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Flipkart And The Ballad Of The Bansals

It would not be an exaggeration to say that no other Indian startup has quite grabbed the collective imagination as Flipkart has. Indeed, 2018 will be seen as a watershed moment for India’s startup ecosystem for several reasons, most of them involving Flipkart. From the heights of success and vindication to the depths of egregious ignominy, Flipkart saw it all this year.

The biggest (and most obvious) headline involving the Indian e-commerce firm was the worst kept secret in India’s startup ecosystem—Walmart’s widely expected USD 16 billion buyout of Flipkart, which had attracted investors from as many as three continents, raised more than USD 6 billion of venture capital from the world’s largest and most deep-pocketed investors, and inspired several hundreds of entrepreneurs in India’s startup business along the way.

At the other end of the spectrum, the now Walmart-controlled Flipkart found itself in the middle of an unwanted and poorly handled, if one may add controversy involving co-founder Binny Bansal, who was forced to resign from the company after an unproven allegation of “personal misconduct” emerged against him.

And that is merely scratching the surface—there were subplots aplenty within the broader narrative, most notably, the fallout between the founders Sachin Bansal and Binny Bansal, the manner in which the exits of both the Bansals (read here and here) were handled by Walmart and the Flipkart board, and the integration of fashion websites Myntra and Jabong that resulted in the laying off of several employees and executives.

These events should serve as a cautionary tale for the next generation of entrepreneurs how legacies can evaporate overnight if one does not fix the culture of the organization that one has built, even if it becomes a multi-billion dollar business.

Make no mistake; Walmart’s acquisition of Flipkart will still remain the defining moment of the year. But the story of Flipkart can hardly be etched in black and white, given the depth of complexity that has marked its evolution over the last decade. To better understand how the events of this year came to pass at Flipkart, a step back is necessary. This narrative of Flipkart has been pieced together after interviews with more than two dozen current and former Flipkart executives, several investors and other stakeholders in India’s startup ecosystem.

Standing out from the pack

In its prime, back in 2013-14, Flipkart was a well-run e-commerce firm. It set new benchmarks for online retail in India, having built an unrivalled logistics and supply chain operation; making shopping affordable for millions of Indian consumers through heavy discounts; and for also being the first Indian retailer to sell smartphones online and, subsequently, turning it into a multi-billion dollar business. As current CEO Kalyan Krishnamurthy said in a recent interview with Mint, Flipkart managed to do what no other e-commerce company did.

“What has happened in the last couple of years is that we have embarked on a number of multi-billion dollar initiatives several of them. All of them got seeded in the last couple of years. The next couple of years will be all about giving them bigger scale, bigger customer adoption. So that is what we’re driving towards,” Krishnamurthy said in an interview earlier in December.

Flipkart became one of the most sought-after startups, not just in India but across the world. Global investors such as Tiger Global Management poured in hundreds of millions of dollars into the company and rewarded it with lofty, eye-popping valuations. The founders Sachin Bansal and Binny Bansal became overnight billionaires, at least on paper.

But then, Flipkart started to falter in 2015. As its ambitions grew, Flipkart struggled to execute the ideas of then-CEO Sachin Bansal, who brought bold vision to the table. Amazon started gaining market share at Flipkart’s expense and threatened to snatch away its much-vaunted market leader tag. That’s when the board of Flipkart decided to intervene. And the relationship between the Flipkart founders changed forever.

A complex relationship

The dynamics between Sachin Bansal and Binny Bansal were already changing back in 2015, after the elevation of Myntra founder Mukesh Bansal as the online retailer’s head of commerce. Sachin Bansal himself underwent a metamorphosis of sorts. He started ignoring short-term sustainability measures and was obsessed about the next big idea for Flipkart. In the process, he started alienating leaders around him.

Towards the end of 2015, even Binny Bansal started feeling that his contribution to Flipkart was diminishing with each day. According to three executives who were present at strategy meetings that featured Sachin Bansal and Binny Bansal, there was no doubt whatsoever as to who was in charge. At one such meeting in mid-2015, Sachin Bansal brusquely shot down one of Binny’s ideas on reducing burn rates and emphasized that the priority for Flipkart was to pivot to a new business model rather than focusing on short-term operational efficiencies.

That was a key point of contention between the two Bansals. While Sachin felt that the company needed to focus on long-term bets at that point, Binny was for pushing Flipkart to focus on the so called nuts and bolts of efficient operations.

Sachin Bansal, at the time, decided to move Flipkart away from its traditional retail commerce roots and try and make it a pure product company by becoming a marketplace taking China’s Alibaba Group Holding Ltd as an inspiration. He had led Flipkart’s mobile-app push from the time it was launched in 2013. After seeing a spike in traction, he decided to shut Flipkart’s websites and make it an app-only platform. He decided Flipkart didn’t need advertising if Flipkart’s product platform was good enough, people would flock to it, Sachin reasoned.

