Ladies and Gentlemen. Presenting to you – the list of failed startups from the year 2018 with reasons of closure and my analysis of what went wrong with them.
Yes, I Know. It took longer than expected, but I had been swamped planning, writing and finally launching: Entrepreneurship Guide – Steps to becoming an Entrepreneur.
And finally, when I got some breathing space – I decided to get the monkey off my back.
Without further ado, let me present to you our analysis of the famous failed startup in India (the year 2018).
As usual, there are learnings from their failures. Learnings – you and I can apply to our struggling businesses and become wise business owners. (I am joking!)
Here is the list:
Well! This wasn’t correctly a shutdown. Instead, it was more of acquisition and then shut down for business strategy reasons. Yeah! I know big words 😊” acquisition” “business strategy” blah-2).
Bottom Line – eBay is no more active in India.
eBay launched its India operations in 2005 but announced its closure on 15, August 2018.
The US-based company sold its India business to Flipkart in 2017 for a cost of $211 million. Not to be left behind in the race to be a part of one of the fastest growing ecommerce markets in the world – eBay, invested $514 million in Flipkart to get a 5.4% stake in the home-grown online marketplace.
And they intend to make a profit from their investment in future by selling their stake for a whopping 1.1 billion dollars.
(By the way, how many zeros are there in a billion? Don’t bother – I only count till 1000 – my current pay scale 🙂 ).
Reason for shutdown or exiting the Indian market:
eBay forayed into the Indian market by acquiring Baazee.com for $50 million.
the acquisition allowed them to get their foot in the door, but they were never the unstoppable force in India (like the US).
Soon they lost business to the native competitors including – Flipkart, Snapdeal and ShopClues.
Add to above, the failure of their auction business model to attract Indian customers, which led to the company after the tried and tested ecommerce model and competing with existing competitors.
Eventually, they invested in a local company – Flipkart.
Well! As they say, if you cannot compete with them, buy them.
After Flipkart said it would shut down eBay India, eBay India declared in May that they would opt out of Flipkart and focus on building a cross-border trade platform.
eBay still hopes and sees India as a growing and potential country for e-commerce and will soon launch its new business model.
Established in 2014 by Mohit Kalra, CEO and Founder and Benson Samuel CTO & Co-Founder, Coinsecure was one of the fastest and largest Bitcoin Exchanges in India which enabled users to trade in Bitcoin with on their online platform at a competitive fee.
The firm had come a long way in a short period and had recently secured Series A funding of $1.2 million making it India’s first Bitcoin company to have achieved the highest financing till date.
The company’s last funding was supposed to help it focus on enterprise services, such as providing public/private blockchain solutions to various industries, such as Banks, Manufacturing Industries, Suppliers, Import and Export Industry.
Literally, any industry which wanted a solution to prevent counterfeiting or reversal, could implement their technology and prevent hacking or any other mode of electronic fraud by internal staff.
The team understood that for Coinsecure to succeed, Bitcoin should become more mainstream, and for that to happen, it must have high standards of integrity and educate Indian citizens on Bitcoin and Blockchain technology.
The company conducts seminars and programs throughout schools and colleges across India to help educate and onboard as many people as possible on this journey of Bitcoin.
Reason for shutdown:
Indian cryptocurrency exchange Coinsecure had remained closed, after a hack on 9th April led to a loss of over BTC 438 worth USD 3.3 million.
Coinsecure revealed none details of an investigation into the theft, which it alleges to be an insider job by its ‘chief scientific officer’ who had the private keys of the exchange’s wallet containing customers’ bitcoin holdings.
It filed a complaint stating this on 10 April to the police unit Cyber Cell and requested that Saxena’s passport should be revoked so he could not flee the country.
It is not clear whether Coinsecure will ever re-open. However, If the stolen funds are not recovered, they will likely go into bankruptcy.
iii. Zebpay India
Zebpay, launched in 2014 in Singapore and Ahmedabad was a cryptocurrency startup helping users in cryptocurrency trading.
It was a popular platform for buying and selling cryptocurrencies including Bitcoin Cash, Ripple, Ethereum and Litecoin. It also sold airtime and gift cards.
