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, the uncertainty and constant pressure to perform is a huge responsibility even for the toughest of individuals. According to 2019's report, more than 5 million startups are founded every year. However, only 10%, which is only 500,000, of those startups succeed and the rest face the failure.
Hence, we decided to take a look into the top failed startups and do a brief startup failure case study.
We have listed the brief case study of these 10 startups with their reason of failure:
Failed Indian Startups
Industry: Food Delivery
Serving home-cooked food is becoming a trend among today’s startups. An example is of ‘N’ number of initiatives jumping onto serving kitchen meals in trains. Yumist was one of them and it was launched in 2014 with the intention of covering 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 high burn business model with equal growth prospects required extensive capital beyond Yumist’s reach. Also enough funding was not available to run the startup. So, the startup has to be shut down. Yumist if the most famous case of failed startups.
Let’s be honest, a chance to talk with your favorite celebrity is in 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 others, the platform also allowed customers to get celebrity signed items like toys and diaries. However, the startup closed its doors within a year.
Reason for failure: The major reason of Dial-A-Celeb's failure was that the trending celebrities were coming up with their own apps to interact with their fans. It highly impacted the Dial-A-Celeb's profitability. Also because of competition with international apps, Dial a celeb has to be shut down in 2017.
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 raised and eventually establishing itself in the hotel rental segment, this brain child of Yogendra Vasupal, Rupal Yogendra and Sachit Singhi started crumbling after its failure to repay vendors came to attention. The troubles then aggregated and in February 2017, Yogendra Vasupal made the official announcement of Stayzilla shutdown.
Reason for failure: Stayzilla was started way ahead of its time. People were not ready for that technology. However the company somehow survived on the funding. But when people started getting familiar with online booking, new competitors' came to market with better discount and deals. Stayzilla was unable to provide the same due to lack of funds. Additionally, legal disputes and lack of focus on the business caused the destruction of Stayzilla.
Inter-city travels have become a mainstream requirement— traveling 100 km or more on a daily basis is an ordinary thing nowadays. Whatever the reason may be office location, excursion, meeting a friend, etc. Such 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 its highlights was offering one-way rides at nearly half the market price.
Reason for failure: Inability to cope with customer acquisition costs and user retention rates didn’t keep up. Also, because of the increasing competition by experienced ventures like Ola and Uber in the field they weren't able to keep up with the expectations. Having a bigger competitor with more funding make the entrepreneurs lose their confidence, which is one of he biggest reasons of entrepreneurial failure.
Also read: Startup Story of Ola
This B2B based startup was an intra-city logistics-provider initiated in 2015 with the aim of bringing a new flavour in the Indian logistics industry. The algorithm followed by Turant Delivery permitted it to offer services at as much as 15% less than what fellow competitors charged for the same (as per the endeavor’s claim).
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, which new startups fails to cope-up with. Hence, funding is a very important factor for a logistic startup. The sooner they get funding, the better it is for logistic startup.
Students are the new target when it comes to offering small loans. Acting on this, Finomena came out with an app that served as an ‘EMI without cards’. The main 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 one of the most unexpected unsuccessful startup of India as it had enough funding. It was a fintech startup which was providing loans. The company was started very late that it has to face a lot of competition from bigger players. Fierce competition from rivals like ZestMoney was the major reason of the failure of Finomena. Also, burning the cash where it was not needed became another reason of failure of Finomena.
Industry: Grocery Delivery
MrNeeds was a grocery delivery startup founded by Hitashi Garg, Yogesh Garg, Ravi Wadhwa and Ravi Verma. They provided subscription based grocery delivery service. People could easily pay for their subscription and receive their grocery on the set date. The Delhi based startup, MrNeeds did good for a startup with more than 10,000 deliveries only in Noida.
Reason for failure: MrNeeds was a subscription based startup. Hence, turnover might not be that great with Indian audience. So, it is possible that they had lack of funding to sustain in the market. Also, entry of funded grocery delivery startups like Grofers and Big Basket can also be another reason of their failure.
A fintech platform founded by Nidhi Gurnani and Nikhil Wason, CardBack let credit and debit card holders 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 post 2014, and the number of multiple card holders in India was less than what it expected to reach out to. Hence, the main reason of CardBack's failure was their over-expectation on market growth. Also, their plan for shifting the headquarters to Singapore, where the multiple credit card culture exists, also failed. This was the final call for them to shut down the venture.
