There is little doubt that Flipkart is a totemic Indian startup, at the least from a funding and valuation perspective. Not only was Flipkart one of the first few privately-held Indian startups to be valued at over a billion dollars but also the first Indian startup to actually raise over a billion dollars in funding. That financing round in July 2014 sparked off the funding frenzy that India witnessed in 2015 and early 2016.

Thankfully, the funding sentiment has cooled down considerably in general since then. And Flipkart itself last raised a round in mid-2015 where it was valued at over $15 billion post-money.

Until yesterday.

Yesterday, Flipkart announced a new funding round of $1.4 billion from a clutch of new investors at a valuation of $10.2 billion pre-money.

What are the takeaways from this round—for Flipkart specifically and the overall system ecosystem in general?

Swallow or Summer?

For a number of years now, there has been a tendency to see Flipkart as some sort of benchmark against which all other Indian startups need to be measured against. Even now, there are opinions that Flipkart’s new round is a signal pointing to a renewed interest from large overseas funds to reinvest in India. But fortunately or unfortunately for the rest of us, Flipkart has been and continues to remain an outlier rather than a representative of the startup ecosystem. The dynamics around Flipkart’s funding and valuation have long outrun any sentiments or constructs that could be regarded as a leading indicator or a template for other Indian startups.

That said, while it may admittedly be unique, Flipkart’s size and gravitas merit attention. So let’s take a deeper look at this latest funding round.

A landmark deal?

Announcing the funding, Flipkart’s founders Sachin and Binny Bansal in a joint statement said, “This is a landmark deal for Flipkart and for India as it endorses our tech prowess, our innovative mindset and the potential we have to disrupt traditional markets.”

While the sheer size of the round, the largest by an Indian startup, might arguably qualify it to be seen as a landmark deal, the rest of the claims seem anodyne and contrived, given the way it was structured.

This new round was led by Tencent, which put in $700 million into the company. eBay put in $500 million while Microsoft ponied up $200 million.

There are three pertinent points about this deal.

Firstly, none of the existing investors put in any additional funds, and the entire round was picked up by new investors.

Secondly, the pre-money valuation of this round was $10.2 billion—a steep fall to the $15 billion post-money valuation that the company commanded at the time of its previous funding round in 2015.

AUTHOR

Sumanth Raghavendra

Sumanth is a serial entrepreneur with more than eighteen years experience in running startups. He is currently the founder of Deck App Technologies, a Bangalore-based startup attempting to re-imagine productivity software for the Post-PC era. Sumanth’s columns appear regularly in leading publications. He holds MBA degrees from the Indian Institute of Management, Bangalore and Thunderbird, The American Graduate School of International Management, USA.

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