The Kalaari-Snapdeal tango reaches the exit door

While many sections of the press are breathlessly covering every nip and tuck of the Flipkart-Walmart-Amazon ménage à trois, in another part of the country, Flipkart’s forgotten competitor is silently playing out the last act of a dance drama of its own.

Fading of the negative energy

It is usually quiet in the Gurugram office of Snapdeal. The nervous energy of last year is gone. People come to work, and eight hours later, leave. The company is not innovating anymore; it wants to hold what it has. There is little communication between the management and staff.

But over the last two weeks, a few whispers have filtered through from several closed-door meetings. And like every well-kept secret, it goes around the office in a matter of days. There is a deal brewing. One of Snapdeal’s investors is getting an exit. Who? Kalaari Capital, two people with knowledge of the deal told The Ken.

The Vani Kola-led fund held is getting bought out by Snapdeal. An exit, finally.

“There is pressure from the investors to start giving them exits,” says a former Snapdeal employee aware of the goings-on at the company. He asks not to be identified as his current company does not allow him to talk to the press. “The only possible right now is Kalaari. And that’s what they’re getting.”

How big is the exit?

While neither Snapdeal nor Kalaari Capital is officially ready to confirm a number, the venture fund is said to be in line to receive Rs 60-70 crore (~$10 million) for its 8% stake in the once-unicorn. This price point, therefore, implicitly values Snapdeal at Rs 750 crore (~$112 million). How Snapdeal went from being worth $6.5 billion to just about $100 million is a fascinating story, but it is a story with the last chapter yet to be written. The story that is now well and truly finished though is the one involving Kalaari’s tango with Snapdeal.

And it is one worth telling as it shines a light on something that rarely gets coverage in India—the twists and turns of a VC investment in a startup over a complete lifecycle, from start to exit. VC investments are usually covered in broad brushstrokes and are treated as arcane black-box systems devoid of detail and context. But going beyond the cosmetic layer gives us an opportunity to develop a deeper understanding of how a VC thinks through each investment she makes.

So, let’s take a deeper look at Kalaari’s journey in Snapdeal.

Before Snapdeal was Snapdeal, it was MoneySaver, a retail couponing startup founded by Kunal Bahl and his school friend Rohit Bansal, in 2007-08. The interesting part about this startup is that it was originally envisaged as offline business. At that point in time, Groupon, a US-based digital coupon site, was one of the hottest and fastest-growing startups in the world. Bahl and Bansal set out to build a similar business in India but felt that they need to build it as an offline business given the low internet penetration in the country at that point in time.

Similarly, before Kalaari was Kalaari, it was NEA-Indo-US Partners. NEA or New Enterprise Associates is a blue-chip US-based venture capital firm that set up an India-focused fund of $189 million in 2007 and entrusted it to three principals—Vani Kola, a serial entrepreneur who shifted from the US to India to start the fund, Vinod Dham, the inventor of Intel’s Pentium microprocessor, and Kumar Shiralagi, a career venture capitalist previously with Intel India.

“Vani was our first institutional investor, and we had done the rounds of all the 13 other VCs by then,” Bahl recalled in an earlier press article. “What could she have possibly seen in us? We were two struggling 26-year-olds selling physical coupon books!” For her part, Kola was apparently impressed by the duo’s ambition and drive.