Overcart was the first Indian fintech player providing a platform to buy refurbished, over-stock and pre-owned items. People could buy and sell their electronic devices on the website. Overcart was founded in 2012. They received substantial angel investment. However, the company failed to capitalize it.
Reason for failure: Overcart was not really seems to be very focused about their business. Their unsatisfactory services such as late delivery, poor quality of purchased items and bad customer services led to customer rebuke, thereby causing the startup to shut down in 2017.
Industry: Real Estate
Last minute hotel bookings usually end up in a mess and disappointment. To deal with this issue, RoomsTonite was launched and had received around $1.5 million in funding and ceased functioning by September 2017. Overall, the startup rose and crumbled within a span of three years.
Reason for failure: Having very strong rivals like Makemytrip and OYO became one reason for the failure. Another big reason of the failure of Roomstinite was credit crunch. Facing sudden reduction in the loan's availability is called credit crunch. Roomstonite faced credit crunch by 2016 which didn’t allow them to flourish.
Also Read: Startup Story of RentRoomie
Conclusion of the Case Studies
Here we are concluding some most common reasons from all the case studies, which causes the failure of 90% startups:
- Lack of funds- The major reason is lack of funds, required to run the startups. On observing closely, it can be seen most of the startup ended because of lack of money.
- Highly anticipated model against the nature and condition of people- Some of the startups failed because of their highly anticipated models which was not appropriate for the Indians audience. Startups should either wait for the right time or educate their future consumers about their technology.
- Poor customer service and lack in quality of products- For an online startup company the customer services are important but in many of these cases, the customer services and the quality of products, both were lacking.
- Lack in focus and legal disputes- For a new startup, it is important to have focus to build the startup more efficiently. Also entrepreneurs should also focus on the legal factors which can cause disputed in the future. Both these reasons were there for the downfall of Stayzilla.
How to bounce Back from your Startup Failure
Panic doesn’t help in failure, relaxation and progressive thinking will prove fruitful. Every successful person has a history of such failures which they have successfully overcome. Here are some tips to Bounce Back from your Startup Failure:
Share your feelings
Don’t think that life ends after a failure. Don’t spend time in criticizing but feel proud of the knowledge gained from that failure. Stay in the company of your favourite groups and enjoy the developing stage. Keep in touch with friends, family and relatives as that would bring happiness in the time of failure. Don’t be afraid of failure and try to find a mentor or a group of experienced people and prepare for the next attempt. There are many people who changed their failure to success. Seek guidance and mental support from mentors and entrepreneurs who have already walked on that path.
Find different sources of income to recover the failure
Every failure will lead to loss of money. So, prepare to gain money from various sources. This will help you to Bounce Back from your Startup Failure. Contact mentors and entrepreneurs who give the suggestions about income. Do not get depressed because money can come and go anytime. So, set the mind towards knowledge. Check how long the savings will last and try to maximize that time. It will be great if one already has a secondary source of income or they can spend some time to create a source of income by freelance or consulting work.
Prepare and plan with consciousness
After failure, a lot of things are learnt. Use these lessons to plan and prioritize how to get back from that failure. Make a rough survival plan. Startup founders are very comfortable with planning and execution. Appoint suitable founders and workers in the right place and work day and night. Hard work always pays off, so, work until success is found. After the failure of the startup, create one 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 can get a lot of clarity to run the business for at least six months.
Wait for right time to get right opportunities
Don’t take any important decision at the time of failure, because the mind is depressed at such a time. Wait for some time and then plan for the future. Take whatever time is required to set the mind but once it is set do not go back to thinking about the failure. Great opportunities do not strike at all the times. So, wait for the opportunity and grab it to improve skills and success. One should rather wait for several months to get the right work than joining the wrong work. Take ample time to make a decision that can change the whole direction of life.
Action speaks louder than words
Not only words, but actions should also be kept in mind after a failure. The right attitude is important during times of depression. Take the right action with the right attitude. Say no to poor opportunities until better opportunities come. Work to the best of abilities to garner success and lost popularity. Aim high and let failures be stepping stones to success.
Failure is not an end. Its the first step to success. All the entrepreneurs in our list of failed startups were brave enough to take that step. Hence, to all the upcoming entrepreneur who are planning or have already planned and started their startup, make sure to take lessons from the mistakes of these startups. Also, plan cleverly so that you don't have to face such problems in the upcoming future of your startup.