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.
According to a 2019 report, more than 5 million startups are founded every year. However, only 10%, i.e., 500,000 of these startups, succeed in the long run.
The case study discussed below 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 did so that you don't end up repeating the same.
List of Failed Startups in India
Industry: Food Delivery
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.
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 famous failed startups in India.
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. 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 own 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 in 2017. Know your rivals well and also brace yourself for competition that may arise in the future.
Industry: Real Estate
Once on the path of becoming the largest homestay network in India, Stayzilla is reminiscent of a riches-to-rags story. With around $33.5 million in funding and having established 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 for sometime 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.
Inter-city travels have 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.
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.
The B2B based startup was an intra-city logistics-provider that was launched in 2015 to bring a new flavor in 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).
Reason for failure: The company did not have the funds to sustain itself for the long run. A logistics service provider needs intensive cash flow to run. Hence, funding is essential for any logistics startup.
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 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 the 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 has reached its saturation levels. Also, use your funding wisely!
Industry: Grocery Delivery
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 startup. 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.
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.
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 on market growth. The plan to shift the headquarters to Singapore, where the multiple credit card culture is abound, also failed. The failure to move to Singapore was the final nail in the coffin for CardBack.
Overcart was the first Indian fintech player to provide a platform for purchasing refurbished, over-stock, 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 services led to customer rebuke, thereby causing Overcart to shut down in 2017.
Industry: Real Estate
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!
Reason for failure: Having strong rivals in the form of Makemytrip and OYO was one reason for RoomsTonite's failure. Credit crunch also added to RoomsTonite's woes. Facing a sudden reduction in the loan's availability is called a credit crunch. Roomstonite faced credit crunch by 2016 which didn’t allow it to flourish.
Founded in 2015, Doodhwala was a subscription-based platform that delivered milk and grocery items directly at the customer's doorstep. Founded by Ebrahim Akbari and Aakash Agarwal, Doodhwala claimed to complete about 30,000 deliveries in a day.
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.
Industry: On Demand Delivery Services
Russsh 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.
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.
Industry: Largest Cryptocurrency Exchange
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 from 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.
Founded in 2016, Krishna Chaitanya Aluru, Akshat Goenka, and Vamsee Chamakura, Doctalk connected doctors with patients. Through the Doctalk app, one could find good doctors in the vicintiy 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 the company insiders.
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. LoanMeet'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 18% interest rate.
Reason for failure: LoanMeet raised funding from Chinese investors Cao Yibin and Huang Wei in 2017 failed to secure any funding after that. LoanMeet's shutdown is attributed to the lack of funds and tough competition from players like Capital Float, Loan Frame, and Happy Loan.
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 the time 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 learnt 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 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 he 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.
Frequently Asked Questions About Failed Startups
How many startups fail in India?
According to a 2019 report, more than 5 million startups are founded every year. However, only 10% of those startups succeed and the rest break down.
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 in a loss when a startup fails.
Why do 90% startups fail or why do most of the 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.
What is the hardest business to start?
Businesses that require huge funds to start off with are hardest to start. Businesses pertaining to logistics, restaurants, travel agencies are deemed as some of the most difficult bussinesses 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 assistant and so on.
Am I too old to start a business?
Nope! 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.