Tuesday, July 24, 2012

FlipKart mustn't die!

If I were a believer in the efficacy of prayer, I would be praying hard for FlipKart to succeed.

If Forbes is reading this, no, I don't work for flipkart, have no investments in flipkart, and have met Sachin Bansal only once.  Nor am I a product of IIT Delhi and so obviously have never been a resident of Jwalamukhi hostel.

So why am I interested in FlipKart succeeding?  No pressure on Sachin and his team, but I believe that the entire future of tech. entrepreneurship, startups and venture funding is resting heavily on what happens to FlipKart.

The fairy tale beginning.
FlipKart is a true silicon valley type startup.  The founders were young when they started, did not have a sugar daddy or a large corporate house to back them, nor did they have any serious experience in the eCommerce space.  All they pretty much had was their belief that they could make ecommerce work in India.  If they succeed, more entrepreneurs will be born and more of the good talent that today gets into "safe" jobs will begin to join startups.

More such fairly tale beginnings will happen only if this fairy tale has a happy ending.

Copy + innovate = success.
Like many other entrepreneurs before them, FlipKart took a well established (in the US) business model and replicated that for the Indian market. Having watched the likes of Amazon, NetFlix and Zappos innovate their way through tight situations,  like Peter Thiel very famously said recently, the founders of FlipKart initially found little need for innovation and copied the best practices from these companies.  That helped them build a extremely responsive and dependable organization that is truly a pleasure to buy from today.  But if they are still alive today and on the threshold of spectacular success, it is because of innovating in thousands of ways, most of them too subtle to wax eloquently about, that has helped them take on the truly humungous obstacles to building a great business in India.  Not being from this part of the world, I can quite understand how Peter Thiel cannot comprehend the sheer magnitude of the innovation happening quietly in the background.

Imagine for a moment what Netflix would have done without the reliable US postal service to bank on?  FlipKart today delivers over 45000 consignments each day through a captive 5000 people delivery organization that they have built from scratch.   That portion of the organization in itself is a huge success.

Now imagine what Amazon would have done if most of their clients were unable to or not inclined to pay online?  An already prolific credit card customer base meant Amazon did not have to spend sleepless nights wondering how to collect money from their buyers.  FlipKart on the other hand has had to struggle every inch of their way and if today more Indians are inclined to pay online it is because of companies like IRCTC and FlipKart who broke down the towering walls of online commerce reluctance by introducing cash on delivery.

Finally, imagine Zappos' plight if their customers had kept all the shoes that were sent to them for trial while paying for just one pair.  Quite rightly, while companies like FlipKart are loath to talk about the low ethical and moral standards of fairly significant sections of their customer base who have no qualms in ripping off a faceless commercial entity, it is again the silent and numerous innovations going on behind the scenes that are helping them tackle such problems. Read my entry on India specific challenges for some of the other issues faced by Indian ecommerce companies today.

With the US market ahead of the curve and countries like India having to catch up, copying of ideas and business models is inevitable.  But FlipKart has to succeed for us to truly believe that we can innovate and Indianize these ideas and succeed in this very complicated country.

Venturesome capitalists.
A decade ago, none of the major VC funds had an India presence.  Around 2003-2004 when I tried to raise some funds in the US for my Indian venture, one of the VCs said "I will not invest in a company if I cannot drive to their office from my Sand Hill Road office."  Today, most VC firms have a clear India strategy and presence and that is a fantastic endorsement of the Indian startup scene.  Nevertheless, given that most of the Indian arms of VC firms are still in their first cycle,  their appetite for risks is, quite understandably not as great as that of their more experienced counterparts in the US.  FlipKart is among the first few India facing companies that raised reasonable early stage funding well before their revenue model was proven.  Accel Partners and Tiger Global deserve all the appreciation they can get for taking the lead here.  And thanks to them, several other ventures have also been able to raise early stage funding.  However, all this will turn to naught if Accel and other investors do not have a fantastic exit soon.

For our VCs to be more venturesome and be ready to back riskier propositions (and eventually pave the way for companies like LinkedIn, Facebook and Twitter to emerge from the Indian startup scene), FlipKart has to be an unprecedented success.  If flipkart does not succeed, we can all kiss goodbye to early stage funding (or any stage funding for that matter) in India!

What's a book?
Already, most of the traditional book shops are closing their doors.  Odyssey has come down to six stores from over 70 stores across India during their heydays (not that long ago, mind you).  If after sounding the death knell to our offline access to books, the online counterparts die, I don't know where we would get our books from!

For all our sakes, I fervently hope that FlipKart succeeds beyond our wildest dreams.  


Raj Bhatt said...


Excellent thoughts! As an Indian entrepreneur,I fully agree with you. I don't care a damn about the issues being raked up by Forbes.

In my personal opinion, they should spin off their delivery service into a separate business and sell it to a logistics service provider (Aramex, UPS, etc).

If Flipkart fails, then most India e-commerce start-ups will fail too.

charles said...

flipkart is like the prodigy that bursts into the mens playing arena ahead of its peers and earns the right to play with them.
But whether that prodigy will turn out a Vinod Kambli or a Sachin tendulkar...you need more time to assess temperament.
For flipkart it is about their founders...will they go all the way or will they sell out to amazon once their valuation peaks. The success of flipkart is not its immediate valuation but if it can leverage its brand to deliver 1000 crore of profits in the next 5-7 years. But then again considering that even a retailer like Kishore Biyani eventually had to sell out, the odds are overwhelmingly in favor of flipkart being sold..the only question is at what price ??