Failed Startups In India | Case Study of 21 Promising Indian Startups That Tanked

Sustaining a startup is perhaps the most difficult phase for any entrepreneur. While everyone advocates entrepreneurship as a shortcut to mint money and get rich scheme, the uncertainty and constant pressure to perform is a huge responsibility even for the toughest of individuals. The team at StartupTalky decided to analyze some unsuccessful startups in India.

As of April 2024, India is home to over 1.28 lakh startups, a significant increase from just 450 in 2016, making it the third-largest startup ecosystem in the world.

The startup failure case study discussed below covers unsuccessful entrepreneurs' stories in India and will give you insights into the failure of some Indian startups that were destined to reach new heights. Learn from the mistakes these Indian ventures made so that you don't end up repeating the same.

Below is the list of failed startups in India:

Yumist

Serving home-cooked food is becoming a trend among today’s startups. Yumist was one such venture. It was launched in 2014 to cover the daily meals segment in India, a largely untapped market. The founders were Alok Jain and Abhimanyu Maheshwari who managed to raise nearly $3 million in funding. It is one of the top 10 failed startups in India.

Reason for failure: A business model with a high burn rate that required extensive capital beyond Yumist’s reach for achieving growth. Enough funding was also not available to run the startup. So the startup had to shut down. The Yumist case study is often mentioned when one talks about famously failed startups in India.

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Dial-A-Celeb

Let’s be honest, a chance to talk with your favorite celebrity is on everyone’s bucket list. Banking on this wish, Dial-A-Celeb was a short-lived yet exciting concept founded in 2016 by Gaurav Chopra and Ranjan Agarwal and they could be considered as unsuccessful entrepreneurs in India. In addition to video chats with actors and celebs, the platform also allowed customers to get autographed items such as toys and diaries. However, the startup closed its doors within a year.

Reason for failure: The major reason for Dial-A-Celeb's failure was that celebrities were coming up with their apps to interact with fans. This trend resulted in immense competition for Dial-A-Celeb and a direct impact on profitability. Dial-A-Celeb was shut down in 2017. Know your rivals well and also brace yourself for competition that may arise in the future.

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Stayzilla

Once on the path to becoming the largest homestay network in India, Stayzilla is reminiscent of a riches-to-rags story. With around $33.5 million in funding and establishing itself in the hotel-rental segment, this brainchild of Yogendra Vasupal, Rupal Yogendra, and Sachit Singhi started crumbling after it failed to repay vendors. The troubles were then aggregated and in February 2017, Yogendra Vasupal officially announced the closure of Stayzilla's operations.

Reason for failure: Stayzilla was way ahead of its time when launched. People were not ready for such Hi-Fi technology. However, the company somehow managed some time on the funding it received. But when people started becoming familiar with online booking, new competitors emerged with better discounts and deals. Stayzilla was unable to provide the same due to the unavailability of funds. Additionally, legal disputes and a lack of focus on growing the business destroyed Stayzilla.

Roder

Inter-city travel has become a mainstream requirement— traveling 100 km or more every day is deemed as just another day to some. The reason may be anything: office location, excursion, meeting a friend, etc. These journeys can burn a hole in the pocket. Roder (earlier known as Insta Cabs) was founded by Abhishek Negi, Ashish Rajput, and Siddhant Matre in 2014 to ease inter-city rides. One of Roder's highlights was offering one-way rides at nearly half the market price. It is one of the famous startups that failed in India.

Reason for failure: The inability to cope with customer acquisition costs and not keeping up with the user retention rates. Moreover, increased competition from experienced ventures like Ola and Uber added to Roder's woes. Having a bigger competitor that is more aggressively funded makes the entrepreneurs lose their zeal. And this is one of the major causes of entrepreneurial failure.

Turant Delivery

The B2B startup was an intra-city logistics provider that was launched in 2015 to bring a new flavor to the Indian logistics industry. The algorithm followed by Turant Delivery permitted it to offer services at a price as much as 15% less than what fellow competitors charged for the same trip (as per the endeavor’s claim) and is one of the top 10 failed startups in India.

Reason for failure: The company did not have the funds to sustain itself in the long run. A logistics service provider needs intensive cash flow to run. Hence, funding is essential for any logistics startup.

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Finomena

Students are the new target audience when it comes to offering small loans. Acting on this, Finomena came out with an app that provided ‘EMI without cards’. The aim was to allow students to purchase mobile phones and other electronics on a loan. In March 2016, Finomena raised its seeding funding and then made quick strides before going down in 2018.

