Kalyan came straight to the point. Handing Nitin a piece of paper, he said, ‘Here’s your termination letter. We will have to do this unless you agree to resign.’ He added that if Nitin chose to quit on his own, Flipkart would arrange a nice farewell and issue a glowing press statement about his contributions. He also promised to give Nitin the stock options that were to vest soon, along with a bonus payment due to him.
Nitin stormed out.
That night, he got an email saying he had been removed from the company.
23
THE SON
The unending tensions, power struggles and shocking turns had compelled many of its employees to liken Flipkart to the popular television series, Game of Thrones. Over the years, many executives had staked their claim to power, ruthlessly casting aside rivals, peers, friends, only to meet the same fate themselves. But it was a flawed analogy, as there was no question about who was both king and kingmaker at Flipkart: Lee Fixel.
Not only was Lee’s firm the largest shareholder in Flipkart, owning about a third of the company, Lee also had excellent relationships with every major player at Flipkart. His influence over other shareholders and board members, his standing with Sachin and Binny who had tremendous respect for him, his network of investor contacts and ability to arrange fund raises, and his overall credibility in the startup world, were unrivalled at the company.
The funding round in April 2017 had secured Flipkart’s future for the next few years. But it had been an unpleasant experience, eroding the company’s valuation. Lee believed that it would be ideal to accumulate so much cash that Flipkart wouldn’t have to worry about raising capital until it was ready for a stock market listing. It would forever liberate Flipkart executives from the troublesome process of fundraising and allow them to direct all their energies towards running the business.
Most importantly, Lee really needed to show some returns on his investment. It had now been seven years since he had first put money into the company. That was a very long time in the venture capital business. He had also bet a huge amount: $1 billion. Parking that kind of sum in any company is risky, and when the company turned out to be as volatile as Flipkart, it was nerve-shredding, not only for Lee but also for his partners at Tiger Global and his fund’s investors to whom he was answerable. Lee needed to take some cash out.
Even before the $1.4 billion funding round had been completed in April 2017, he rang up SoftBank founder Masayoshi Son. Lee and Son had known each other for many years. They were co-investors in many startups. In 2012, Son’s conversation with Flipkart about an investment had ended abruptly as he had taken off on a long-pending vacation. By the time he returned, Flipkart’s engagement with Naspers had already moved to an advanced stage. Son later ended up investing a large sum in Flipkart’s rival, Snapdeal. Now, he had become one of the most influential figures in the technology business. He had shocked the world by drawing up plans for a $100 billion fund to invest in startups globally, including in India. SoftBank had become the preferred supplier by default for any startup needing large amounts of capital.
When Lee approached Son in early 2017, SoftBank had a mess on its hands with Snapdeal. After vying with Flipkart and Amazon for dominance of the e-commerce market for years, Snapdeal had become a much smaller company in 2016. It couldn’t raise the capital required to continue competing with its rivals. Still, Snapdeal’s new reality didn’t affect the bravado of its CEO Kunal Bahl, or his ability to spin headlines. As he said in an interview in 2016, for Snapdeal, ‘GMV was so 2015.’ GMV, or gross merchandise value, reflects gross sales, an unreliable measure of a startup’s financial health. What Snapdeal wanted to do now was ‘to build a real business’.1
But by early 2017, Son had given up on the company and Kunal. He had always known that Snapdeal’s infrastructure and e-commerce operations were inferior to those of Flipkart and Amazon. He had hoped that the e-commerce market would become so large that Snapdeal’s leaner business model would emerge victorious. He also had tremendous faith in Kunal’s ingenuity. Then, after the e-commerce slowdown of 2016, he realized that the market wouldn’t sustain more than two large retailers and that Snapdeal wasn’t going to be one of them – Kunal had failed him. It made little sense for SoftBank, which had already invested $1 billion in Snapdeal, to continue pouring money into the struggling company.2
So, when Son received the call from Lee, he was receptive to the idea of investing in Flipkart. He had one condition: Lee had to help him out with his Snapdeal problem. Son proposed that Flipkart buy Snapdeal, after which SoftBank would invest in the merged company. He would also buy shares from Tiger Global, giving Lee the much-needed part exit from Flipkart.
The merger made little business sense. Snapdeal was a marketplace platform with completely different technology and logistics systems from Flipkart’s. It was seen as a downmarket brand whose service was unreliable. Managing Snapdeal was going to be a nightmare for Flipkart executives. One newspaper pointed out that the proposed merger was a rather ‘desperate attempt at financial engineering by the country’s two most influential startup investors’.3 Still, for the Flipkart team, SoftBank’s allure overshadowed all their misgivings about absorbing a struggling rival. SoftBank’s cash and its disposition as a freewheeling investor would be of great help to Flipkart against Amazon. Besides, they could always just
