin, it had always been a bit different. Before every board meeting in Singapore or Dubai, which took place once every four months, Sachin would meet Lee over dinner or breakfast. They spoke regularly over the phone. Dinner with the Bansals was a fixture of his India trips. Lee, who called him ‘Saa-chin’,8 had known the Flipkart CEO for nearly six years by now. When Lee had first decided to invest in Flipkart in late 2009, he was an unknown figure in the startup world. Since then, from being an anonymous fund manager, he had risen to become one of the smartest young startup investors anywhere in the world. By the end of 2014, the not-yet-thirty-five reclusive fund manager, who had not granted the media a single interview, had devised a unique investment strategy that spanned continents. Few in the business could match his global network of investor connections, his deep knowledge of the internet market ranging from eastern Europe to the subcontinent, his ability to spot the brightest entrepreneurs across these very diverse markets.

  But Lee’s crown jewel was Flipkart. They had risen together, Lee as an investor, Sachin and Binny as entrepreneurs. Their relationship was symbiotic, they fed off each other’s successes. Lee’s soaring reputation as an investor had much to do with his bet on Flipkart, on the entrepreneurial abilities of Sachin and Binny. However, Lee had harboured doubts about Sachin’s radical plan to remake Flipkart. He had challenged Sachin, and the two had fought each other in vigorous debates. Still, Lee’s belief in Sachin’s entrepreneurial genius did not waver.

  Just how strong Lee’s faith was in Sachin would become evident soon. In the summer of 2015, Sachin approached Lee with a startling request: remove Kalyan Krishnamurthy from Flipkart’s board of directors. Sachin cited a technicality to seek the replacement of Kalyan – who had become a Singaporean citizen – with an Indian national. It was apparent to all that this was just a ruse. Everyone knew there was bad blood between Sachin and Kalyan. The Flipkart CEO had criticized Kalyan for ‘damaging’ Flipkart’s brand with his mishandling of the Big Billion Day sale. In turn, Kalyan had denounced Sachin’s makeover of Flipkart and his recruitment of a new management team. A few weeks after Kalyan leftthe Flipkart board, Sachin accused him of hiring Flipkart employees at other companies in Tiger Global’s portfolio. A Flipkart sales executive had agreed to join a smaller rival, another Tiger-funded company on whose board Kalyan served as a director. Kalyan had facilitated his exit by vouching for him to the new company. Sachin believed that Kalyan had, in fact, persuaded this employee to leave Flipkart. A furious Sachin complained to Lee that Kalyan held a grudge against him. Kalyan denied this categorically.

  This episode was a blip in an otherwise heady season for the Bansals, for Lee, and for Flipkart. In April 2015, Flipkart had finalized another funding round of more than $500 million. The company’s valuation now soared to $15 billion. Its business was surging forward. Over the past eighteen months, monthly sales had quadrupled. With the grand new valuation, Sachin and Binny, not yet thirty-five, crossed a new threshold: they, too, had become billionaires. Each held about eight per cent in Flipkart, their ownership having reduced through the successive funding rounds. The $15 billion valuation meant that they were now worth more than $1 billion each.9 Lee was riding high, too. The following month, he would be promoted by Tiger Global to head all of its private investments.10

  19

  CHAOS AND CONFUSION

  On 14 May 2015, Myntra held a press conference. Sachin and Mukesh announced that Myntra would shut its website and become an app-only platform. It was no surprise; newspapers had been revealing this over the last several months. A few days ago, Myntra itself had emailed its customers about the shutdown. At the event, Sachin and Mukesh talked about revolutionizing the app by creating an interface like n
o other.

  Myntra had actually been serving as a lab rat for Flipkart. Sachin declared that Flipkart, too, would shut its website over time. It hadn’t done so already only because of a lack of ‘internal readiness’.1 Within Flipkart, Sachin’s statements caused much consternation. While he had been talking of shutting down the website, a timeline hadn’t been agreed upon yet. But Sachin didn’t care. He was going to get it done.

