Thoughts on Flipkart acquisition of LetsBuy

In case you missed it, Flipkart acquired Letsbuy for ~$20 Million in stock and cash.

I think its a very smart move by Flipkart and the investors (Accel and Tiger Global in particular).

Flipkart is doing about 50 Cr (About $10 Million) per month in sales (approximate, from multiple sources).

Letsbuy was doing about 15 Cr (About $3 Million) per month in sales (also approx).

Flipkart can already do an IPO (I think) in NASDAQ by 2012. But with $150 Million run rate (rather than $120 million), they have accelerated that by about 3 months – 6 months.

So flipkart’s good. They got a good price, they bought some revenues and have a few folks who are category experts (or better experts than their in house ones).

The two companies share 2 investors (Accel and Tiger Global) – who just yesterday announced an investment in Myntra.

So I can easily see a discussion at Accel and Tiger where both Letsbuy and Myntra come up for follow on rounds. They would first have asked Letsbuy to get funding from other VC’s – they apparently did try Sequoia and Matrix, but could not get the deal done.

Letsbuy goes back to Accel and Tiger who realize that Myntra is in a category (apparel, which is a lot more complicated than electronics) which Flipkart will take a long time to get to, but in electronics, Flipkart is mostly there.

So they chose to fund Myntra and consolidate their position with a “clear winner” by getting Flipkart to buy LetsBuy.

I consider Hitesh of Letsbuy a friend, so I may be biased on this one, but I think this is a good outcome for them too. Better to have tried to reach for the stars and climb Kilimanjaro than aim to climb Vindhyas and end up at Nandi Hills.

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10 thoughts on “Thoughts on Flipkart acquisition of LetsBuy

  1. ashish

    If VC calls it a shot – then what’s the point in building a business like this? I mean – this is no kindergarton naming system (I went thru’ one where there were 2 Ashish and class teacher decided to call somebody Ashish1 and other Ashish2).

    I mean – what was 1 thing which LetsBuy built which they can be proud of? an IP (sans patent)?

    Reply
    1. Mukund Mohan Post author

      Ashish
      Its hard to build supply chain relationships in electronics. Its hard to get VC’s to give you money to the tune of $6 Million. Its hard to grow a company to 350+ people. These things might not be the range of “Changed the world” but they are things to be proud of. They tried. They did okay. Even if they “failed” I’d still say they did well because they did what 95% of people did not do – start something and build something.

      Reply
      1. ashish

        Oh yes! I am with you on the starting up part – it takes a lot of courage to do all of this. But my basic question is around the fundamentals of building a business – way too many people try to shortcircuit the evolution phase and jump to growth stage.

  2. Manish Taneja

    I agree with you Mukund to some extent, but fail to understand why would Flipkart buy Letsbuy?
    Would it be only for IPO and revenue acquisition reasons – I doubt.
    If it has been forced by investors – then its not good for flipkart?

    Reply
    1. Manish Taneja

      Timing IPOs is very difficult in these times, therefore just advancing the IPO timeline by 3 months can be a not-so-fruitful strategy.
      I have had the chance of interacting with Letsbuy founders – I like them for having built a business doing $40-50M in sales and building a 350 people strong team. They are definitely in the top 5% who took the plunge and made it moderately big. I just wish they had done slightly better in customer acquisition, BUT again – you can always connect the dots looking backwards..

      Reply
    2. Mukund Mohan Post author

      Manish
      I believe the Flipkart guys are smart. They would not be forced into doing anything, and neither would the VC’s be able to force it if it does not make sense. They have a fiduciary responsibility as they are investors and on the board of Flipkart. Its not something they take lightly.

      Reply
  3. Ankur

    There’s more here than meets the eye.. 3 months ago, it wasnt clear which one between LB and FK would be the winner… I have heard rumors of all types.. :)

    Reply
  4. Simran

    I think the question of VCs calling the shot is fair but then its also fair to assume that FK founders wouldn’t have gone into it if it didn’t made business sense for them.

    But one must consider that in addition to monetary part of it, mergers also have a large softer component and I think its going to be really difficult:

    – The founders (and other staff too) were up till recently in a heavy competition mode, so some amount of acrimony is always there. Plus other issues such as culture fit and supply chain also remain

    – Research shows that more than 70% of the mergers fail (http://j.mp/xZ6vkp). So at a time when FK can use its money and time bandwidth for further growth, they will have to focus on making the marriage work. Considering no one really has experience in managing such large mergers, they will probably need a team of consultants, which can create even more problems.

    Reply
  5. Shayon

    Hi Mukund, when is Amazon planning to operate fully in India? I believe they are serious contenders and just maybe FK wanted to go on a consolidation spree before the mighty Amazon comes hard at them..

    Reply

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