In what is touted to be the start of the war between retail giants, the Walmart – Flipkart Deal, (referred to as ‘WFD’ from here onwards in this article) is the actual fairy tale ending that many startups dream about. We will deal with the war of the retail giants and the fairy tale ending later in the article, but we will first deal with the various facets of the WFD. Flipkart was launched in 2007 and along with the Walmart acquiring 77% of Flipkart’s stake, the Indian retail portal now has a market value of $21 billion. On one hand, the WFD boosts start up morale especially when cash rich investment is taken into consideration, which in turn propels exits. On the other hand, start ups are wary about the loss in control and independence, as going public in India is difficult considering risk aversion and a general edginess about negative cash flows. A colossal agreement like the WFD brings with it a concept called exits, which are benchmarks that start ups look ahead to as that signifies increased revenue and profitability.

To put it in simple terms, an exit strategy is one where an initial investment by either venture capitalists, angel or seed investors is given back to them. The WFD was eventful for Flipkart as a core member of the founding team stepped down as well as it can also see a potential exit of Flipkart’s early investors. For startups this is seen as a welcome shift in operations, as cash and stock rich deals leads to bigger investors with additional focus on current and strategic business enhancement objectives, as operations are now infused with investments and growth can now be maximized. It is termed as a ‘virtuous cycle’. Satisfy an investor now and future sentiment towards investing in startups is definitely impacted in a positive manner. The WFD also made sure that Walmart gains an unshakeable stance in the Indian E-Tail along with retail landscape. We just witnessed the strategic synergy of two market giants, which has the ability to spark conflict and tease the third market giant. Amazon is now in the spotlight as the WFD assists Flipkart in terms of Walmart’s retail and logistics expertise.

How will Amazon customize and heighten its customer loyalty programs, especially with reference to the food and grocery segment? The answer will become evident as the days pass. Another point for startups to note is the expertise that a bigger firm brings in either related to operations or management, which can prove to be valuable in converting an ailing firm into one that is trusted by customers and investors alike. Finally to the fairy tale ending as it was promised at the start of the article. Post the WFD, Flipkart employees observed increased stock valuation and they also have better prospects in terms of career growth along with disruption when it comes to Flipkart maturing into a technology driven company as compared to a manpower driven company. This is proof that high value acquisitions can serve in improving compensations for startup employees, with the added benefit of improved investor valuation. Now that the Walmart Flipkart Deal is completed, we will need to wait and watch to learn Flipkart’s strategy on leveraging Walmart’s dominance and global outlook.

Until then, it’s time for startups to build their investor pitch decks and be confident that a global giant is waiting to acquire your business!

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Reference Websites:

• Businesstoday.in
• Dailyo.in
• Startupxplore.com
• Economictimes.indiatimes.com
• Hindustantimes.com
• Moneycontrol.com
• Bloomberg.com
• Yourstory.com
• Timesofindia.indiatimes.com
• Dynamiccio.com
• Exchange4media.com

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