Reason for failure: Finomena is counted amongst those Indian startups that failed unexpectedly despite having enough funding. It was a fintech startup that focused on providing loans, a segment already dominated by established players before its entry. Fierce competition from rivals like ZestMoney was the major reason behind Finomena's failure. Also, burning cash where it was not needed was another cause. Before you launch your startup, check if the target segment has reached its saturation levels. Also, use your funding wisely!

MrNeeds

MrNeeds was a grocery delivery startup founded by Hitashi Garg, Yogesh Garg, Ravi Wadhwa, and Ravi Verma. It provided a subscription-based grocery delivery service. People could easily pay for their subscriptions and receive their groceries on the set date. MrNeeds, a Delhi-based startup, did well with more than 10,000 deliveries in Noida alone.

Reason for failure: MrNeeds was a subscription-based Indian startup that failed. Hence, turnover might not have been that great given how frugal Indians usually' tend to be. So it is possible that the startup had a lack of funding to sustain itself. The entry of funded grocery delivery startups like Grofers and Big Basket can also be another reason for MrNeeds' failure. It is considered as one of the top 10 failed Indian startups.

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CardBack

A fintech platform founded by Nidhi Gurnani and Nikhil Wason, CardBack lets credit and debit cardholders with multiple cards know which card provider would offer the best rewards and points on transactions. The venture was funded by famous angel investors such as Alok Mittal and Sunil Kalra and managed to raise $170k in five years. It is one of the unsuccessful startups in India.

Reason for failure: CardBack could not secure funds after 2014, and the number of multiple cardholders in India was less than what the fintech startup had expected. Hence, the main reason for CardBack's failure was its over-expectation of market growth. The plan to shift the headquarters to Singapore, where the multiple credit card culture abounds, also failed. The failure to move to Singapore was the final nail in the coffin for CardBack.

Overcart

Overcart was the first Indian fintech player to provide a platform for purchasing refurbished, overstock, and pre-owned items. It was founded in 2012. People could buy and sell their electronic devices on the website. Overcart received substantial angel investment; however, the company failed to capitalize on it.

Reason for failure: Overcart did not seem to be very focused on its business. Unsatisfactory services such as late delivery, poor quality of purchased items, and bad customer service led to customer rebuke, thereby causing Overcart to shut down in 2017.

RoomsTonite

Last-minute hotel bookings usually end up in a mess and utter disappointment. RoomsTonite was launched to deal with this issue. It received around $1.5 million in funding and ceased functioning by September 2017. The startup rose and crumbled within three years! It is one of the unsuccessful startups in India.

Reason for failure: Having strong rivals in the form of MakeMyTrip and OYO was one reason for RoomsTonite's failure. The credit crunch also added to RoomsTonite's woes. Facing a sudden reduction in the loan's availability is called a credit crunch. Roomstonite faced a credit crunch in 2016 which didn’t allow it to flourish. It is one of the famous startups that failed in India.

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Doodhwala

Founded in 2015, Doodhwala was a subscription-based platform that delivered milk and grocery items directly to the customer's doorstep. Founded by Ebrahim Akbari and Aakash Agarwal, Doodhwala claimed to complete about 30,000 deliveries in a day. It is also considered one of the top failed startups in India.

Reason for failure: According to experts, lack of funds and tough competition from the big shots like BigBasket, Milkbasket, and SuprDaily caused Doodhwala to shut down. It is a prime example of startups that failed in India that failed due to strong competitors.

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Russsh

Russsh, one of the failure companies in India, was founded in 2012 by Bharat Ahirwar. Russsh offered both first-mile and last-mile on-demand delivery services to individuals and businesses. The company claimed to have a database of over 50,000 loyal clients and completed 500,000 transactions. However, on June 3rd, 2019, the company announced its closure and is considered a failed business in India.

Reason for failure: The major reason for Russsh's failure was the lack of funds. It was a self-funded startup and in the absence of enough funds, Russsh was unable to resist the intense competition from its rivals. Bharat Ahirwar also admitted that being a single-founder venture and the absence of a strong team were equally responsible for Russsh's shutdown.

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Koinex

Rakesh Yadav, Rahul Raj, and Aditya Naik founded Koinex in August 2017, and in no time the company established itself as India’s largest cryptocurrency exchange. With a user base of over 1 million, Koinex claimed to have a trading volume of over $3 billion and the successful execution of 20 million+ orders.

Reason for failure: Koinex suspended its services on 27th June 2019. The cryptocurrency trading business has seen many ups and downs in India and this instability affected Koinex. The founders stated the lack of a clear regulatory framework for cryptocurrencies in India to be a major deterrent that prevented them from running Koinex's operations smoothly. Koinex is one of the famous startups that failed in India.

