Why Startups Fails | A Brief Case Study of 10 Failed Startup

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.

We have listed the brief case study of these 10 startups with their reason of failure:

Roder
Turant Delivery
Finomena
Fabfurnish
CardBack
Yumist
Overcart
Roomstonite
Dial-A-Celeb
Stayzilla

Roder

Industry: Logistics

Roder Logo | Failed Startups

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

Turant Delivery

Industry: Logistics

Turant Delivery Logo | Failed Startups

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.

Finomena

Industry: Fintech

Finomena | Failed Startups

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 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.

MrNeeds

Industry: Grocery Delivery

MrNeeds Logo | Failed Startups

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.

CardBack

Industry: Fintech

CardBack logo | Failed Startups

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.

Yumist

Industry: Food Delivery

Yumist logo | Failed Startups

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 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.

Overcart

Industry: Re-Commerce

Overcart logo | Failed Startups

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.

Roomstonite

Industry: Real Estate

Roomstonite logo | Failed Startups

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

Dial-A-Celeb

Industry: App

Dial-A-Celeb logo | 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.

Stayzilla

Industry: Real Estate

Stayzilla logo | Failed Startups

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.

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.

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.

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About Lakshya Singh

I am a visionary content creator and internet researcher.
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