  Still, Sachin and Mukesh both failed to explain why Myntra and Flipkart couldn’t make their mobile apps revolutionary without having to shut down the desktop site. By the company’s own admission, Myntra would be forgoing more than thirty per cent of its orders by closing the website. So, why not keep the website and make the app attractive at the same time? the media wanted to know. In Mukesh’s view, the shopping experience on the app would be so enthralling that people would be compelled to use it over the desktop site in any case. The reporters present were incredulous. Mukesh hadn’t specified the changes that would transform the app. Indeed, the app’s interface had nearly been the same for months; it wasn’t even all that different from the Amazon or Snapdeal apps – or Flipkart’s own. But the changes were coming soon, Mukesh promised. ‘Every single desktop user will have a smartphone. It may take a few months, but every single person will end up using and liking the mobile shopping experience than what they are used to [on] the desktop.’ 2

  The Flipkart engineers had been under pressure for months to deliver this magical interface. They were told that the Flipkart app would have to be so good that ‘customers should have an orgasm’ from using it. It was certainly an unbeatable way to take commerce to the masses.

  Few people, either within or outside the company, were convinced that the app-only move was a smart one. Still, it had become the talk of the startup world. Investors, analysts, entrepreneurs, journalists – everyone put forth their own theories. Some drew on strategy literature to make sense of the decision, some ascribed it to thoughtfulness, others to ulterior motives. No possible explanation was leftuncovered. But the simple fact was that Sachin was propelled more by impulse than by hypotheses. It was clear that smartphones would become the primary medium of internet consumption in India. Sachin decided that Flipkart should drop everything else and make its app the best shopping platform in the world – it would then surely become the preferred choice of customers. Of course he drew on influences and cited data; he had also considered the repercussions. But eventually he did give in to an impulse; it was his ‘gut feeling’ that drove him to take this decision. Sachin had always been a radical entrepreneur. And now, the urge to be a visionary was irresistible.

  Sometime around the middle of 2015, Sachin called for a meeting of the seniormost Flipkart leaders. By now, most of the dissenters had resigned from their positions. Sachin asked his newly appointed lieutenants to voice their opinions about the app-only initiative and prepare presentations backing their arguments. Many of these leaders agreed that the company should shut its desktop site. One presentation quoted the Irish intellectual George Bernard Shaw: ‘Doing what needs to be done may not make you happy, but it will make you great.’3 Sachin loved it. By the end of the meeting, he had decided that Flipkart would shut its desktop site before October. The app-only project was named Project Shaw.

  In July, Flipkart called an all-hands meeting. Sachin and Flipkart’s product chief Punit Soni were to announce the decision to the rank and file. But at the time of the meeting, Sachin was nowhere to be found. Punit addressed the crowd by himself. He had privately been lukewarm about the plan. But as he addressed the gathering, Punit became the champion of the idea, savouring his moment in the spotlight.

  He was surprised that Sachin hadn’t turned up. After making the announcement, Punit turned to some of the departing senior Flipkart officials, who were standing nearby, and said, ‘Sachin and I were supposed to do this together!’ They were greatly amused, unable to control their laughter.

  IN AUGUST 2015, the New York Times published an investigative story about the work culture at Amazon. It showed Amazon to be a ruthless organization engaged in the single-minded pursuit of growth, marked by a ‘purposeful Darwinism’ that pitted employees against each other. It detailed several instances of ruthless treatment of employees including one where a breast cancer survivor was put on a ‘performance improvement plan’. Amazon was ‘conducting a little-known experiment in how far it can push white-collar workers, redrawing the boundaries of what is acceptable,’ the article suggested.4 These disturbing aspects aside, the piece also revealed – as have other accounts, including Brad Stone’s The Everything Store – how even after employing more than a hundred and fifty thousand people,5 the company was able to impose a uniform corporate culture.

  After Flipkart had divided itself into three parts in early 2015, its employees were spread out over three large offices. The company had taken up two opulent spaces in Bangalore’s Outer Ring Road area. Its technology team was housed in one building; the other new office, nearly two kilometres away, hosted a large part of the sales department. Binny’s supply chain team remained at the Koramangala headquarters. This wasn’t by design – finding a large enough office space in that area for a company of Flipkart’s size had proved quite difficult. The segregation would have a considerable impact: soon, these three offices started working so independently of one another they may as well have been three different companies.

