Thrillers to tragedies: India’s failed ecommerce pioneer on what ails Flipkart, Snapdeal

Photo credit: Themeplus.

“Some things are not meant to be,” says K Vaitheeswaran wistfully. He founded one of India’s first ecommerce companies in 1999 and ran it for 14 years before shutting it down.

Fabmart, which later became IndiaPlaza, raised US$5 million from Kalaari Capital in 2011 to scale up as ecommerce began to take off in India. But two years later, it failed to raise follow-up funding, as investors did not see the growth metrics they wanted.

“My pitch to potential investors was a romantic comedy, when all they wanted were James Bond action thrillers,” says Vaitheeswaran over a cup of finely steeped Darjeeling tea at Infinitea, a disruptor from East India offering something different from the cafes in Bangalore.

Vaitheeswaran is a coffee drinker himself but he likes hanging out at Infinitea because it is different.

From action thrillers to tragic dramas

The emergence of Flipkart and Snapdeal and their plunge into growth at all costs sounded the death knell of IndiaPlaza in 2013. Nobody was interested in a different story.

Vaitheeswaran founded one of India’s first ecommerce companies in 1999 and ran it for 14 years before shutting it down.

Vaitheeswaran was unable to raise follow-on funding to grow the business he had built for 14 years. His own investor Kalaari had placed a bet on Snapdeal.

Looking back now, he knows 2012 was the wrong time to make a pitch for building a sustainable business. “Nobody was saying ‘I will be profitable.’ And investors too were not looking for [a return on investment] from business; they were looking for returns from transfer of stakes,” says Vaitheeswaran. That’s because of skyrocketing valuations.

“It was a game of musical chairs. One fine day the music stops.”

The music has indeed stopped – or at least the tune has changed. Mega funding rounds, discounting bonanzas, and advertising splashes were the theme of the last two years. Now the talk has sobered down to cost-cutting, deferred hiring, and business model restructuring. This follows markdowns in valuations and reported difficulties in raising funds this year.

It was a game of musical chairs. One fine day the music stops.

How ironic for Vaitheeswaran to see action thrillers giving way to tragic dramas at the box office. It has come four years too late for him. The question is if India’s large ecommerce players can change course now, or if it’s too late for them to do so.

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