Why I cover a list of failed startups is for the simple reason “There are lessons to be learned from each failure”. Teachings which will help us find the simple issues because of which startups fail.
We are in mid of 2018. The year 2017 has passed by with a lot of VC money going down the drain and again, a lot of funded startups failing to survive the year.
Time for me to update the list of failed startups of 2017 in India.
In the year 2017, the number of startups funded decreased while the funding received by startups increased. Most noticeable was the reduction of seed funding for startups. i.e, startups looking to raise funds at the idea or initial stage did not find many takers.
NASSCOM states that the seed stage funding has dropped by 53 percent and funding for start-ups that were founded in the last five years has come down slightly from $2 Bn to $1.8 Bn. (source : https://www.entrepreneur.com/article/304078)
One of the biggest problems with Indian Startup ecosystem was the lack of govt support policies to support the startup system (we all know what happened to startup India 😊 . Well, we don’t. Only a very few selected entities know when startup India started and disappeared. Unfortunately, i am not one of them).
Add to above, the lack of profitable exits for VCs. Other than the Walmart acquisition of Flipkart which happened in the year 2018, no real profitable exit happened in 2017.
Industry experts usually associate businesses failures as a part of running a business and I agree no less. 8 out of 10 startups fail and it is fair to say that odds are stacked against startups from day one to survive and survival is just the beginning. Next comes the most difficult barrier – Succeed.
A stage where you are able to meet your own expenses and take some money home. Trust me, the majority of startups do not survive and very few (among the ones which survive) are able to reach to the stage of success.
One bad move and there is danger lurking in the corner – waiting to become a reason for startup’s failure.
My analysis of failed startups in the year 2017 brings forth some interesting points.
While the majority of startups closed due to financial issues (the number one reason for failure), others failed because of changing trends or for a simple reason that they could not keep up with the market.
Here is the list of famous (irony) failed startups from the year 2017:
Startup year: 2006
Founders: Yogendra Vasupal (Yogi), Rupal Yogendra, Sachit Singhi
Stayzilla ventured into the profitable segment of hotel rentals establishing a niche for itself.
The company raised USD 33.5 million with the support of marquee investors Matrix Partners and Nexus Venture Partners and after the funding, went on to become the largest homestay network in India.
Stayzilla’s closure was a big shock for the startup community.
The road to end started with the company failing to pay its vendors on time leading to legal disputes.
There were allegations of non-payment of dues to the tune of Rs. 1.7 crore by JigSaw Solutions, an advertising agency which handled all promotional activities of Stayzilla.
Jigsaw dragged Stayzilla to court for non-settlement of dues. At present, Yogendra or Yogi (as he is popularly called) is in police custody for a criminal proceeding initiated by JigSaw Solutions.
In February 2017, co-founder of Stayzilla Yogendra Vasupal made an announcement through his blog post about the closure of the business. He said, “halting Stayzilla operations in its current form, and looking to reboot it with a different business model.”
To survive all the legal troubles and pay off the past debts, the company filed for insolvency. Unfortunately, the insolvency proceedings were dismissed by Supreme Court.
Legal issues. Financial Troubles. Inability to raise more funds and Non-payment of vendors are some of the issues which Stayzilla’s founders could not address. Thereby, leading to a failure of one of the most famous startups in India.
Startup year: 2014
Founders: Aseem Khare, Abhiroop Medhekar, Ajay Bhatt and Amit Chahalia
Taskbob a VC backed company with a Series A funding of USD 4 million from IvyCap Ventures, Orios and Mayfield worked in the home service business.
With good money (from VCs) comes the promise of delivering great results.
Unfortunately, the startup failed to grow at the desired pace and lost the confidence of investors.
After two years of operations, company’s closure news came from the co-founder Aseem Khare. He announced, “due to unforeseen circumstances, Taskbob will be shutting down its operations as of 19th January.”
He further added that “a solid business is created only by building scalability and profitability.”
One of the reasons attributed to the failure of Taskbob was working with a low margin in a market where survival depends on your power to raise the next level of funds (capital investment).
