Home / Industry / Retail /  What the Flipkart deal means for Indian start-ups

What the Flipkart deal means for Indian start-upsThe world’s largest retailer Walmart is buying 77% of Flipkart for $16 billion, valuing India’s biggest Internet start-up at $21 billion, marking a moment of triumph for India’s start-up and venture capital ecosystems.

Why is the deal so important?

It redraws India’s e-commerce landscape and escalates Walmart’s global battle against Amazon, its biggest rival in the US. Several tens of billions of dollars are at stake on both sides. While this is positive for Flipkart and all its stakeholders, e-commerce in India will essentially be dominated by two American giants from now.

What does it mean for Walmart?

This is arguably the most significant acquisition in the history of Walmart and one that was pushed by its chairman Greg Penner, heir to the multi-billion-dollar Walton family fortune. For Walmart, this represents a fight for everything it has built over the past five decades and a massive bet on the future of retail. Flipkart will be the centrepiece of its global e-commerce ambitions as the full potential of the Indian market is yet to be realized and there is enormous scope for growth.

What about Amazon?

Amazon insiders had always anticipated a situation where they may have to fight Walmart in India. From Amazon’s perspective, its domination of global online retail has forced its biggest American rival, Walmart, to spend a whopping $16 billion—a clear acknowledgement that it is trying hard to make up for lost time. The deal spooked Walmart’s investors and eroded over $10 billion of its market value while Amazon shares rose 1% on Wednesday.

Who benefits from the deal?

All Flipkart stakeholders, including investors, founders and employees. Many employees have turned dollar millionaires overnight, while early investors such as Accel Partners and Tiger Global Management and even late-stage investor SoftBank Group have made a killing. Together, Accel, Tiger and SoftBank stand to exit with over $8 billion.

Will the deal help Indian start-ups?

Start-up funding is expected to rise, and the number of ventures starting out is also expected to increase, after two consecutive years of decline. The venture capital ecosystem has received a boost and the investors’ successful exit is expected to power the VC business in India for a long time.

What does it mean for Indian e-commerce?

Indian e-commerce has won and lost. While the deal marks the biggest triumph for an Indian start-up, it also means that for the foreseeable future, the online retail business in India will be controlled firmly by two large American firms—Walmart and Amazon.

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