Story Highlights

• Kunal Bahl steered Snapdeal through many avatars, but stopped short of acquiring an identity that could have made it essential to ecommerce in India
• The nightmare started when Amazon came in. What are Snapdeal’s weapons against Amazon? Not capital, and certainly not technology
• Bahl did try to organise the long tail of retail in India and bring the small merchants online, but its GMV race with Flipkart diluted that positioning

Kunal Bahl has always had a nimble mind, as shown in his quick switching of lanes. But, looking at where Snapdeal stands today — reportedly being acquired by Flipkart in a cloud of declining business and staff cuts — Bahl was perhaps too nimble.

As founder and CEO, he steered Snapdeal through many avatars, but stopped short of acquiring an identity that could have made it essential to ecommerce in India.

Bahl failed to get into an IIT. He did sit for the joint entrance examination (JEE); he was expected to follow in the footsteps of brother Nikhil, who had joined IIT Delhi, and had told his mates his brother was coming next year.

Bahl took his unsuccessful shot at JEE as a sign that he was meant to do something else. He applied to the Wharton School, University of Pennsylvania. It was the only one in the United States that offered an engineering and business degree in five years. Bahl finished it in four to save money.

While at Wharton, he saw a business opportunity in the love of cricket among the Indian students, of whom there were many. The 2003 World Cup was the first to be streamed live online. Bahl bought a full subscription. He used to book a lecture hall every night, where he invited fellow students to come and watch the matches. The entry was free — Bahl did not want to get into trouble over re-selling a consumer subscription — so the halls were more than full every night. But he charged $5 for a samosa and a cola.

In the final year of college, Bahl set up a company, his first, called Dropps. It made detergent, which was sold in Walmart stores.

He joined Microsoft after finishing college. That year there were 120,000 applications from India for H1B visas. Only 60,000 were issued. It was like tossing a coin, one in two had to go back. Microsoft’s application for a visa for Bahl was rejected. He had to leave in three months. Years later, Satya Nadella, Microsoft’s current CEO, at a panel discussion with Bahl, called it America’s “enlightened immigration policy” that it let the young entrepreneur return to India; Bahl chuckled at Nadella’s comment, dripping with sarcasm.

The India innings

Deported from the US, Kunal Bahl came back to India in September 2007, and called Rohit Bansal.

They were together in Class XI and XII at Delhi Public School, R K Puram — the most respected in the eponymous nationwide chain of schools. They sat next to each other, talked about food, and cracked dirty jokes. They bonded over mathematics.

They studied together for the JEE. Bansal got through, and went to IIT Delhi. When Bahl came back from the US, Bansal was working with Capital One, the US financial services company, in Bangalore. He had just received his H1B visa to go to the US next year. It had been stamped in his passport — the gateway to a great life.

Kunal asked Rohit not to go, and told him they should start something together in India. Bansal comes from a small town called Malout, 45km from Bathinda in Punjab, and from a modest background. Going to the US would have been great for him.

Yet, when Bahl called, Bansal chose to stay back and set up that company Bahl was talking about.

They started a coupons business, called MoneySaver. In 2007, organised retail was taking off. There were tens of millions of people who shopped in India. It was not too much to expect that a million would buy their coupon book every month.

In a year of slumming the streets of Delhi trying to sign up restaurants, spas, and salons to get them into their coupon book, Bahl and Bansal hustled enough to get some big brands to sign up with MoneySaver, but finding consumers was far more difficult. They were sure of selling millions of coupons, but ended up selling no more than 20,000.

By early 2010, merchants had started telling Bahl and Bansal that a lot of online companies were reaching out to them to list their coupons. The duo said they could do that, too.

That Republic Day, they spent eight hours in Costa Coffee, Rajouri Garden, and came up with a name, Snapdeal, and a plan for the online business. Eight days later, Snapdeal was up on the internet. The merchants in MoneySaver’s coupon book went online.

Snapdeal was the seventh deals site. Within six months, there were 50 more. But Snapdeal, with its large supply base of merchants, scaled up the fastest, leaving behind the likes of Smile Group’s DealsAndYou. Within 14 months of launch, it had a 70% share of the market.

Funding followed, from Kalaari Capital, Indo US Ventures, and Nexus. The investors were, however, in for a surprise. In the middle of 2011, as Snapdeal lorded it over the online deals market, a lot of its merchants once again came to Bahl and Bansal, this time to say they wanted to sell physical projects online, not just deals.

The duo started listing some products on Snapdeal, which did well. The turning point was when Bahl and Bansal went to China in 2011 and saw Alibaba and the vibrant online commerce in that country. They realised how big product ecommerce could become in India. But it could not, unless it changed in character.

Ninety-three per cent of retail in India was unorganised. The other seven was never going to increase because real estate cost as a percentage of retail sales in India was 14 times that in the US. The solution had to be one that did not involve real estate cost.

Snapdeal started signing up sellers. A few months later, in December, Bahl and Bansal were telling their investors that Snapdeal was shutting down the deals business to do something completely different: an online marketplace for businesses.

In January 2012, Snapdeal became an online marketplace for products, a platform to bring together sellers and buyers.

“Everyone thought we had gone mad,” Kunal once told me. Yet, no one had a reason to complain. Ecommerce was burgeoning in India, funds were flowing, and the GMV, or gross merchandising value — the sum of the MRP of all goods sold without factoring in discounts — was rising.

