This post was originally published by The Telegraph, Kolkata .
Letsbuy, an e-commerce start-up by two young entrepreneurs, has just been sold for a rumoured $25 million. Paran Balakrishnan on the breakneck speed at which the duo went from modest beginnings to hitting the big time
It has been a roller-coaster ride of monumental proportions for youthful entrepreneurs Hitesh Dhingra and Amanpreet Bajaj. Just 15 months ago, in December 2010, they were two young hopefuls running a shoestring start-up firm from a small, dingy office in New Delhi’s Punjabi Bagh. When a team of deep-pocketed venture capitalists came to size them up and offer multi-million dollar funding, they didn’t have enough chairs to offer them.
Cut to two weeks ago when word leaked out that Dhingra and Bajaj’s e-commerce site, Letsbuy, was being swallowed up by its powerful rival, Flipkart, for a rumoured $25 million (about Rs 125 crore). The news capped a string of extraordinary events when life seemed to be moving at warp speed for the two 31-year-olds in the cut-throat world of business. “The announcement was premature and it came barely two weeks after we met Flipkart’s management team for the first time,” says Dhingra, who still looks a bit stunned by the speed of developments.
But Dhingra should be used to swiftly changing fortunes by now. Ever since they started up, life has moved at a helter-skelter speed. In December 2010, when they first got funding of $6 million, they were running a company that operated from a 4,000-sqft office and which had 13 employees. Letsbuy began by selling electronic goods — everything from televisions to PCs down to tiny items like digital thermometers — and the two frequently had to pitch in and carry their products up three flights of stairs to their office. “We did everything. We took things up several flights of steps. We had them packaged. We even personally home delivered to some customers in Delhi,” says Bajaj.
Today, Letsbuy’s corporate headquarters is spread out over 60,000 sqft, sprawled over four-and-a half floors in one of Gurgaon’s prime industrial districts. The company has 370 employees and another 100 working on contract in warehouses across the country. “We’re hiring one new person a day,” says Dhingra. The newcomers include graduates from the Indian School of Business and the Indian Institutes of Management who’re all attracted by the bullish predictions for e-commerce and the pace at which it is growing. Says Bajaj: “E-commerce is a success story in India.”
E-commerce is, of course, still in its infancy in India and many of the oldest players in the game are still just about three years old. But in the last one year, business has suddenly taken off and has been growing in leaps and bounds for a lot of the ambitious start-ups. The front runner in the game is Flipkart which copied the model established by Amazon in the US, and established its presence initially as a major league bookseller and then expanded into electronic goods and other items. Buyers click onto the Flipkart site and place their orders. The wares are then delivered home and the items paid for on delivery.
Dhingra and Bajaj say it’s important to understand one element about e-commerce. The crucial part of the business is not necessarily technology — when asked, Dhingra and Bajaj look a bit sheepish and say they know enough “to ensure the tech guys don’t take us for a ride”. They say it’s actually logistics and being able to ensure that a product gets to the customer as quickly as possible — without mishap. For that it’s essential to build warehouses all over the country. Flipkart, for instance, has over the last 18 months built a giant network of warehouses. It even has its own courier teams in 37 cities. Bajaj’s background, incidentally, is in logistics. He was at consultancy firm Ernst & Young where he dealt with fields like supply chain and logistics. Dhingra, before becoming an entrepreneur, was at an infotech distribution firm in Singapore. He also worked in an online advertising start-up.
About 50 e-commerce sites have been furiously jockeying for customers’ eyeball time in recent months. But Letsbuy, which focused on electronic goods at the start, found itself in a strong niche. In 2010-2011, the firm did business worth between Rs 10 crore and Rs 15 crore, according to its founders. This year that has risen by a colossal 900 per cent to about Rs 150 crore. They predict they’ll be able to do business worth Rs 300 crore to Rs 400 in the coming year — but that will need a large cash infusion.
Dhingra and Bajaj reckon that Letsbuy has, over the last few months, shot into second position in the world of e-commerce — though they are admittedly far behind Flipkart (which has sales of between Rs 400 crore and Rs 500 crore). And in October, to ensure that growth didn’t slow for a moment, Letsbuy also began muscling its way into office products and kitchen appliances. Soon afterwards it also branched out in other directions and added an unusual mix of watches, toys, sporting goods and even musical instruments to its online emporium. Says Dhingra: “We did surveys and realised there were huge gaps in these categories.” Today it sells about 200 watches a day and around 100 toys. “We even stock arrows for archery,” adds Bajaj with a grin.
For the time being the two entrepreneurs say they’ll be staying on board though they haven’t worked out the details of how they’ll divide responsibilities with Flipkart’s Sachin Bansal and Binny Bansal (Flipkart’s two founders aren’t related). And Letsbuy will continue to function as an independent e-commerce site with its own suppliers. The crucial change that will take place is that Letsbuy will start using Flipkart’s giant warehousing network.
How do the two young businessmen feel about selling Letsbuy? They obviously have mixed feelings but recognise that there would have been many hard battles ahead for control of the e-marketplace. Crucially, they were reportedly having a struggle raising more cash from the venture capitalists which would have made the future tough going. All the successful e-commerce sites like Flipkart, Snapdeal and Letsbuy are raking in cash but they are spending it even faster in the bid to stretch their tentacles across the country and build unbeatable networks. So they need to constantly go cap-in-hand to key venture capitalists like Tiger Global, Accel, Helion Ventures and Sequoia Capital which are some of the major players in the game. One reason the Flipkart-Letsbuy deal worked out so quickly is that the two companies have common investors, Tiger Global and Accel, who’ve obviously played a big role in bringing the two companies together. Says Dhingra: “In two-and-a-half years we’ve managed to exit profitably.”
You could even say that Dhingra and Bajaj are accidental entrepreneurs. Dhingra, for instance, had nothing in his background that suggested that he might become an entrepreneur. His father was an executive at IFFCO and his mother worked at Syndicate Bank. His wife is a teacher. By contrast, Bajaj’s family has a trucking business. He says: “I’ve always been in logistics. But I wanted to study and so I did an MBA and then joined a consulting firm.”
The two youngsters were in college together in Delhi and then went their separate ways to business school and first jobs. They met after a seven-year gap at a friend’s wedding. The friend, as it turned out, was waxing eloquent on e-commerce and the opportunities it presented. “He said e-commerce is hot and he was getting into it,” says Bajaj laughing. In the event, it was Dhingra and Bajaj who grabbed the initiative and who are walking away with the millions.