Startup year: 2014
Founders: Alok Jain and Abhimanyu Maheshwari
Food-tech startups have always found it difficult to survive in a market where margins are low, and competition is high. I was critical of them in 2016 (read : Why are the Startups targeting “the 15 billion Dollar” food ordering Industry struggling?) and even now, my perception about them hasn’t changed a bit.
They are in a market which I consider as suicidal. They can probably play around turnovers and fancy numbers but the day they make a profit is a day, my cynicism about them will go away.
Yumist, the food tech startup founded by Alok Jain, ex-CMO of Zomato and Abhimanyu Maheshwari, a seasoned restaurateur
From day one was competing against the likes of Zomato, and food panda.
Company’s USP was providing home cooked food starting at INR 100.
Now, that’s pretty affordable and I think, there should have been a market for the same. Provided, the food was awesome, and the delivery was on time 😊
During it’s peak time, Yumist enjoyed the patronage of loyal clients that gave 70% of the business and brought 50% new customers through word of mouth.
The credit for this popularity and growth was attributed to its quality and affordability. Yumist was earning a net profit (not gross) of Rs. 65 on an order of Rs. 190 till the first quarter of 2017.
Alas! The company could not survive the cut-throat competition in food tech space and despite being in the market that saw a growth of 150% in 2016 (source : https://www.hindustantimes.com/tech/food-tech-startup-yumist-shuts-down-blames-dead-end-to-high-burn-business-model/story-BdrVENMb1Tq3rXNKq4GcSL.html ) and has recently seen the entry of players like uber, Yumist could not survive.
The company shut its operations in 2017 citing a bunch of internal and external factors as a reason for shutting down.
Startup year: 2014
Founders: Amit Gupta
Overcart started as an online marketplace of pre-owned, refurbished and unboxed goods. The company started on a promising note, receiving a capital funding of USD 3 million in series A funding from JSW Ventures and Omidyar Network.
Unluckily, the company could not sustain the initial tempo built.
They went downhill in recent years and from a company which dealt in all kind of orders, it turned into a company which only started accepting bulk orders.
The source that first reported the shutdown tried reaching out to the company, but all its emails and messages have not received a response from the company.
One of the prominent reasons attributed to the failure of Overcart was the inability to grow their demand and supply business model. A typical complex business model adopted by all marketplaces.
Other factors that contributed to the failure were business model issues like maintaining the quality of pre-owned goods and finding a standard pricing for refurbished products.
The business’s complexity and inability to raise further funds ultimately led to the closure of a business.
Startup year: 2014
Founders: Nidhi Agarwal
Kaaryah was backed by none other than, the most famous business person in the country – Ratan Tata. It also received funding from Infosys veteran Mohandas Pai and the Saha Fund in 2015.
As per the founder of Kaaryah, Nidhi Agarwal – the company had plans to touch a 100-crore turnover within 5 years.
The promising startup had to close in the year 2017 due to lack of funds to grow further.
As per Nidhi “It was not sudden. We have been trying to raise funds for the last 18 months. We had broken even twice in 30 months.”
Kaaryah Lifestyle Solutions Pvt. Ltd. reported a loss of Rs. 4 crore in 2015-16. The company waited for another 18 months to raise more funds before laying off all 60 employees and announcing the shutdown of the business in 2017.
Startup year: 2015
Founders: Abhishek Garg and Ridhi Mittal
Finomena offered quick loans to people who lacked access to traditional loans.
For some reason, I never heard about them 😉 . I have a long list of people who are willing to take loans without any possibility of returning the loans (my friend Nirav was one of them. I rue the missed opportunity of connecting him to Finomena)
The company worked on a unique algorithm backed system that checked the creditworthiness of buyers.
The company caught everyone’s attention when it was selected for the International Innovator of the Year award by LendIt USA 2017.
Finomena received USD 1.7 million in funding from Matrix Partners and 10 angel investors that include Abhay Singhal, co-founder InMobi.
The owners of the company were featured in 2016 Forbes 30 under 30 list.
