Down-round for Snapdeal. What does it mean to other start-ups ?

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Bharat Sabnani, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

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Snapdeal has had a poor last year with their losses increasing from Rs 1328 crore in 2014-15 to Rs 3316 crore in 2015-16. This in addition to the speculations from investors has resulted in down-round for Snapdeal. A down-round means a reduced valuation of the start-up compared to that of the previous round. This down-round can affect the investors sentiments and its founders but it can also reduce the short-term pressure that Snapdeal faces. The reduced valuation can actually lead to smart business practices and making the business sustainable.

Other emerging start-ups can also learn from this to focus on effective business models instead of short-run marketing gimmicks like deep discounts. The flow of money and investments are not infinite and the start-ups should keep this in mind. The aggressive funding will eventually come down and this will balance the current start-up ecosystem of India. This is just the start of down-round and all the start-ups should make it a point to make their businesses sustainable, so that they are not affected by the increase or decrease of their valuations.

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Flipkart and Ola batting for law against Capital dumping

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Krishnachaitanya Potturi, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur.


Recently, we saw the headlines that Flipkart’s Sachin Bansal and Ola’s Bhavish Aggarwal are trying to seek government protection against capital dumping by global rivals. Now, prominent venture capitalist Vani Kola, founder and managing director of Kalaari Capital has also joined the controversial debate.

Bizarrely, they never felt the need for any playing field, level when Ola and Flipkart were busy pulverizing other local players market with foreign funds. A total of $3.2 billion in foreign funds has been invested in Flipkart and is even registered in Singapore. The majority of Flipkart’s capital is in the form of foreign funding. Founders Sachin and Binny Bansal together hold only a 30 percent stake in the company. Ola’s Bhavish Aggarwal has secured sufficient foreign investment to the point that he and his partner Ankit Bhati currently own only 10 percent of the firm’s shares.

Flipkart, Ola and many, many other startups in India have entirely been set up on a copy-paste model. Flipkart took 9 years and US$3.5 billion to grow to where it is. Amazon simply took less than $2 billion and built a larger and better-loved business in India than Flipkart that too in 1/3rd the time. Ola went the same path. It raised $1.3 billion and spent a lot of that to build a business that it asked for $5 billion to sell. Uber  just spent 1/10th that amount – i.e. around $500 million to build a larger and more loved business in India than Ola, once again, in 1/3rd of the time.

Current investors in Flipkart have cut its on-book valuation from $15 billion to $5 billion.  Ola and Snapdeal have been devalued by their investors too. Hence the request to grant protection and ask the government to let them put foreign money in Flipkart and Ola and not let foreign money go into Amazon and Uber. While the absence of Indian-ness in a Flipkart or Ola works as a fitting response, the allegation has implications beyond an India-versus-others debate. ‘capital dumping’ is no longer about MNCs versus Indian companies but bigger versus smaller players, regardless of founder origins and nationalistic pleas.

Flipkart’s See-Saw Move

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Hardik Kharbanda, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur

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Flipkart announced its withdrawal from the deal with Airtel to join the Airtel Zero Platform to show its support for Net Neutrality as per Indian Express article dated 15 April 2015. It comes 10 days after it was reported that Flipkart is in talks with Airtel to join Airtel Zero. It is a damage control action taken by them as a result of massive protests by users which included deletion of Flipkart Apps, downgrading of app ratings and poor rating of products on Flipkart store.

It is surprising to see that it went into such a deal in the first place. The consequences of Telecom companies’ request for differential pricing of data are gruesome for all start-ups and not for the users alone. Implementation of such pricing would mean that cash rich companies will be able to provide better connectivity to users to sell their products thereby quashing the cash crunched companies, especially new start-ups. It also means that the rich will become richer and poor poorer. As per the article, TRAI has received over three lakh e-mails from internet users to express their concerns over net neutrality.

Flipkart started as small web store that sold books and grew to be an online megastore in just 8 years. However, they should have realised that would never have been able to achieve this had such a situation existed then. Incidentally they are drawing flak from social media activists even now stating that the withdrawal is just a marketing gimmick and being compared to the big billion sale failure.

Flipkart’s next Big Billion-Day Sale

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Mukesh Kumawat, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur
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The Economic Times reported on 31st Jan 2015 that Flipkart is preparing for its next Big Billion-Day(BBD) sale. The sale is being planned sometime at the end of this year. And it is going to be much bigger.

Flipkart had its first BBD sale last October. But the sale was not smooth as many users complained that its website was inaccessible during the peak trading hours. Flipkart was clearly unprepared for such a sale. The forecast of traffic on the website was way inaccurate. Moreover it was observed that Flipkart increased the price of some items just three days prior to sale and marked heavy discounts on those products on the BBD day.

Flipkart needs to be very careful this time. Any irregularity can be a severe dent in its brand image. Demand Forecast needs to be done thoroughly this time with the help of experts. The bandwidth of the website needs to be increased in order to avoid any “error 404- website unavailable” situations.

Some companies whose products were on sale complained that their products were being sold way too cheaper. For example Samsung Galaxy Tab2 whose price generally was above Rs 10000, was being sold for Rs. 200 during the peak discount hours. This led to a dilution in the perceived brand image of these companies. Flipkart needs to have prior talks about the prices with the companies whose products will be on sale.

Alibaba, the Chinese E-commerce giant had a much bigger sale last November which was executed successfully without any glitches. The company is soon going to start its operations in India. It will get tough for Flipkart to maintain its market share with Amazon and Snapdeal already pumping in more investments. The Indian consumer is likely to be benefitted the most in the fight of these big four.

References:

http://economictimes.indiatimes.com/industry/services/retail/undeterred-flipkart-gears-up-for-next-big-billion-day-sale-event-to-be-many-times-bigger-than-the-previous-one/articleshow/46071989.cms