India Awards: VC Deal of the Year – Flipkart
In India's fiercely competitive e-commerce market, the mantra is eat or be eaten. Flipkart, through a combination of new funding and lateral acquisitions, has placed itself firmly in the former camp.
Letsbuy.com, a rival online shopping platform that was bought for an estimated $25 million in February 2012, is one of several acquisitions Flipkart has made in recent times. According to ShekharKirani, a member of the India investment team at Accel Partners, one of Flipkart's VC backers, the company continues to hunt for opportunities that allow it to broaden its industry footprint more rapidly than organic expansion.
For Accel, however, the big payoff came later in the year as Flipkart completed a Series D round of funding worth $150 million, valuing the entire company at $850 million.
The round was led by South Africa media platform Naspers and San Francisco-based ICONIQ Capital, with Accel and Tiger Global, another early investor, also participating.Accel first identified Flipkart in 2008, when it was barely a year old, and provided some seed funding.
"The founders [former software developers at Amazon] were outstanding, and not only knew technology but were very business savvy," Kirani says. "We had many opportunities to interact with the team, and they would frequently come back with improved business metrics. All that got us to believe in their capability in the space."
AVCJ Research's records show that Flipkart received $1 million from Accel in its first round of institutional funding. Tiger Global then put in $10 million in 2010 and $20 million in 2011, before the Series D round took the company's valuation to new heights.
In the interim, Flipkart has established itself as India's biggest online retailer, distributing products including books, movies, music, games, consumer electronics and apparel to more than four million registered users. The company shipped 64.7 million products for the year ended March 2012, posting sales of INR5 billion for the year ended March 2012, up tenfold from the previous year. It is aiming to reach $1 billion by 2015.
The latest round of capital is being used to support the build out of logistics, technology capabilities, customer support and marketing as Flipkart looks to expand further. It entered 30 new cities in the last financial year, taking its network to 37, while the number of employees rocketed from 1,200 to 4,800. It remains to be seen when scale will turn into profit, but the VC investors are backing the rapid expansion of e-commerce in India as much as the entrepreneurs themselves.
"The company and board are still very much focused on building and scaling the business," Kirani adds. "No IPO plans have been drawn up as the company has enough funding to scale its operations."
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