In 2013, Amazon, the world’s largest electronic retailer and open marketplace pioneer, came into India. Flipkart began to offer its site as a marketplace.

And, Snapdeal? It tried to embrace the Facebook way.

The Facebook way — that didn’t lead anywhere

At a conference in 2015, Facebook presented its business as a clan of apps, a monolith that has in its belly a number of smaller apps that allow everything from chat to photo-sharing to messaging and search.

“Social is a strong leading indicator of how ecommerce will evolve. Not a monolithic platform, but an ecosystem, or a set of apps,” Bahl told me.

He did not see Snapdeal as an ecommerce company, only as one that enabled others to do ecommerce.

Snapdeal set out on the Facebook way in earnest. It acquired FreeCharge, a mobile recharge and coupon, and took it into the mobile wallet business. It acquired others: Doozton, a social product discovery technology platform; Wishpicker, a gift recommendation technology platform; group buying site Grabbon; online sports goods retailer eSportsBuy; and Shopo, an online marketplace for handicrafts. It went on to make bigger ones: RupeePower, which provided marketplace loans, credit cards, and financial services; and Exclusively, which sold designer labels. It also made a large investment in logistics company GoJavas.

Unfortunately, the Facebook way, though it works for Facebook, did not work for Snapdeal. Every pie in which it put it finger already had a chunk taken away by someone else. To mention the big ones, FreeCharge could not catch up with Paytm; Exclusively had to shut down.

Snapdeal could have absorbed those shocks had its core business of marketplace had enough resilience. But there it kept chasing GMV, which has not been debunked as an irrational parameter for deciding success and valuation. Bahl gave interviews to newspapers predicting he was going to soon catch up with Flipkart on GMV. Flipkart scoffed, investors stopped caring.

The problem with being a ‘me-too’ product

On February 22 this year, Bahl and Bansal sent an email to Snapdeal’s employees, in which they talked about making the company “entrepreneurial”. That is the ingredient that had gone out of most Indian startups.

Two years ago, while researching and reporting for a book about modern technology startups in India, I asked a large number of people if Indian e-commerce companies had stopped trying to do new, interesting, innovating things. Wasn’t cash-on-delivery their last big innovation?

Those were the days when Flipkart was blazing a trail of high valuations. A funding round of $100 million had become commonplace. “Hey,” they chastened me, “fundingraising is an art, which we have perfected.”

But fundraising can be a fickle art, as many start-ups realised when investors turned coy.

Bahl and Bansal’s email read almost like a confession: “…a large amount of capital with ambition can be a potent mix that drives a company to defocus from its core. We feel that happened to us.”

A good entrepreneur cares about customers and tries to solve their problems, which is how Uber and Amazon came up. As did Microsoft — Bill Gates built his company in the initial phase with money from IBM, which liked his software.

If you only try to replicate a model that has succeeded elsewhere, you end up being a “me-too” version of the original. And you are in trouble when the “me” — the original — comes to play in the same market.

Me-toos can flourish in China, or Russia. In those countries you have to know the right people to succeed. India, for all its quirks, embraces all kinds.

The nightmare came true for Indian ecommerce startups when Amazon came in. While our ecommerce companies were busy replicating Amazon, the original had moved several notches above.

Amazon does not think of itself as an e-commerce company, it visualises itself as a technology company. It is among Fast Company’s and Forbes magazine’s list of most innovative companies for 2016. Its streaming services for movies, music, audiobooks, and games are counted among the best. It makes Emmy-winning TV shows. Amazon Web Services has become a $13 billion business that powers Airbnb and Netflix. It is dabbling in artificial intelligence with Alexa.

What are Snapdeal’s weapons against Amazon? Not capital, and certainly not technology. What will it tell its investors, which include SoftBank, a fund house whose many deals in India under former honcho Nikesh Arora are being questioned?

The entrepreneur-investor relationships is, at best, a tricky one. Inevitably, they clash when the chips go down. And the winner of this clash is often the one with the largest holding. Now, few Indian entrepreneurs, with the possible exception of Paytm’s Vijay Shekhar Sharma, can boast of equity holdings in double digits.

Look around. Flipkart’s founders are no longer running the company. Some indicators show it is bouncing back, but it has the advantage of being the first, the biggest, the most funded, and the highest-valued commerce in company in India — none of which can be said for Snapdeal.

Bahl did try to organise the long tail of retail in India and bring the small merchants online, but its GMV race with Flipkart diluted that positioning. The “small merchants” identity went to ShopClues, which thinks of itself as online Karol Bagh, after the middle-class shopping haven of West Delhi.

Lessons to be shared

Bahl once went to meet DPS R K Puram’s principal. He told the principal that he was a former student of the school, and a successful entrepreneur. He said he would love to come in once a week and teach a course on entrepreneurship.

The principal told Kunal to come back next year, that the school’s session had started and he could not accommodate him in the middle of it.

Kunal called him two months later. “Have you changed your mind?”

He hadn’t. “I told you to come next year.”

As a last ditch attempt, Kunal said he could organise a fundraiser for the school. But the principal was not impressed. He said: “Bhagwan ki daya se bahut paisa hai hamare paas. (With the blessings of the almighty, we have a lot of money.)”

Kunal did not call again. Imagine the lessons he might have taught.

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