Flipkart's first VC investor thought it would only take $500 mn to break even

Monumental. That's how Accel Partners described portfolio company Flipkart's $16 billion acquisition by US retail giant Walmart Inc. The venture capital firm also called itself a "stalwart supporter" of Flipkart's founders Sachin Bansal and Binny Bansal in a blog that traced Accel's journey with the country's most valuable startup.

Accel wrote Flipkart's first big cheque - $800,000 in seed capital back in 2008 - and also went on to invest more than $100 million in subequent rounds. While Accel has not sold all of its shareholding in Flipkart, which is worth around $1 billion, the partial exit will still rank among its best global exits.

Its first investment in Flipkart came at a time when the Bengaluru-based startup was struggling to raise money. Big players like Sequoia Capital had passed up on the opportunity to invest in Flipkart several times.

Accel's blog, co-authored by partners Subrata Mitra and Sameer Gandhi, offered several explanations for Flipkart's difficulties at the time. Among those reasons was that e-commerce was still at a nascent stage in India, and even organised retail barely held a toehold in what was a relatively small domestic consumer retail market
"A company of the sheer scale and value of Flipkart was nearly unimaginable back in 2008," the blog said.

Recognising the challenges but also identifying the opportunities, Accel eventually decided to invest in Flipkart out of its $65 million seed and Series A fund.

Accel was "taken by the founders’ penchant for constant innovation, experimentation, and ability to look at every obstacle as an opportunity."

In the blog, Accel's partners admitted that they were way off in their original assumption was Flipkart would require around $500 million in additional capital to reach break-even, despite realising that the company would need to be financed in an unprecedented fashion.

As it turned out, the rise of heavily-financed competitors such as SoftBank-backed Snapdeal, Alibaba-backed Paytm and Amazon put paid to any such hopes of a quick road to profitability for Flipkart. The firm had received more than $7 billion in funding before the Walmart deal and is yet to break even.

However, they recognised that Flipkart had "fundamentally reshaped" the retail, payments, and logistics sectors in India and abroad.

Accel said that Flipkart's success was mostly due to the company building its own delivery network and pioneering cash-on-delivery models.

"One thing that still sticks with us is how they [Bansals] promised to usher in a revolutionary customer-first approach to their business, which, even though Flipkart has scaled thousands of times since, remains one of the core principles of the company even today." wrote Mitra and Gandhi.

Accel's exits
Accel India operates under US-based Accel’s banner but is managed and run independently. Accel Partners has had some stellar exits globally in recent years, particularly in 2015.

Atlassian, a tech company in the US, went public with a $1.1 billion initial public offerings. According to CB Insights, Accel Partners had invested in a $60 million secondary market transaction in 2010, when Atlassian was valued at $400 million.

Another Accel portfolio company, US-based ed-tech firm Lynda.com, was acquired by social networking platform LinkedIn at a valuation of $1.5 billion.

In India, Accel had a good exit, when cab-hailing app TaxiForSure was acquired by rival Ola for $200 million in a cash and stock deal. That was the second largest deal in the consumer internet space in India, behind Flipkart’s acquisition of fashion e-tailer Myntra in 2014.