We're in the early part of investment in Flipkart: Sameer Gandhi

Interview with Partner, Accel Partners

Sameer Gandhi, a partner at venture fund Accel Partners' Silicon Valley office in Palo Alto, California, still travels regularly to India to keep track of his firm's investment in e-commerce player Flipkart. Starting from early 2009 when Gandhi signed on to Flipkart founders Sachin Bansal and Binny Bansal's vision at a time when they were shipping books on scooters from their apartment in Bangalore, Accel has backed the company, including the latest round of funding when Flipkart raised $200 million from four investors last month. Gandhi spoke to Indira Kannan from Palo Alto about his vision for Flipkart. Edited excerpts:

How do you see Flipkart fending off competition from global majors and local rivals?

Flipkart has a very strong consumer value proposition and e-commerce is very competitive as a category, regardless of geography. While it's a merchant business, they (Flipkart) have really architected it to be a service business, whether that is having great price and selection on the website, a super shopping experience whether you're coming from the web or mobile, enabling payments, very consistent high quality delivery, great customer support - and to build that is very expensive and difficult. If you look in the US, companies like Zappos and Amazon have really pioneered phenomenal service, and, ultimately, those have been the differentiators for those companies. In India, it will be a long race but those are the kinds of things the founders of the company, from literally the day they started the business, have been hyper to focused on.

What's your take on Flipkart's recent moves to adopt the marketplace model in place of the inventory-led model, and launch the online payment system?

Cash-on-delivery has been incredibly successful for us in India and it is a very comfortable model for the Indian consumer. It is also complex, right, because you're moving a fair amount of cash around in the system. But as with anything, there are more efficient ways to move cash and over time, just as you've seen a lot of innovation happening in the US around next generation payments, inevitably it will happen in India. Payments are one of the areas in which Flipkart is forced to truly innovate because very little of that infrastructure exists. I think it's still early days of being able to talk about what we might be doing in payments but it's a core part of the strategy.

With respect to marketplace, it is an important addition to the commerce offering at Flipkart. What you've seen there is an e-commerce model that has been largely about buying products from Flipkart and it is not unlike an Amazon-style model. But to be able to broaden the choice for consumers is a good thing and marketplace does that. What it also does is, it becomes a great new channel for small business in India. Businesses that don't have the reach and scale and logistics for payment infrastructure that Flipkart has already invested a lot of money in, if they can leverage what we've already done in the platform, and want to reach a pan-India audience of consumers who are already comfortable shopping on Flipkart, it is a great channel for small business, too. So, I would describe it as an important pillar of our business, very analogous to what you saw with Amazon when they launched third-party sellers on their site.

When do you see Flipkart becoming profitable? Are you comfortable with its timeline and targets?

I can't comment specifically on that. The company is growing at a tremendous pace. Our investments in marketplace and payments and more categories for consumers and better service levels are all very conscious decisions made by the team and the board, to be very aggressive about investment. We are very comfortable doing that because of the large opportunity we've seen to lead in this category.

Flipkart has seen some challenges lately, including departure of some senior managers and a trimming of the workforce. What gives you the confidence to stay invested?

In a hyper-growth company, new people get added, and then there are people who find the company isn't right for them because it has changed dramatically in the 24 months or so that they've been there, and that's to be expected. But when I look at the team we have, the strength of the founders, our ability to recruit great people on an ongoing basis, I feel very good about it. Everything else is no different from what you would see in any very dynamic high growth kind of situation.

When does Accel want to exit and what are you waiting for?

Often people think we have some master plan on exit, and the reality is that we're not ultimately the deciders or drivers of exit. What we really care about doing here is we want to build the defining company for commerce in India. We're comfortable if that takes a long time. We're very comfortable with whatever the form of exit is, whenever that happens. Obviously, that's very dependent on continuing to realise the potential of the business, and so if it takes longer, that's perfectly fine with us.

How do you define 'longer'?

We've been associated with companies sometimes from the very inception and are still intimately involved with those companies more than a decade later. So, from a Flipkart standpoint, we're in the early part of the investment.