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DocTalk

Founded in 2016, by Krishna Chaitanya Aluru, Akshat Goenka, and Vamsee Chamakura, Doctalk connected doctors with patients. Through the Doctalk app, one could find good doctors in the vicinity and after just one in-person visit, the patient could connect to the doctor through the Doctalk app for further consultation and queries.

The patients had to pay a subscription fee, whereas the doctors were charged an initiation fee. In 2018, Doctalk pivoted to a new business model wherein it built an electronic medical record (EMR) solution to help doctors write digital prescriptions on customized prescription templates. The EMR business was launched under a new brand name 'Pulse' and was sold to the doctors as a tool that let them digitalize the entire consultation, and share the same with the patients.

Reason for failure: Doctalk's pivot from its initial business model into the electronic medical record solution (EMR) business was not successful; it is often cited as the cause of DocTalk's closure by company insiders. It is considered as one of the biggest startup failures in India.

LoanMeet

P2P lending platform LoanMeet was started in 2015 by Ritesh Singh and Sunil Kumar to help small businesses grow through ultra-short-term loans (for 15, 20, or 30 days) for buying inventories. LoanMart's services included B2B marketplace financing, working capital financing, cash credit line, and channel financing in the range of Rs 5,000 to 5 lakh for a period of 15 days to 9 months. The company claimed to have an average lending ticket size of Rs 50,000 at around an 18% interest rate.

Reason for failure: LoanMeet raised funding from Chinese investors Cao Yibin and Huang Wei in 2017 but failed to secure any funding after that. LoanMart's shutdown is attributed to the lack of funds and tough competition from players like Capital Float, Loan Frame, and Happy Loan.

Houseparty

Houseparty was a social media and video chat application that was founded in 2016 by Ben Rubin, Sima Sistani, Itai Danino, and Scott Ahn. The app gained popularity for its unique feature that allowed users to connect with friends in group video calls and play games together in real-time.

Reasons for failure: Houseparty’s closure was influenced by multiple factors, including the decline of the pandemic, insufficient funding, and Epic Games' prioritization of other areas, and is considered one of the biggest startup failures in India.

Dark Sky

Dark Sky was a weather forecasting app that provided hyperlocal weather information and accurate forecasts to users. It was founded in 2011 by Adam Grossman and Jack Turner. Dark Sky gained popularity for its user-friendly interface and precise weather predictions, which were based on real-time data and advanced algorithms.

Reasons for failure: Sky announced that it had been acquired by Apple and would be discontinued on other platforms, including Android. The acquisition by Apple led to the dissolution of Dark Sky as an independent entity, and its features were integrated into Apple's own weather services.

ShopX

Amit Sharma and Apoorva Jois founded the startup, which had secured a total funding of $56.4 Mn from multiple rounds since its inception. The startup had received backing from prominent investors, including Infosys co-founder Nandan Nilekani and Fung Investments.

Reasons for failure: The B2B e-commerce startup operated by 10i Commerce Services had to close its operations and file for bankruptcy. In a filing with the Registrar of Companies (RoC), the startup informed its board that it faced challenges in generating sufficient cash flow or raising new capital through the sale of stakes. It is considered one of the top 10 companies that failed in India.

Lido Learning

Lido Learning was a Mumbai-based Indian educational technology (EdTech) startup that focuses on providing online education. February 2022, Lido Learning made headlines as the first tech startup to lay off more than 150 employees, using the term "pink-slipped," which raised concerns about the company's employment practices.

Reasons for failure: Lido Learning faced a concerning situation when payments to their teachers and employees were not being adequately taken care of.

Amazon Food, Distribution

In May 2020, Amazon Food entered the competitive Indian food delivery market. However, after trying it out for more than two and half years, Amazon decided to shut down its food delivery platform, which was being piloted in Bengaluru, India, by 29 December 2022.

Reasons for failure: Amazon Food failed in India due to stiff competition from established players like Zomato and Swiggy, localization challenges in catering to diverse culinary preferences, operational complexities in building a reliable network of restaurants and delivery partners, and broader cost-cutting measures undertaken by Amazon in a challenging economic environment.

Koo App

Koo was an Indian-language microblogging site designed for connecting, commenting, and engaging. The platform was available in multiple Indian languages and included features such as English-to-regional language keyboards, local language news feeds, and hyper-local hashtags. It allowed users to express themselves on various topics through text, audio, and video.

Reasons for failure: Koo shut down after failing to secure deals with several major internet companies, conglomerates, and media houses. Although Koo had successfully expanded to Brazil, gaining over 1 million downloads within 48 hours of its launch, it struggled to gain traction in the Indian market. It is considered as one of the famous failed companies in India.

