Big Billion Startup: The Untold Flipkart Story

by Mihir Dalal

  By the start of 2007, when Binny joined Amazon, the India base had morphed into a typical back office engaged in specialized routine work. Amazon had come to India with the goal of creating world-beating products. Less than three years later, the dream had died. No one was calling A9 the Google Killer any more. Employees were disenchanted; Amazon had lost its hold over them. When a member of the A9 team was on his way out, he was instructed, by the same company that had lured employees with its office bar and commuter benefits, to return his laptop bag. In a bold act of white-collar solidarity, nearly every employee on the floor threw down their own bags.

  Earlier, the Amazon India office operated almost like two different startups, each team working towards building its respective product – A9 and FPS. But after Amazon moved to the Ali Asker Road office in 2006, it introduced many new processes that employees found constraining. Amazon teams in Seattle had also started hiring engineers in Bangalore to handle routine tasks for the headquarters after realizing that they could adhere to high professional standards, and would cost much less than their American counterparts. For many employees in India, it was their first experience of ‘seeing a startup become a corporation’.

  As Amazon’s appeal waned, entrepreneurship became a more enticing prospect, and the entrepreneurial urge that had seized some senior executives at the company in early 2006 gradually turned into a broader movement over the next two years, drawing dozens of engineers from Amazon and other companies, and even some colleges.

  Inspired by the likes of Vikas Gupta and Krishna Motukuri, a few mid-level Amazon employees leftthe company in 2006 to launch their own ventures or enter the startup scene in some capacity – as investors or senior employees. Among the first of such deserters was Gaurav Singh Kushwaha. After graduating from IIT Delhi, Gaurav had worked independently as a freelance software engineer for a German company. Ever since, he had felt inclined to start his own company.

  At Amazon, Gaurav had seen how the power of the internet could change lifestyle choices. This got him thinking about what kind of internet services could work specifically in India. It was an optimistic period for the country. The economy was booming. Indian companies were buying foreign ones, including companies based in the land of their former colonial masters. Mobile phones were selling faster than manufacturers could make them. Telecom connections were hitting record numbers every month. Everyone assumed that the masses would be introduced to the internet soon. Bursting with confidence, Gaurav felt his time had come.

  This was the spirit with which many people like Gaurav lefttheir jobs to pursue entrepreneurship. India’s flourishing economy and their stint at Amazon led these would-be entrepreneurs to ask themselves why they were working for someone else. Why couldn’t an internet company be built in India, for Indians, by Indians?

  The Silicon Valley entrepreneurs were driven partly by the belief, however misplaced, that they were changing the world for the better. In Bangalore, in those days, it was the urge to prove that an Indian engineer had the wits and the audacity to be an innovator, to create something indigenous, reject the middle-class championing of professional ‘service’, combined with a lust for excitement, wealth and fame that propelled many to take up entrepreneurship. Over the next few years, many of these startup founders would fail to realize their dreams. Even for the Bansals, who became entrepreneurial icons admired for their energy, skill and inventiveness, this idealism would culminate in a transformational but complex achievement.

  AFTER QUITTING AMAZON in early 2006, Gaurav wanted to launch a mobile ads company. But he dropped the plan after realizing that the field was crowded and began searching for other startup ideas. A few months later, his roommate and longtime friend, Nitin Rajput, who was also employed at Amazon, joined forces with him. Soon, they noticed that there were no Indian websites that offered film content the way IMDB did internationally. This was a surprising omission in a country of over a billion people known for their love of movies – and potentially a big business opportunity. In early 2007, Gaurav and Nitin launched Chakpak, conceived as a social network for all content related to Bollywood.

