After the Indian e-commerce firms failed to figure out how to merge to fight Amazon, Snapdeal’s largest investor is backing Flipkart in a big way.

(Bloomberg Gadfly)—Just as we started to question Masayoshi Son‘s sanity for attempting to buy, well, everything, the Japanese visionary pulled off an impressive judo flip in India.

Masayoshi Son, SoftBank

Masayoshi Son

As the largest backer of e-commerce startup Snapdeal, Son’s SoftBank Group Corp. had been trying to engineer a merger with Flipkart Group so the combined entity could better take on Inc.

Flipkart is No. 76 in the Internet Retailer 2016 Asia 500, Snapdeal is No. 176 and Amazon is No. 1 in the Internet Retailer 2017 Top 500 and No. 4 in the Asia 500.

Like petulant children refusing to eat their greens, Snap’s co-founders scuttled that deal despite it being best for the company’s health.


“No worries,” thinks Son. “I’ll invest in Flipkart instead.”

In the world of venture capital, investing in a portfolio company’s rival breaks an unwritten rule (and often written ones, too). Thankfully for Son, he has $100 billion and a different entity through which to funnel the money: SoftBank Vision Fund.

With Amazon pledging to spend $5 billion in India, the country’s e-commerce market is beginning to resemble an arms race, with cash the biggest weapon. It also means each funding round becomes a zero-sum game: More money for Flip is bad news for Snap.

SoftBank Vision Fund is injecting about $2.5 billion into Flipkart, split between new cash for the company and the purchase of some of Tiger Global Management’s stake, according to Bloomberg News’s Saritha Rai. That takes total investments in Flipkart past $6 billion, according to Crunchbase, leaving it with more than $4 billion in cash and a valuation of almost $12 billion.

Venture capitalists know most of their investments will become flops, so they bet on massive returns from a choice few. Son is being pragmatic here, ensuring he has a stake in the Indian e-commerce market either way.


His investment paves the way for three possible outcomes:

Snapdeal somehow manages to win the battle — perhaps via a merger elsewhere, or fresh funds from a new sugar daddy — and Flipkart loses. This is the least likely scenario now that Son has backed the new horse and has a huge pile of cash.

Flipkart wins and Snapdeal dies. This could happen quickly or slowly, but either way Son comes out on top. India can probably only support one major player outside of Amazon, and so whichever holds on long enough has the potential to reap a huge windfall. A short-term loss on Snapdeal should be more than compensated for by an outsize return longer term.

A third scenario is one that Son is probably also counting on, which is that his shift to Flipkart weakens Snapdeal to the point where he can buy it on far more favorable terms later on, should he want to. The merger’s failure this summer could actually mean Flipkart dodged an overpriced acquisition.


Snapdeal clearly thinks it’s bigger than it really is. But like in judo, Son has used that perceived size against it to win this bout.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.