Zebpay was forced to shut due to the financial policy of RBI to prevent cryptocurrency from entering the market.
Now – that’s a bummer!
At the time of closure (around September 2018), the company had over 3 million users.
Reasons for failure:
They were the unlucky ones.
In April 2018 when RBI issued a guideline to restrict banks and finance companies from doing business with crypto exchanges and wallets.
After RBI’s announcement on April 5 of 2018, it gave three months to close the deals and accounts.
Due to this reason, ZebPay and many other crypto agencies tried to survive by shifting their exchanges to crypto-to-crypto and peer-to-peer which did not work as per their expectations.
At the time of closure, Zebpay owners said, they could not find a reasonable way to conduct the cryptocurrency exchange business with RBI restrictions. Hence, leading to the closure of the company.
As per an official statement made by the company “However, the recent past has been extremely difficult. The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business,”
Nevertheless, the crypto exchange is kept alive to allow the users to their wallets.
Along with them, many crypto exchangers appealed against the RBI order in the Supreme Court but to no avail.
Rather than helping them sail through tough times, the government became stricter with crypto exchangers. Unocoin owners were arrested in October 2018 in Bengaluru on the charges of installing a Bitcoin ATM.
After Zebpay, many other crypto exchangers including Coinsecure, BTCXIndia, MoneyTrade, Bitconnect also closed their ventures in 2018.
Ofo, the bike rental company – was started in 2014 in Beijing, China. From 2014 to 2016, ofo focused on the home market (China). From 2016 to 2018, they increased their market share by increasing its international footprint.
In 2017, Indian operations started – only to shut shop within 7 months of starting.
It received $866 million from Alibaba Group in March 2018, but nothing could save the shutdown. It fired its Indian team of 30 employees to ensure a smooth withdrawal.
A press note issued by Director, Public Policy and Communications, Ofo, Rajarshi Sahai, read that the company is closing its India operations as part of its strategy to withdraw from international markets.
According to the Business Standard, in India, Ofo completed 1 million rides across 7 cities in only 10 weeks. Rajarshi Sahai added, Even though India is a difficult market, it had huge potential in the bike riding segment.
Reason for shutdown:
Ofo’s closure in India is a part of their work philosophy, which revolves around expanding and securing markets only in profitable countries.
Though India had enormous potential, still it could not match the growth rate in China, Singapore, Paris and other countries.
“It’s a new strategical phase on the international front,” Ofo France General Manager and Head of EMEA Laurent Kennel told the TechCrunch writer. “The company wants to focus on the most mature and promising markets.”
Another reason could be the cash crunch faced by the company, which led to the closure of unprofitable operations for the company.
As per Technode, there had been talks going on about Ofo facing a cash crunch. They even mentioned that “people close to the matter had already paid off just 20% of its RMB 3 billion debt.”
Again, that’s just talks and speculation. The speculation which was put to rest by an official statement from the company.
An ofo spokesperson responded by saying that the company’s rapid expansion in the last year gave it a better understanding of its international business. And this is why they started focusing on profitable markets.
Sanjay Rao and Sandeep Kannambadi came together in 2015 to form Monkeybox, a consumer service company operating in Bengaluru. The company started with supplying Recommended Dietary Allowance (RDA) approved vegetarian meals to school.
Starting with a few schools, it soon added 85 schools to its service list. In July 2017, Monkeybox was providing meals for over 1,500 kids of age group 3-18 per/day.
After adding 2K subscribers to its website, it acquired food businesses – 75 In A Box and RawKing.
75 In A Box was a food delivery company, and RawKing was a juice delivery startup.
Reasons for closure:
We know nothing about the reasons for the shutdown – It’s a movie where the heroine suddenly runs away with the Villain and the movie ends. (that was a bad joke)
For its closure, the company only mentioned its services temporarily because of its failure to meet its targets.
It pulled the plug on 23 March 2018.