  To expand, they needed capital. Gaurav approached Subrata Mitra, his former boss at Tavant Technologies, who had started a fund, Erasmic Venture, to invest in young startups. Erasmic and Canaan Partners invested $2 million in Chakpak. It was one of the biggest cheques written for a nascent internet company, a rare instance of a classic venture investment in India. Gaurav and Nitin had little idea of the market’s size. They lacked a long-term vision, couldn’t tell a balance sheet from a profit-and-loss statement. But they did relish the everyday excitement of running their own startup and offering for the first time in India quality film content in an online space where users could interact with one another.

  To attract customers Chakpak ‘gamed Google’. Chakpak would feature at the top of Google search results to do with Bollywood films and film stars. Ensuring such a result and attaining virality on Orkut and Facebook wasn’t just a proud achivement, it was Chakpak’s business model. The site drew as many as 150,000 users a day – an impressive number for its time.

  Gaurav and Nitin worked out of the Erasmic Venture office on Bangalore’s Cunningham Road, less than half a mile away from Amazon’s Ali Asker Road office. A few months after Chakpak’s launch, Sachin and Binny sought out Gaurav and Nitin for advice.

  AT AMAZON, SACHIN and Binny were bored. Work had become uninspiring. The payments product they were working on hadn’t taken off and the office had lost the energy of the early years. They did enough to escape censure but preferred to spend work hours playing video games and in various other pursuits. Sachin Dalal recalls that the Bansals played truant for several months in 2007. They would be ‘out all day and work late when they could order pizzas and take it easy’ after the bosses had already returned home to their families.

  In reality, when Sachin Dalal thought the Bansals were just evading work, they were actually out conceiving a plan to start their own company.

  In early 2007, Sachin had started talking to his friends about launching a startup. By mid-year, he felt more confident about his plan as well as teaming up with Binny. Sachin had said to a colleague at Amazon, ‘This doesn’t work ... working for someone doesn’t work for us.’

  By now, Sachin and Binny had known each other well for nearly two years. They were still not close friends, but out of their NGV group, they were the only ones inclined towards entrepreneurship. This formed the basis of their bond, which would grow into a strong partnership that would take their friends by surprise. Sachin would admit to his mates that while he and Binny weren’t best friends, they got along well and thought on similar lines.

  Years later, in a 2013 interview, Binny spoke about his early interactions with Sachin. ‘The journey [with Sachin] started seven years back, I think, when I joined Amazon. And we started interacting more ...’11

  Sachin and Binny resigned from their posts at Amazon in the second half of 2007. This caused some consternation at the office. The company was losing people in hordes but two employees resigning in the same week was especially worrying. The bosses had reason to be surprised, too. Owing to his fine performance in 2006, Sachin had been promoted only a few months ago while Binny had barely completed six months at Amazon. Why would they leave now? A manager of theirs wondered if a rival company was methodically stripping Amazon of its prized talents. But there was no such nefarious plot. Amazon India had lost its way and its ambitious employees were simply moving on to pastures new.

  On one of Sachin’s final days at Amazon, he had a brief exchange with his namesake, Sachin Dalal. Dalal had said, ‘I heard you are leaving and starting your own company. Haan, why not try it? You’ve anyway got a promotion and can always come back.’ Sachin had laughed in response.

  The only downer for the Bansals was that Sachin had to return the referral bonus he had earned for recommending Binny to Amazon.12

  4

  THE DESERTION

 
; Sachin and Binny knew Nitin Rajput, Gaurav’s co-founder at Chakpak, from Amazon. Gaurav had interviewed Sachin at Amazon in early 2006. And all four of them lived in Koramangala.

  Initially Sachin and Binny considered starting a website that would offer product reviews. It would collate information on products on various e-commerce sites and guide customers to the most reliable ones. The modus operandi would be the same as Chakpak’s: ‘game Google’.

