What the Flipkart deal means for Indian startups in six points

Bangalore: The world’s largest retailer, Walmart Inc., announced on Wednesday that it has agreed to buy a 77% stake in Flipkart for $16 billion, valuing India’s largest internet startup at a whopping $21 billion — something that was widely expected and has been reported by numerous media outlets, including Mint, over the past few weeks and months.

For the Indian startup and venture capital (VC) ecosystem, this deal is its most triumphant moment yet, marking a remarkable victory for an internet startup that launched a decade ago in a country that has long been starved of big startup exits. This deal also has huge implications for multiple stakeholders across the board.

Why is the Flipkart-Walmart deal so important?

The deal completely changes the e-commerce landscape in India and intensifies Walmart’s global battle with Amazon.com Inc., its biggest rival in the U.S., with tens of billions of dollars at stake for both sides. While it was a positive outcome for Flipkart and all its shareholders, the e-commerce landscape in India will now be largely dominated by the two American giants.

What does this deal mean for Walmart?

The Flipkart deal could be described as the most significant acquisition in Walmart’s history, and it was pushed by CEO Greg Penner, heir to the multibillion-dollar Walton family fortune. For Walmart, the deal represents a fight for everything it has built over the past five decades and a huge bet on the future of retail. Flipkart will be the centerpiece of Walmart’s global e-commerce ambitions, given India’s position as one of the world’s last remaining major internet economies.

What does this deal mean for Amazon?

While Amazon missed the opportunity to buy Flipkart, it will be business as usual for the world’s largest online retailer. Amazon insiders say they have long predicted a situation where they might have to fight Walmart in India. Moreover, from Amazon’s perspective, its dominance as a global online retailer forced its biggest US rival, Walmart, to spend $16 billion on what is surely one of the most expensive acquisitions in history — a clear confirmation that Walmart is trying hard to make up for lost time by not investing more aggressively in e-commerce earlier. In fact, the Flipkart acquisition spooked Walmart investors and wiped more than $10 billion off the US retail giant’s market value, while Amazon shares actually closed down 1% on Wednesday.

Who benefited from this agreement?

All stakeholders—including investors, founders, and employees. Many current employees became overnight millionaires, while early investors like Accel Partners and Tiger Global Management, and even late-stage investors like Japan’s SoftBank Group, made a fortune—Accel, Tiger, and Softbank combined have made more than $8 billion.

How will the Flipkart acquisition help the Indian startup ecosystem?

This deal is expected to attract the attention of many large, foreign strategic investors who have been eyeing India for a long time. Broader startup funding is expected to pick up and the number of start-ups is also expected to pick up after two consecutive years of decline. The VC ecosystem has also received a huge boost with this deal and this exit is expected to propel venture capital activity in India for at least another decade.

What does this mean for Indian e-commerce?

Indian e-commerce has been both a winner and a loser from this deal. While the Flipkart buyout marks the biggest win ever for an Indian internet startup, it also means that for the foreseeable future, the online retail business in India will be tightly controlled by two major American companies — Walmart and Amazon. It will be a fierce battle for supremacy.