The company had what you call as the perfect opening at the box office for a movie.
Unluckily, the company lost all its steam within a few years. High Cash burn left them with little money to survive and no investor invested money in them at a later stage.
The attempts to sell the company went futile because of the higher cost of acquisition.
- Dial A Celeb
Startup year: 2016
Founders: Gaurav Chopra and Ranjan Agarwal
Dial A Celeb was a short-lived but exciting business idea.
Dial A Celeb offered video chat with celebrities; booking celebs for events like weddings, anniversaries.
The company also gave fans opportunities to have birthdays and celebrity signed products like teddy bear and diaries.
Not much information is available about Dial A Celeb as it closed operations within a year of starting.
Today DialACeleb.com is available for sale. The website is inactive and the last update on the Facebook page was made on May 1, 2017.
The reason for the closure of the service is changing trends in celebrity service.
The celebrities in India started making their own apps which put a huge dent in the revenue model of this company.
Startup year: 2013
Founders: Harsha Nallur, Mohsin Dingankar and Animesh Chaudhary
HotelsAroundYou was an online hotel booking portal offering end moment booking deals.
The offers were from transit stay hotels which took bookings from 6 AM to 6 PM for – 4, 8 and 12 hours.
The company also had hotels that offered night-use rooms which offered bookings from 9 AM to 2 AM with the option of same-day check-in.
The company worked with hotels to get the unsold inventory at a discounted price and made a profit by selling the unsold rooms.
One of the reasons for the company shutting down was the inability to generate follow-up funding.
The company initially received a seed funding from VentureNursery in 2014.
Besides VentreNursery, it got funds from Aditya Birla private equity group Bharat Banka.
But the dry spell of funds after the primary funding slowed down the growth resulting in the shutdown.
- Turant Delivery
Startup year: 2015
Founders: Satish Gupta, Ankur Majumder, Siddharth Arora
Turant Delivery Started as an intra-logistics company.
The company focused on quick delivery of products at an affordable price.
As per the company, their rates were 15% less than the market price. In its initial years, the company restricted its operations to Delhi, Mumbai, Bengaluru, Kolkata, and Surat with plans to expand further in later years.
To keep their cost in check, the company relied on a zone-based algorithm.
Turant Delivery raised funds to the tune of 1 crore and was in talks with multiple ventures for a USD 2 million deal, but the deal didn’t materialize and the company reported shutdown.
“The B2B model demanded heavy working capital and that sort of kept the VCs away,” said one of the founders of the company.
Startup year: 2012
Founders: Saurav Kumar, Abhilekh Agarwal and Aakash Jain
Headquarter: New Delhi
Cube26 Software Pvt. Ltd. was a company focused on IoT products.
To start with, the company launched a Bluetooth-controlled color-changing smart bulb with the brand of IOTA in 2015.
In August 2016, Cube26 launched a suite of Smartphone apps with the brand name of Reos which was further followed by Reos Lite, the new version of the smart bulb.
In 2015, Tiger Global and Flipkart invested USD 7.7 million through seed funding in Cube26 which allowed the company to innovate as per market needs.
Unfortunately, the company could not raise follow up funding and decided to limit its operations to software and service sector.
And that ends our list of major startups that failed in the year 2017. 2017 was also the year when VCs followed a cautious approach to funding startups.
And, they started investing in business models that could go on to give them a good exit or generate profits.
In our list of failed startups from the year 2017, one of the reasons which is common to all the failed startups was “inability to raise funds”.
On a personal front, I find businesses that live in the hope of surviving because of next round of funding absurd.
When I run a business, an extra round of funding is to expand a profitable business.
To put money in a business where “profits” are a distant reality is a crime. But them I a naïve business owner who has rarely been funded and does not understand the world of evaluations, GMVs, Exits. For me, profit is something that has to happen soon else the company will fail.
This is why I highly recommend that startups should bootstrap and once they have validated their idea, should they jump to the next stage – Raising funds.
By the time they raise funds, they would have seen the tough days and would have turned wiser in using the money to further fuel their growth.