Sachin Bansal and Binny Bansal, the founders of Flipkart, India’s largest e-commerce marketplace, are now ranked among the top100 richest people in India, with a net worth of $1.3 billion each, at a time when opinion is divided on whether Indian startups are over-valued.
The Bansals’ swift ascent — they are the youngest in the list — is not surprising, given that the company raised over a billion dollars in just the last one year. Valuations of e-commerce companies have gone through the roof, and with that the value of shares that founders hold.
Flipkart also came out with its own valuation, for the first time, although the number was known in industry circles based on gross merchandise volume of products sold on their portals, and on investment valuations. The company, backed by DST Global, Qatar Investment Authority and Tiger Global, is now worth $15.2 billion, according to an official response. The company shifted base to Singapore for tax purposes last year, and is speculated to be preparing for an IPO. The large majority of its employees are in India.
Prominent investors such as Vinod Khosla have said that e-commerce firms such as Flipkart and Snapdeal are over-valued. Venture capitalists have invested $2.33 billion in Indian start-ups in the June quarter alone, according to data by CB Insights, almost three times of what they invested in the same period last year. Ratan Tata, who has been among India’s top individual investors in some of the hottest early-stage startups such as Ola, Snapdeal and Urban Ladder, has similar views as Khosla. “It’s true valuations are very high and valuations seem to be driving these companies more than the more traditional metrics of valuations,” he said in June.
Others have a different view. Alok Goel, managing director, SAIF Partners, said that in any segment of the industry, there are about 10-20 startups that are being funded, and that e-commerce firms are not over-valued. “If there are 20 companies getting funded, roughly four will make it big and 16 will fail. But no one knows which one, and hence investors will put early bets,” he said in this interview.
The fact remains that none of them — from Flipkart to Paytm — is making any profits, nor close to being out of the red. But they are hiring aggressively, including experienced executives from the Silicon Valley who have the skills to manage fast-growing startups to the next level. And as they get more funding, and generate higher sales, expect more entrepreneurs in high-valued startups to feature in the top 100 richest Indians. Profits, however, will take time coming.