As per an official statement from the company “Unfortunately we are at a point where we will not be able to fulfil our promise of delivering a healthy and nutritious meal to the kids going forward due to constraints on our end and don’t want to falter on the quality of our services. Hence we are getting back to the drawing board and working to get back again to serve all the beloved kids in a way which will continue to uphold our vision. Until we figure out a way to do that, we will have to shut down our services temporarily.
So it’s with heavy heart, we would like to inform you that Friday, 23rd March 2018 will be our last day of services. We will be initiating the refund process on 26th March 2018, and whatever the balance credits that’s available in each subscribers account, it will be refunded to their appropriate bank accounts. If in case, it was a COD, then we would request you to send an email to [email protected] with your Bank account details so that we can deposit the same.
MonkeyBox co-founders added that the startup is unable to fulfil its promise, and the team will work on new strategies before resuming the service.
vi. Just Buy Live
In the year 2015, Just Buy Live was launched in Mumbai to offer retailers – a meaningful platform to buy directly from brands.
The founders Bharat Balachandran and Sahil Saini’s target segment were small and medium enterprises.
They even went a step ahead by offering an unsecured credit lending for these businesses to help them buy directly from the brand (I know you are thinking – where were you when all this was happening?).
They also provided working capital to small retailers to buy branded products in all categories, from FMCG to Smartphones from “Just Buy Live”.
In August 2017, a Dubai based investment group, Ali Cloud Investments invested a massive $100 million (INR 699.25 crore) Series B funding in Just Buy Live.
Alas! The funding proved insufficient.
Now, That’s a lot of money. You must be wondering – Why did 700 cr (roughly) prove insufficient?
Let’s analyse the reasons for their failure.
Reasons for failure:
I don’t know the full story behind its failure as the founders are still hopeful of reviving the business and have not yet come out in the open to discuss their failure but as far as the internet tells me – The company failed because they had an Unscalable business model and a negative cash flow.
Other than the negative cash flow, faulty business model too was attributed to the company’s failure
Frankly, both – broken business model and negative cash flow go hand in hand. I have learned from my failed startups that flawed business models, lead to negative cash flows as most of the money is spent supporting and fixing the “flaws” in a business model.
And then the inevitable happened. Just before closure, Just Buy Live had to let go off the company’s employees, delay salaries and reduce their staff strength to keep the company afloat.
The last I checked, “Just Buy Live” website was down.
Nevertheless, all is not dark and gloomy.
The founders are hopeful of the revival of the brand with the help of new funding.
MrNeeds was a startup based out of Delhi/NCR in the grocery business catering to NCR Region only. The venture was started in 2016 by four young entrepreneurs – Hitashi Garg, Ravi Wadhwa, Ravi Verma and Yogesh Garg.
The startup offered online subscription-based services in grocery items like milk, eggs, bread. In June 2017, Ravi Wadhwa told ET that their per-delivery cost was 50-70% lower than others. He further maintained that they served 36K orders monthly to 9K families in Noida.
MrNeeds closed its operations despite the overwhelming response they received to their services.
Reasons for failure:
According to its owners, the company was doing reasonably well but stopped abruptly without providing any specific reasons for their closure. Even the mobile application of MrNeeds was removed from the Google Play Store.
It is speculated that the failure of MrNeeds was because of the stiff competition offered by BigBasket and DailyNinja.
But that is just pure speculation. Because the company did decent business (MrNeeds had successfully made 10000 deliveries in Noida and some parts of Delhi in July 2017).
PortDesk was a startup offering e-procurement software. Pushpit Pallav started this e-procurement portal PortDesk in 2014 in Noida.
The business model was to give logistics management services for port-related operations including ports DA estimate and voyage, layout and contract management, cash management and accounting.
They received a funding a year before its closure. Alphard Maritime Group, a Singapore-based maritime service company, provided $2 million (INR 13.98 crore) in seed funding to the portal.
Despite the funding which is usually considered as the first step to success in the startup world, Pushpit Pallav closed shop in 2018 leaving his clients and funders guessing what went wrong with PortDesk.
Reasons for failure:
Portland’s shut down came out of blue. It suspended its operations in the early months of 2018.
