Lee also introduced Sachin to Masayoshi Son, the founder and CEO of the Japanese multinational conglomerate SoftBank Group. Son, a Japanese citizen of Korean descent, was well known in Asia’s technology sector; he was once hailed Japan’s ‘answer to Bill Gates’.4 When Sachin wrote to him asking for a meeting, he told the Flipkart co-founder that he was leaving for a holiday but would be keen to meet on his return. While this meeting didn’t take place, in less than a month, after just a few discussions, Naspers was ready to invest in Flipkart. Within a few years, Flipkart had established itself as the preeminent internet startup in India. Its business was doubling every six months or so. The Bansals and their leadership team seemed exceptionally bright. To Naspers, investing in Flipkart was almost a no-brainer.
Naspers funded Flipkart in August 2012, after an audit that lasted a few weeks. Iconiq Capital, another firm that Lee had introduced to the Bansals, participated in the funding round. In all, the two investors put $150 million into Flipkart, enhancing its value to nearly $900 million.5 Not long after its survival had been called into question by a cash crunch, and just a few weeks after a damaging article had dented the company’s morale, Flipkart had secured the firepower to pursue its objective of taking e-commerce to the masses.
But Sachin continued to feel unsatisfied – Flipkart’s valuation had fallen short of his magic number: $1 billion. Still, he was now a wealthy man, and so was Binny, each boasting a net worth higher than $100 million.
Earlier that year, Tiger Global and Accel Partners, whose holdings had multiplied in value, had rewarded the Bansals and some senior employees for their stellar performance. More than a dozen such employees, including Sujeet Kumar and Mekin Maheswari, received crores of rupees in bonuses, as part of the company’s stock option scheme.
It was unprecedented in Indian business for such a young company to share wealth with its employees. It was also one of the first instances of ESOPs turning out to have real value. Infosys was considered a benchmark in the aspect of awarding generous amounts of shares to its staff. The employees would, however, have to wait nearly two decades before they could encash these benefits. Flipkart’s first cash payout for employees, on the other hand, happened less than five years after the company had been founded. As more Indian startups prospered in the coming years, Flipkart’s example became a norm.
It was through such gestures that Flipkart reinforced belief in the idea of internet entrepreneurship. By 2012, Flipkart had not only become the biggest internet startup in India, it was also the ‘too big to fail’6 firm. One by one, Flipkart continued to defy the sceptics, who had overwhelmingly outnumbered the believers. As it came closer and closer to fulfilling its vision, the company uplifted the entire startup ecosystem. The belief – among other entrepreneurs, investors, startup employees, as well as those who had chosen to stay out – that India could sustain a thriving startup scene grew stronger.
The Flipkart executives weren’t shy about displaying their wealth. Sachin, who had been driving a Chevrolet, bought a Mercedes, while Binny’s Hyundai i20 was replaced by a BMW. Both Sachin and Binny also bought new homes in Koramangala. In 2012, even Sujeet bought a Mercedes.
AFTER THE CAPITAL infusion from Naspers, Flipkart’s investors demanded that the company fix its finances and accounting systems. It would also have to adopt a new legal structure to ensure it didn’t violate India’s investment rules. Its current arrangement was too risky. While the entity that owned the Flipkart website and WS Retail were separate on paper, the Bansals were owners and directors of both. Even a casual observer would have spotted the sham. BusinessWorld had informed the company that it was working on a story about the questionable legal structures of e-commerce firms including Flipkart. It was time to devise a new legal ploy to skirt the country’s investment rules. And all of this had to be done while the company grew rapidly. In the internet business, current valuations are determined primarily on the basis of estimated future sales growth – one of the costs of accepting venture capital. Flipkart’s valuation had swung from less than $5 million to $900 million in just three years based on the hope that its business would continue to fly. If its growth slowed, the company would be in serious trouble, its ability to attract more capital would diminish.
After consulting lawyers, Flipkart finalized a new legal structure. In 2011, it had moved its holding company from India to Singapore.7 Apart from avoiding regulatory trouble, Flipkart also wanted to prepare for a public listing abroad. Indian stock markets did not allow loss-making companies to list their shares. And neither did India have a specialized ecosystem of analysts and investors that understood how internet companies were valued.
As part of the new structure, Flipkart created several new entities under its Singapore holding company. Separate units were created for the marketplace platform that owned the Flipkart website, the logistics operation and a new payments business. The biggest change was at WS Retail, the entity that was purportedly a third-party seller for Flipkart. Sachin and Binny along with Sachin’s relative, B. K. Bansal, who were directors of WS Retail, would need to end their association with the entity.8 Tapas Rudrapatna, who was already an employee and director of WS Retail, would be joined by a Flipkart colleague. It was decided that WS Retail would have to be padded up; it would be given ownership of Flipkart’s logistics unit to pretend that it wasn’t a shell company.
For a Flipkart employee to move to WS Retail would be dangerous – if regulators ever looked into Flipkart’s relationship with WS Retail, executives at the latter would certainly be investigated. The risk wasn’t restricted to financial penalties; it possibly involved jail time. Sujeet Kumar, the most powerful leader at the company after the Bansals, volunteered to move to