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List Of Other Failed Startups In India

Main Reasons Why Startups Fail in India

The above-mentioned examples shed light on major issues that are responsible for the failure of nearly 90% of the emerging startups in India:

• Lack of funds: On close observation, it is evident that insufficient funding or the lack of it caused most of the startups to shut down.
• Highly anticipated model, not in sync with the nature and lifestyle of the Indian population: Some of the startups listed above failed because their highly anticipated models were not appropriate for Indians. Startups should either wait for the right time or educate their future consumers about their technology in advance. Also, the company should pivot only after a thorough market study.
• Poor customer service and sub-par quality of the products offered: Be it an online startup or a brick-and-mortar store, customer service is of utmost importance. Some startups compromise on customer service and the quality of their products; the compromise always results in the closure of business.
• Lack of focus and legal disputes: It is imperative for any startup to focus on building a solid foundation and then growing it further. Entrepreneurs should also focus on the legalities which may cause disruptions in the future. What if you ignore these two factors? You cease to operate like Stayzilla.

How to Bounce back from your Startup's Failure

Panic doesn’t help in failure; relaxation and progressive thinking will prove to be useful. Successful people have seen failures and have overcome all challenges.

Here are some tips to bounce back from your startup's failure:

Share Your Feelings

Don’t think that life ends after a failure. Don’t spend time criticizing yourself or anyone else, but feel proud of the takeaways from that failure. Keep in touch with friends, family, and relatives to stay calm and relaxed in times of failure. Find a mentor or a group of experienced people. Learn from them. Seek guidance and mental support from mentors and entrepreneurs who have seen both success and failure.

Find Different Sources Of Income To Recover Your Loss

Failures will lead to financial difficulties. So work on expanding your income stream. Contact mentors and entrepreneurs for suggestions on income generation. Do not get depressed because money is meant to come and go. Calculate how long your savings will last and plan accordingly. It will be great if you already have a secondary source of income. If not, spend some time creating a source of income through freelancing or consulting.

Prepare And Plan With Consciousness

A lot of lessons are learned after hard times. Use these lessons to prepare and prioritize. Make a survival plan. Startup founders are very comfortable with planning and execution. Appoint suitable founders and workers to assist you. Hard work always pays off, so work until you achieve success. If your startup fails, create an Excel sheet, and write down the skills in one column and the potential income from those skills in the second column. By doing this simple exercise, one will get some clarity on how to keep the business running for a few more months.

Wait For The Right Time To Get The Right Opportunities

Don’t take any important decision at the time of failure because the mind is depressed at such a time. Wait and then plan for the future. Take whatever time is required to make up your mind but once the thought process is in place, do not go back to thinking about the failure. Great opportunities do not come frequently. So wait for the right moment. It is better to wait for several months for the right kind of work than to get stuck on the wrong assignment.

Actions Speak Louder Than Words

Be mindful of your actions after a bout of failure. The right attitude is important during stressful moments. Take the right action with the right attitude. Say no to poor opportunities. Work to the best of your abilities. Aim high and let your failures be the stepping stones to success.

Failure is not an end. It's the first step to success. Whether you are running a startup or are planning to launch one, note down the mistakes discussed in this post. Nothing hurts more than committing a mistake you were already aware of. If this case study on the failure of some promising Indian startups was useful to you, let us know in the comments.

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FAQs

How many startups fail in India?

Recent studies as of August 2024, show that up to 90% of startups in India fail within their first few years, highlighting the crucial need for strategic planning, market research, and strong financial management for entrepreneurs.

What happens when startups fail?

The startup may gather outstanding accounts, take up loans to settle outstanding debts, sell resources for paying debts, and cater to the investors who funded the startup. Venture capitalists and other investors usually end up at a loss when a startup fails.

Why do 90% of startups fail or why do most Indian startups fail?

Here are some of the major reasons:
1. Lack of funds.
2. Highly anticipated model against the nature and lifestyle of the target audience.
3. Poor customer service and low-quality products.
4. Lack of focus and legal disputes.

Which are the failed startups in India 2024?

The startups that failed in 2024 are Resso, Rario, OKX, Muvin, GoldPe, and many more.

What is the hardest business to start?

Businesses that require huge funds to start off with are the hardest to start. Businesses pertaining to logistics, restaurants, and travel agencies are deemed some of the most difficult businesses to start.

What is the safest business to start?

Businesses that require low investment are the safest. Things that can be done entirely from the comfort of your home are the easiest. Some examples are logo designing, digital marketing, website building, online tutoring, virtual assistance, and so on.

Am I too old to start a business?

There is no age limit for starting a startup. You can be 50 and have a unique idea that might take off in the market.