  This trick – better known as search engine optimization (SEO) – was to use all kinds of mechanisms to have one’s site at the top of Google search results. At that time, internet awareness was still low; most users were not familiar with more than a handful of websites, and Google had become their gateway to the internet. Naturally, it became critical for websites to find a prominent place on these search results. Gaurav had gamed Google to make sure Chakpak would get noticed whenever anyone in India browsed the internet for movies. Similarly, Sachin and Binny wished to make their website popular for shopping-related searches. But why wouldn’t they just sell the products themselves? Sachin later explained that the Bansals ‘didn’t want to do the dirty work of packing and shipping of books, handling of operations and all that’. They were software engineers who knew only ‘how to write software’.1

  Soon, the Bansals realized that a price comparison website would contain the most fundamental of flaws: when all suppliers are substandard, there’s no value in comparing them. The e-commerce landscape was laughably tiny with only a few well-known sites, among them Indiaplaza, Rediff and Indiatimes. These sites claimed to sell a wide variety of products including books, laptops and CDs. But altogether, the annual sales of products over the internet amounted to less than $40 million.2 In 2007, Amazon’s sales in North America alone exceeded $8 billion.3 The Indian market, on the other hand, had failed to pick up primarily because the shopping sites were notoriously poor in usability, product quality, delivery – nearly every aspect of e-commerce. Directing users to these sites would be akin to a search engine that inevitably throws up inaccurate, inadequate information.

  About a month later, sometime in September 2007, the Bansals decided they would get their hands dirty. Sachin explained this move later while giving a talk at a 2010 startup conference, ‘We basically asked ourselves the question, “Can two people, working from home ...compete with bigger e-commerce players?” ... [We] did market research, talked to a few vendors, looked at revenues of current e-commerce players ... We basically found that the answer is yes. Because the problems that the bigger players were facing were really basic ... around technology, around service, which we thought were very simple problems. Technology was something we were good with. And the service was the only part where we thought that if we can make a difference ... we can probably compete with them.’4

  The Bansals’ previous jobs had paid well and, aided by their frugal lifestyles – video games, puzzles and sports don’t require all that much upkeep – they had saved well. In all, Sachin and Binny put up ₹400,000 together to launch their startup.5 It wasn’t an insubstantial sum, even for young, well-paid engineers.

  The news shocked their flatmates. What had seemed a passing fancy had turned into a purposeful, irreversible act. They had strongly discouraged the Bansals from taking up entrepreneurship. Moreover, online retail seemed like an especially foolish business idea. Their reaction was similar to Ajay Bhutani’s during campus recruitment season at IIT Delhi, when he learnt what kind of business Amazon did: who sells books online for a living! It was considered mad to start an internet company, especially when one’s career was advancing nicely. But the Bansals were determined to at least ‘try something’. They reasoned that even if their startup failed, they would get better jobs afterwards because they had ‘tried something different’.

  After launching the company, Sachin and Binny continued to live in separate apartments at the NGV complex. In the short period between relinquishing the price-comparison idea and choosing to start an e-commerce firm, two momentous events transpired.

  Sachin and Binny finalized the name of their website. Not having enough money to buy a domain of their preference, they settled for a name that cost them just ₹500. Sachin set the parameters – the name was to have no more than eight characters or it would be too much to type, it had to sound ‘cool’, make the brand stand out. A few brainstorming sessions later, ‘Flipkart’ was found to be suitable. They ran with it, hoping that ‘kart’ with its recall of shopping carts, would resonate with customers.6

  The second event nearly caused the startup to fold up before it had even been launched: Sachin and Binny lost their third co-founder. When the Bansals had started working on their startup idea, they had enlisted a third entrepreneur in the team.

  The story of how the Bansals ended up as Flipkart’s only two co-founders is rather comical. While the founding of Facebook and Twitter saw ideas being ‘borrowed’, people ruthlessly discarded, one-upmanship adopted by all sides as the norm – typical American stories of capitalist greed – the story of Flipkart’s founding is in the Indian middle-class idiom.

