• From $1 billion to $750 million valuation, Flipkart’s ‘down’ round in 2012 was at its toughest times

    Terming 2012 as the toughest year, Flipkart, Executive Chairman and Co-Founder, Sachin Bansal on Friday said the company had to go for a down round of funding as he made the wrong call of delaying raising money on hopes of better valuations.

    “It was the toughest time for us. We were hoping that if we delay raising funds that was available, we would be able to get a better valuation. However, Flipkart had to raise funds at valuations of $750 million compared to $1billion in the round before it,” said Bansal at TiE Delhi-NCR organized India Internet Day. In August 2012, Flipkart had announced it had raised Series D funding of $150 million from MIH (part of Naspers Group) and ICONIQ Capital.

    A down round of funding is denoted by investors purchasing stake or shares in a company at a lower valuation than the valuation arrived at by earlier investors.

    Talking about this little known part of the company’s journey, he went on to add that from the middle of 2012 till the end of the year the company did not grow and had to go back to the drawing board and regroup. “We had to reduce cost and figure out ways to provide better customer experience,” said Bansal.

    According to Bansal the current financial conditions for startups is similar, but he would not be worried about it. “A lot of times people look at a down round negatively and it is not a pleasant situation for any company, but the fact is that almost every Internet company around the world go through it. Facebook is an example of this. Financial cycles govern this and even today we are seeing much of that happen. Down round for me is not negative and for me business interests needs to be ahead of everything else. These things take care of themselves. I would keep my head down, keep executing and carry on with business,” says Bansal.

    For budding entrepreneurs Bansal’s advice was that one should raise funds when they can, rather than when they have to. “Do not get into a situation when you really need funds and you get into a situation where you have to look for investors. We have followed this is Flipkart and this was a learning we had in 2012 when we delayed fund raising in the expectation of better valuations. That was a wrong call,” said Bansal.

    Publicly available data shows Flipkart has raised about $3.2 billion in funding over 12 rounds from 16 investors. Bansal says the company has not thought of listing on the bourses. “I think the depths in private markets allow you to stay longer and every entrepreneur should take advantage of this and stay private longer. This is the trend across Internet companies across the world and I think it is a good thing. However, this is not a formula and depends from company-to-company. We do not need to raise funds and the need to tap public markets will be made at the right time when we need it,” said Bansal.

    Startups in the country and around the world have found it difficult to raise money as wary investors have tightened their purse. Having braved the financial downturn of 2009 and internal challenges of 2012, Bansal, however, is optimistic. “It is important to remember good times do not last forever and bad times also do not last forever,” said Bansal. Tobias Enstrom Authentic Jersey

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