For Binny, there was always the sense that he would always have to play second fiddle to Sachin as long as the latter continued to call the shots. So, when Tiger Global partner Lee Fixel pushed to make him CEO, Binny was happy taking on that role, more so because Sachin wasn’t running Flipkart anymore. Binny did not side against Sachin when the board relieved him of his duties in January 2016. But he did not speak up for Sachin either. Binny had made his bed and was prepared to lie in it. And Sachin never forgot that, according to three executives mentioned above.

A similar moment of deja vu would emerge during the sale talks with Walmart in early 2018. Having been removed from his role as undisputed leader and being on the sidelines since the beginning of 2016, Sachin Bansal wanted to reclaim his sway over Flipkart. And the Flipkart-Walmart deal, he thought, provided the ideal opportunity to do so. Sachin on his part wanted to take a massive loan and increase his stake in Flipkart. He wanted a larger say in the running of India’s foremost internet startup.

Fixel put an end to Sachin’s moves. Backed by his long-time lieutenant Krishnamurthy, Fixel got the entire board to side with him. What shocked Sachin most was that Binny ended up taking the board’s side. And that was the point of no return between the two men.

An awkward question

Binny suddenly found himself in the spotlight after Sachin’s Flipkart exit. He ended up becoming the face of the Walmart-Flipkart deal and Sachin’s name was not even included in the press release announcing the deal. His fortunes had turned 180 degrees yet again, just like in January 2016. And just like then, he had been on the verge of leaving Flipkart. Binny wanted to have little to do with Flipkart after the Walmart takeover.

From his perspective, as reluctant as he was to have a continued association with Flipkart post the Walmart deal, here was a golden opportunity to salvage his reputation after his own failed stint as CEO of Flipkart in 2016. That, however, was not to be. In July, a month before Walmart’s deal with Flipkart was closed, Walmart received a complaint accusing Binny of sexual harassment. And that put paid to his hopes of rebuilding his own legacy.

About a month and a half ago, on the eve of Flipkart’s flagship Big Billion Days sale, Binny found himself answering an awkward question during a fireside conversation with a high-profile Indian venture capitalist (VC). The occasion and mood was one of celebration at one of Bengaluru’s upscale hotels. The room was filled with several prominent entrepreneurs, VCs, bankers and tech journalists. Most significantly, on 9 October, nobody in the room that evening had any inkling that Binny was facing an internal probe that would ultimately lead to an unceremonious ouster.

Most questions posed by Chiratae Ventures’ founding partner Sudhir Sethi to Bansal were harmless enough. But one of them caught Binny off guard.

“A press report says that you’re leaving Flipkart…,” Sethi trailed off, without needing to finish the question. The press report in question was Mint’s article on 24 September, which stated that Flipkart might appoint a new group CEO in place of Binny. Binny, trying to deflect the question, laughed it off.

“I think that’s the thing about the media here. The media loves us, and we love the media. This kind of a report is there every other year about me or some other member of the (Flipkart) team. We just take it in our stride and focus on what is next for us,” said Binny, without actually clarifying whether the news was accurate or not.

Walmart’s handling of the Binny Bansal episode has also been criticized by entrepreneurs and investors. Walmart received the complaint in July from an unidentified woman but the company chose to disclose it and the investigation only after it closed the Flipkart deal, which was cleared by India’s antitrust regulator in August. What has raised eyebrows is why Walmart disclosed the investigation given that “it did not find evidence to corroborate the complainant’s assertions” against Binny.

What lies ahead?

For all that, the Walmart-Flipkart deal is set to usher a new era for Indian ventures.

The impact of the deal has already been felt this year. Since Walmart announced the deal in May, more than two dozen USD 100 million startup funding deals have been closed in India, according to data from Tracxn. While not all of it can be attributed to Flipkart’s exit, there can be no denying that the Walmart-Flipkart deal was a seminal moment for Indian startups and its ripple effects will continue to be felt for years to come.

While Infosys planted the flag for Indian tech startups back in the 1980s, Flipkart has boldly gone where no other Indian startup has, and through its ups and downs helped take up the collective maturity levels of startups in India’s Silicon Valley, Bengaluru, by several notches. Its founders, especially Sachin Bansal, now play a crucial, central role in mentoring and investing in the next-generation of internet and non-internet startups.

Love it or hate it, there is no ignoring the Flipkart phenomenon. It rewrote the rule book for Indian startups while showing investors the exit route for their billion-dollar investments. For that alone, wannabe entrepreneurs will always owe a debt of gratitude to the Bansals.― Livemint

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