Imagine you are back in 2007. What if someone told you that a decade from now, in 2018, you could pick up your phone, book a cab by tapping a button and it would turn up at your doorstep within a few minutes? What if they told you that you wouldn’t have to worry about leaving your wallet at home and still pay the cab driver and get through the rest of the day just fine?
My guess is you would have looked at your Blackberry handset and laughed. Why? Because back in 2007, Ola did not exist; Paytm wasn’t born. Heck, even Uber was two years away. The point I am trying to make is this: pundits who try to measure the worth of a truly disruptive company based on the business it does today will always end up looking silly.
Will The Armchair Experts Stand Up, Please?
Can all those armchair experts who poked holes in the “Flipkart model” raise their hands?
Critics kept pointing fingers at Flipkart’s burn rate, even as the company’s valuation surged to $20 billion in a little over a decade. In that time, thanks to Sachin and Binny Bansal’s entrepreneurial chutzpah, Flipkart has endured countless critics, a few down-rounds and all kinds of obstacles that entrepreneurs face only to emerge stronger.
Flipkart’s acquisition of Amazon has several broader ramifications for Indian internet enabled businesses and entrepreneurship as a whole.
One, it validates the Indian entrepreneurship story at a global level. Any half-baked analyst across the world will wax eloquent about India’s 1.3 billion population as the big opportunity, the growing middle class, increasing internet penetration etc.
But Walmart’s acquisition of Flipkart is the proof of the pudding: that a bunch of young entrepreneurs can build a business from scratch, scale it up to the biggest opportunity in Asia and eventually lure one of the largest company’s in the world to buy it. Flipkart’s acquisition has reinforced the India entrepreneurship story on the world map.
Two, the acquisition also proves that there are multiple models for growth. Critics and pundits who carped about Flipkart’s “discounting” model of growth will now have to re-evaluate if their old model of “profits and multiples of profits” is the only way to measure the success or failure disruptive companies.
Three, the acquisition also validates the fact that despite the logistical challenges a large and diverse country like India can throw up, desi startups that truly innovate on global tested models can survive and thrive in India. For instance, while Flipkart’s ecommerce model was inspired by Amazon, it adapted it by introducing several locally relevant innovations like Cash on Delivery (CoD), reverse logistics etc.
Finally, there is a lesson in this acquisition for the Indian conglomerates. For them, this acquisition is a missed opportunity. Who were the first to wake up to the opportunity that tech enabled startups threw up? It was the Tiger Globals and the Softbanks of the world. These foreign investors were the first to spot the opportunity in companies like Flipkart and are reaping the benefits today.
Missed Opportunity for Indian Conglomerates Today, seven out of the top 10 most valued companies in America are tech companies. That’s the way the world is going and India conglomerates will lose out if they don’t continue investing in this space.
For Indian conglomerates, it’s a bit like somebody who sat on a piece of land which had a massive gold mine underneath it and did nothing to mine it. Today, seven out of the top 10 most valued companies in America are tech companies. That’s the way the world is going and India conglomerates will lose out if they don’t continue investing in this space. If they want to become $100 billion entities, the old economy businesses of steel and cement are not going to get them there.
What does the acquisition mean for Walmart? Walmart gets a solid head-start against rival Amazon. Walmart and Amazon have been on a warpath ever since Walmart sewed up a $3.3 billion deal to acquire startup
Jet.com in August 2016. Jet has been the fulcrum for Walmart's online shopping strategy. In turn, Amazon made a foray into offline retail in June 2017 when it snapped up Whole Foods Market for $13.7 billion.
With the Flipkart acquisition, Walmart gets a serious play not just in ecommerce but also in India’s $670 billion retailing market. What else could one ask for!
K Ganesh (@ganeshk03 ) is partner, GrowthsStory and promoter of BigBasket and Portea Medical.
Read our comprehensive coverage of the deal here.