This time, on beyourboss we have an case study on Flipkart.
We are gonna cover it in 3 stages
So, let’s start with the Entrepreneurs, Sachin Bansal and Binny Bansal(alumni of IIT Delhi) both of them worked at Amazon and had a dream to start something of their own. So they left Amazon and started Flipkart in an apartment in Bangalore.
The company was founded in October 2007 with an initial investment of $5,600 by Bansals to set up the business.
As they were from Amazon, they too started their journey by selling books online in India.
And by 2008 they were running about 100 order/day and had a dream of acquiring other companies with different products.
This kept on going for 2 years and the turning point of company arrived when they introduced COD (Cash on delivery), huge number of people in india didn’t used credit card or online transaction at that period. Providing this service was risky for the company but they took the Risk and this brought an exponential growth to the company.
Initially they raised $1 Million in year 2009 in series A. And then in half way 2010 they raised $10 Million in series B.
Now in the series C of 2011 they raised $20 Million and then $150 million in 2012 of series D.
Above here you saw that they were growing exponentially and then they raised $200million and $160 Million in combined series E in 2013 at the valuation of $1 billion. All these in just 6 years from starting.
And now the big bang series begins when they raised $210 million in series F, $1 billion in series G and $700 Million in series H in 2014.
And then just in 24 months from then, they achieved the $11 billion valuation.
Now let us look behind the scene of investments what happened.
In 2010, They acquired the Bangalore-based social book discovery startup WeRead from lulu.com.
And the journey of acquiring startups started. In late 2011, flipkart acquired Mime.com and the digital content library of Bollywood portal Chakpak.
Also, In May 2012, the company acquired Letsbuy.com, an online electronics retailer. In May 2014, Flipkart acquired Myntra, an online fashion retailer, for $280 million.
Also in 2014 they came up BBD(Big Billion Days) for the first time and it created $100 million sale just in one day, but that actually turned out be disaster. And the disaster was that the application crashed, people were not able to order things, things went out of stock and so on. But they saw great opportunity in this and came back again in 2015 with all the preparation and created $300 million sale in 3 days.
In 2016 they decided to have Myntra only as website portal and due to this they saw an 10% decrease in revenue. So Myntra app was relaunched along with its web portal.
Now the next year they went silent with no investment raised, and all this was their due to drama in their board of directory.
Next, In year 2017 under the leadership of kalyan krishnamurti the company raises $4 billion and Softbank became the biggest investor with an investment of $2.5 billion. And boom! they had 40% market share leaving behind Amazon and snapdeal.
And with this steady growth in revenue, they generated $2.3 billion in 2016 and at the same time made losses of $1.3 billion.
In 2017, Snapdeal business failed to generate more revenue and capture the market. So, Flipkart in 2007 tried to buy Snapdeal in $700 – $800 Million. But Snapdeal didn’t agreed below $1billion. So Flipkart denied to pay that amount and didn’t bought snapdeal under it.
If Flipkart would have bought it, that would have given them 66% market share and an absolute high position against Amazon.
Even after raising private equities from investors, Flipkart borrowed $150 Million in debt. By taking debt you are no longer giving them equity i.e you have to pay it back to them. Still Flipkart borrowed $150 Million from banks.
And this comes to an end of Growth and investment.
Now we come to the part of Acquisition
Initially Walmart was only allowed to do business with wholesalers in india and was restricted to sell directly as a foreign company by the indian law.
So for Walmart in order to expand their business in india, Walmart bought Flipkart for $16 billion on this july 6th as Flipkart cover the indian market by 40%.
And now, here beings the Board war and Acquire war.
The Board war was between Sachin (who was not given any prominent role in the company due to his clashes with Tiger globe investors) with Softbank at one side and Tiger Globe + Binny + Board at other side.
Sachin and Softbank agreed the Amazon deal of $22 billion for the whole company, and Sachin was hoping a big role in company under Amazon.
While the other 3 agreed to the deal of Wal-Mart which was offering $16 billion for 77% stake.
And finally the Walmart deal was accepted and it owned 77% stake in the company.
Some people were saying that this was an expensive aquasation, but strategically Walmart had to do this because of the tremendous competition which it is facing in America against Amazon.
And now, if Walmart put its operational efficiency on the table of Flipkart and reduce the losses, it will really turn out to be a profitable deal for it in the future.
Also some studies state that less than 25% of Indian population had made a purchase online.
So, It’s a tremendous opportunity for Walmart to turn their investment into profit.