  The third entrepreneur who was part of Flipkart’s founding team was Varun Sharma*, a friend of Binny. Unlike many of his NGV friends, Binny was a part of other social networks, too. It was not that he was especially social; he was just less socially awkward than the others. Binny had expressed his wish to start his own business to some of his friends outside the NGV circle, and Varun was one of the few who saw merit in the idea. He didn’t need much convincing.

  It was decided that Sachin, Binny and Varun would be equal partners in the startup. Varun worked with them for a few weeks and their partnership got off to a promising start. He seemed to offer a way of thinking that was different from Sachin and Binny’s, something both Bansals valued. The trouble was that Varun had not revealed his entrepreneurial ambition to his parents.

  Varun visited his parents sometime after he had started working with the Bansals. When he told his parents that he was going to quit his job to launch a startup, they were appalled. ‘Have you gone crazy?’ they said. ‘Forget about it and move on with your life.’

  In the decades after India’s independence, when Varun’s parents were growing up, job security was paramount and getting a job was often a hard-won victory. To give one up, especially a job at a multinational corporation, and gamble on internet entrepreneurship instead, would have seemed ridiculous to them. Thus thwarted, Varun told the Bansals he was backing out.

  Varun’s desertion deflated Sachin and Binny. They debated whether they should move forward at all. They were giving up stable, rewarding jobs, staking their savings on a venture which their friends had called foolish. Now, to have a co-founder leave even before the venture had begun, shook their confidence. It hit Sachin particularly hard. He had told his friends earlier that with him and Binny almost always being ‘on the same page’, a third person was needed to challenge them. After Sharma’s departure, he vented to his friends and sought commiseration. It so happened that some of them, despite their misgivings, encouraged Sachin to keep going.

  The Bansals soon overcame their setback and started work on the e-commerce website in September 2007. Their resolve and the increasing strength of their relationship took the people around them by surprise. For the most part, Sachin and Binny didn’t even discuss Flipkart with their friends, who took this as a sign of maturity, and suggestive of the trust that had developed between the duo. At least at an interpersonal level, Flipkart was starting to work out.

  5

  UP, DOWN, HELLO, GOODBYE

  As Sachin and Binny recovered from the shock of Varun’s desertion, the Flipkart website took shape. Coding up a site was no problem for the two IIT computer science graduates. But the Bansals also wanted it to be seamlessly easy to use. Ever since he had created the file-sharing system at IIT, Sachin had nursed an interest in product design. Now, both he and Binny were determined to produce a neat, uncluttered website that would stand out from the messy interface
s of existing e-commerce portals such as Indiaplaza and Indiatimes.

  The website was ready in October 2007. The Bansals tinkered with it some more after showing it to their friends and gathering feedback. Finally, they felt confident enough to unveil it to the public. Flipkart.com highlighted all of Flipkart’s promises in clear, simple terms: a large selection of books, low prices, free delivery and secure transactions. The letters ‘f’, ‘l’ and ‘p’ were treated in an orange font, the ‘i’ was inverted to make it look like an exclamation mark, and the last four letters that formed ‘kart’ were a sapphire blue. The search bar was prominently displayed.1 The website’s design wouldn’t have won awards but the Bansals had produced a clean, functional interface. They asked their friends and family members to try it out. Ankit Agarwal, Sachin’s flatmate at NGV and former IIT-mate, was among the first to successfully place an order on Flipkart. The Bansals were elated.

  That is how it is in the early days of entrepreneurship. One day the entrepreneur is flailing, filled with self-doubt, anxiety, frustration. The next day, a task done well, they feel superhuman, chest out, adrenaline pumping, ready to take on the world. Likewise, with the website launched and the first orders placed on Flipkart, the Bansals felt on top of the world.

  They had decided to start with books. The cue had been taken from the Amazon playbook. It made sense to do so, especially in India. Books are cheap, standardized, easy-to-deliver items that many customers might not feel compelled to physically hold before buying. The hope was that if a website sold original, first-hand books at a discount and ensured that the books reached customers in a few days, they wouldn’t mind buying from the website.