  While Sachin had always believed in the supremacy of technology, he did recognize – especially at the time Flipkart was founded – the importance of having a strong operations function. In a 2010 interview with the news website vccircle.com, he had emphatically stated that e-commerce was a ‘very execution-heavy’ business.6 What he meant was that success in e-commerce was determined to a large extent by a firm’s ability to instil discipline among its suppliers, run warehouses, operate a logistics fleet and other such labour-intensive tasks that had little to do with writing code. But by 2015, Sachin was so obsessed with making Flipkart a technology company that he displayed a revulsion towards most things real, or physical, that could not be governed by algorithms. To him, the sales team that had run the company for the last two years were now little more than ‘relationship managers’ with brands rather than executives with much-needed business acumen. Sachin wanted everyday decisions – which products should Flipkart buy, in what quantities and at what prices – that had earlier been taken by sales executives to be made the domain of the technology team. It was like asking literature graduates to become accountants.

  The already-weak unity between the technology and sales teams now disintegrated. Punit’s role was perhaps decisive here. Sachin and Mukesh had given Punit and his team almost complete control of Flipkart. Punit was only too happy to take up the mission of converting a retailer into a technology firm with Silicon Valley mores. He had become the most important executive at Flipkart after the three Bansals and he ensured everyone knew that. Ever since he had joined Flipkart in March 2015, Punit had been eagerly expanding his turf. He introduced some of the rigorous technology practices and procedures of American technology companies at Flipkart. Borrowing a practice from his former employer, Google, Punit started a weekly beer rendezvous for Flipkart employees. He worked as per a strict regimen, and refused to entertain anyone on its outside. His time was precious, every minute of which had to be utilized productively. Colleagues couldn’t just walk into his office. Even senior leaders had to wait their turn to meet him. He rejected the timeless custom of Indian Standard Time. If someone was late for a meeting with him, he would openly admonish them, regardless of their position.

  Colleagues who got to know him closely claim that Punit came across as a man with two diametrically opposite personalities. Outside the office, he was a warm, garrulous guy with whom one might enjoy getting a drink. At work, he was almost compulsively disagreeable, too enthusiastic about promoting himself, uncompromising in his dealings with the heads of other divisions. He was especially dismissive of the sales
executives, whom he saw as neanderthals.

  Taking their cue from Punit, his juniors in the technology team, too, would treat their sales counterparts with contempt. One senior sales executive recalls that product managers, many of whom had barely spent a few months at the company, would openly insult sales officers. ‘The tech–product guys had almost stopped holding meetings with our team. And when the meetings would happen, we would come back demotivated,’ he claims.

  The disunity between the technology and sales teams gradually led to a mess. Decisions about new category launches would be delayed for months. If the sales team wanted to start a new category, they would ask the technology team to prepare the required infrastructure on the Flipkart app. Inevitably, the engineers would respond, ‘We’re following our own roadmap and we’ll only work according to that.’ Flipkart had prepared a plan to start selling groceries at the beginning of 2015. For nearly six months, the plan remained on paper, unimplemented.

  In such an environment, the company’s sales strategy came to be defined by a comical lack of coherence. Sachin had promoted his new vision for Flipkart as one that would set up the company for long-term success. Astonishingly, one of Flipkart’s first moves that year had been to voluntarily forgo the books category, a move it knew would allow Amazon to dominate the category. This was actually a decision that Kalyan Krishnamurthy had made before returning to Tiger Global. For nearly two years, Kalyan had been pushing Flipkart to reduce its budget for books. He had been arguing that the category was a financial wasteland, that customers who bought books were too small in number and rarely ever purchased other goods from the company. Finally, at the end of 2014, his wish was granted by the Bansals. By April 2015, the company’s books sales, in real terms, had dropped by half. Other weak categories had also been marked as toxic: laptops, electronic storage devices, and so on. Flipkart lost cash on each order in these ‘non-strategic’ categories. Binny believed that in a few years’ time, laptops would become altogether redundant, replaced by large-screen phones and tablets. He didn’t care if Amazon came to monopolize laptop sales – soon the category itself would die. Accordingly, laptops and its ilk were wound down along with books.