A few weeks after buying Mime360, Flipkart took over Chakpak, the film content website founded by Gaurav Singh Kushwaha and Nitin Rajput, the Bansals’ colleagues at Amazon India. Chakpak had started off in 2007 on a promising note but the rise of Facebook had crippled its ability to attract advertising revenues. Realizing that the company had no future, its founders arranged a sale to Flipkart. It was just a way for them to avoid firing their employees, who were hired by Flipkart; there were no cash or stock payments. Nitin and a dozen other Chakpak employees joined Flipkart while Gaurav went his own way, to conceive his next startup idea.
Later on, as part of Flipkart, the Mime360 team launched Flyte, an online music platform. Users praised it for its attractive interface and easy delivery of music. But Flyte had to be shut down in 2013 – Indians didn’t want to pay for music when it was available for free on the internet. Sameer and Rahul remained with Flipkart and went on to become senior leaders at the company. Nitin Rajput also took up an important role in Flipkart’s product team.
By the time these acquisitions took place, Flipkart was engaged in fundraising discussions with General Atlantic, a private equity firm based in New York. Other investment companies had shown interest in Flipkart but baulked at its asking price of $1 billion. General Atlantic was one of the few willing to meet this demand. It wasn’t a typical investment company; General Atlantic was a highly regarded private equity firm globally. It had been a picky but intelligent investor in internet startups, boasting holdings such as Facebook and Alibaba. An investment by General Atlantic would put an elite stamp on Flipkart. Lee Fixel was friendly with a partner at the firm, and had introduced him to the Bansals. Sachin had led the talks, visiting the General Atlantic headquarters in New York several times along with Binny. Sachin believed that the deal would mark the moment when Flipkart – and he, its CEO – had arrived. It would catapult Flipkart to the global stage and validate the Bansals’ status as visionary entrepreneurs.
After several months of discussions, in late 2011, General Atlantic finally signed a term sheet to invest in Flipkart. While a term sheet is not binding, it typically converts into transactions. General Atlantic then began their due diligence process, auditing Flipkart’s books and financial records.
The auditing took another few months. At Flipkart, the founders and investors were growing increasingly anxious. After signing the term sheet with General Atlantic, they had ended discussions with other investment firms. Now they were worried about cash flow. Flipkart’s business, ever expanding, was sucking up increasing amounts of cash. They had expected the General Atlantic deal to close by now but the firm had raised questions about the state of Flipkart’s accounts. It was also concerned that Flipkart might not be compliant with India’s foreign investment rules that prohibited inventory-based e-commerce firms from receiving foreign capital.
It was true that in the rush to expand, Flipkart had neglected setting up proper accounting systems. The company had hired a finance chief in 2010 but he had turned out to be a misfit – as were many others who were confounded by the speed at which Flipkart was moving and had urged the Bansals to slow down in order to put proper processes in place. But the Bansals explained to the fund managers at General Atlantic that Flipkart’s frenetic growth had overwhelmed its accounting systems. They assured the financiers that Flipkart was close to hiring an established chief financial officer who would soon help fix its systems. They also explained that the company’s legal structure was sufficiently clean – most e-commerce firms had similar structures. General Atlantic seemed pacified – they knew that weak accounting systems were a common feature at high-growth startups across the world. Yet they kept postponing the signing of the deal. At the same time, they assured Flipkart that their extensive diligence process was a norm and that the issues it had discovered were minor.
Finally, at the end of 2011, General Atlantic informed Flipkart that its investment committee had approved the deal. The firm had agreed to the $1 billion valuation. The Bansals were elated – months of painstaking discussions had finally concluded. Flipkart’s investors, Tiger Global and Accel Partners, were relieved after having watched the slow progress of the discussions with increasing concern.
A day before General Atlantic had indicated it would sign the deal and send the investment amount, Lee Fixel got a call from his friend at the investment firm. The conversation was brief, tense. In an apologetic tone, he told Lee, ‘Sorry, we’re pulling out.’
Lee, usually unflappable, was furious. Flipkart had carried on in the belief that the General Atlantic deal would come through. Now the company was on the verge of running out of cash – it was utterly helpless. To save Flipkart, Lee would have to persuade his partners at Tiger Global to put up $50 million in emergency funds. It wasn’t a conversation he was looking forward to having. It was a humbling moment for the young fund manager, one of the most frightening points of his promising career, something that could have caused serious damage to it.
A few days after General Atlantic backed out, Tiger Global injected $50 million into Flipkart. Accel Partners India, which was a far smaller fund than Tiger Global, had to ask its US parent to wire funds to Flipkart whose capital needs were beyond its capacity.
The episode was a watershed moment for Flipkart. It marked the point at which Lee Fixel became heavily involved in the company’s affairs, when his career became inextricably linked with Flipkart. Until then, Lee’s role had been confined to
