Flipkart: Million-Dollar Hiring Mistakes Translate Into Billion-Dollar Valuation Erosions
As the week drew to a close, a story that broke headlines in the world of Indian e-commerce was the departure of Flipkart’s Chief Product Officer, Punit Soni. Rumours had started swirling about Punit Soni’s impending exit since the beginning of the year (link), almost immediately after Mukesh Bansal had taken over from Binny Bansal as Flipkart’s CEO (link).
Punit Soni was among a clutch of high-profile hires made by Flipkart in 2015, rumoured to have been paid a million dollar salary (amounting to 6.2 crores at then prevailing currency exchange rates — see this and this). This was in addition to any stock options he and other similar high-profile hires earned.
One decision that Punit Soni was most closely associated with was the neutering of Flipkart’s mobile-web execution, where he killed Flipkart’s mobile site, forcing users to download the app on smartphones. The mobile app itself was poorly designed, had a mostly unusable interface, and was riddled with bugs to the point of crashing every few minutes. I had written in detail on its mobile app’s state in 2015 (see this article in dna, or from my blog). At the time I had expressed my astonishment that Myntra, the fashion e-tailer that Flipkart acquired and which had gone app-only, had a mobile app that was NOT optimized for the iPad. The same was the story with the Flipkart app — no iPad-optimized app, but a “universal” app that ran on both the iPhone and iPad devices. Even today, the Flipkart iPad app does not support landscape-mode orientation, even as Amazon’s iPad app has grown from strength to strength.
A statement made by Punit Soni in 2015 revealed a disturbing focus with technology instead of the customer experience — “The Mindshare in the Company Is Going to Be App Only” (link) — a case of techno-solutionism if you will. At one point, there were strong rumours of Flipkart going app-only (link) — killing off its desktop website completely. I had written on this mobile-only obsession ( Mobile advertising and how the numbers game can be misleading, Mobile Apps: There’s Something (Profitable) About Your Privacy).
If hiring Punit Soni was a million-dollar mistake, or whether there was simply a mismatch of expectations between employee and employer, or whether Punit Soni’s exit the inevitable consequence of the favoured falling out of favor with the ascension of a new emperor, it does not appear as if Flipkart has learned any lessons. His replacement is said to be yet another ex-Googler, Surojit Chatterjee.
Whether Surojit will fare any better than his predecessor is best left to time or tea-leaf readers, this hire however does exemplify the curse of VC money in more ways than one. First, free money leads to the hubris of mistaking outlay with outcomes — splurging a million dollars on a paycheck with the outcome of success in the e-commerce battles. Second, VCs pay the piper (Flipkart is nowhere close to being profitable), and therefore they decide the tune. If VCs want an executive from a marquee company like Google, Flipkart’s founders may well have no say in the matter. Third, in the closed network of venture funding and Silicon Valley, the you-scratch-my-back club ensures lucrative job mobility for professionals and VCs alike.
Costly though million-dollar hiring mistakes can be, they can translate into even bigger billion-dollar erosion in valuations, as Flipkart would have found out, when Morgan Stanley Institutional Fund Trust Mid Cap Growth Portfolio, Fidelity Rutland Square Trust Strategic Advisers Growth Fund, and Variable Annuity Life Insurance Co.’s Valic Company I Mid Cap Strategic Growth Fund marked down the value of their Flipkart holdings by 23%, 23%, and 11% respectively ( Flipkart Valuation Cuts Spark Concern for India’s Billion Dollar Startups — WSJ).
Is Flipkart listening? In its battle with Amazon, it cannot afford to ignore the Whispering Death.