The only one with intimation about their shut down was Techcircle. According to them, they just received a message from the direct communicator that Portdesk had suspended operations.
There were no reasons cited of why the PortDesk shut down after receiving a fund in 2017, and even the Founder has not responded regarding the sudden shutdown.
ContentMart was a marketplace where you could hire qualified writers for any writing job. It was not limited to blog or content writing. You could hire writers who could write a sales page, service page or anything related to writing.
When contentmart came out, it achieved traction of 16,000 writers and 20,000 clients in less than a year.
The Gurgaon-based Contentmart shut down operations three years after it first launched into the market as India’s first content marketplace.
At the time of closure, the company connected the north of 103,000 writers with over 110,000 international clients.
Reason for failure:
The startup failed due to lack of an efficient business model. ContentMart did not generate enough revenues to sustain the operations. In August this year, the startup officially announced the shutdown.
However, it is still allowing writers to connect with businesses and exchange contact if they wish to continue doing business offline.
In 2014, Bengaluru saw a fleet of bikes running on its roads. Tazzo, the new kid in the startup world offered point-to-point commuting on bikes at INR 5 per/km.
This easy, quick, convenient and affordable option commuting option soon became the talk of the town.
The owners Priyam Saraswat, Shivangi Shrivastava, Priyank Suthar and Vikrant Gosain made a full proof plan to run the service.
They had a mobile application integrated with GPS technology for real-time tracking of their fleet.
Reasons for closure:
Deepak Shahdapuri, MD of DSG Consumer Partners, gives the non-profitable nature of business as the biggest reason for its failure. Deepak invested $225K (INR 1.5 crore) in Tazzo in October 2016, but even this bailout package couldn’t support the business for a long time.
The project was capital intensive, but there was no profit model for the business.
Moreover, they had substantial operational activities on the online end and on the offline end, which subsequently led to losses as they required too much capital to manage both ends of operations.
The Co-founder of Tazzo, Priyam Saraswat, spoke to TechCircle said the imbalance of internal and external factors led to shutting down and the main reasons were because of capital intensive operations and the business couldn’t uphold raising follow-up funding’s from the investors.
It had to shut down before the funds dried up.
In the year 2013, Bengaluru based Anter Virk, and Anish Basu Roy started Shotang as a B2B platform for manufacturers, distributors and retailers.
The idea was to offer an online trading platform and to earn a commission in financial transactions. They primarily worked for the mobile and apparel market.
According to VCCircle, Shotang was heavily funded by VCs. They received $5 million (INR 35.94 crore) by Exfinity Venture Partners in December 2015 and $864 thousand (INR 6.8 crore) by Patamar Capital in February 2018.
Just before the venture plummeted, it’s market valuation was $40 million (INR 279.7 crore).
Launched in 2013, it shut shop in 2018 under immense pressure from competitors.
Reasons for failure:
Shotang tried its best but failed miserably due to rising debts and funds crunch. According to Techcircle, they did the last fundraising to pay off debts – creditors, employees and partners.
The real reason for the failure of shotang was – fierce competition from Flipkart, Amazon and Paytm Mall who, with their deep pockets were fastly wiping off competition.
As per CEO Dinesh Agarwal, “the decrease in sales and the effect of demonetisation on the company are some of the reasons for the company’s shutdown.
BabyBerry was a child healthcare portal launched in 2014 in Bengaluru.
Its owners Bala Venkatachalam, Dev Vig and Subhashini Subramaniam provided educational content on parenting, including physical growth, cognitive skills and development of social and emotional behaviour in toddlers.
Parents could find a digital vaccination chart on the app and set vaccine reminders on the chart. Also, parents could maintain the health record of their kids and find paediatrics using the app.
In 2016, Babyberry raised $1 million (INR 6.99 crore) for product development and marketing.
For some reason, BabyBerry went into a slumber and stopped responding to calls by its loyal customers.
It has been inactive since October 2018 – there has been no posting on social media and no communication with visitors.
Reasons for closure:
The only communication it made was in August 2018 when a statement came from the owners.
The statement read that the website was fixing technical errors reported by its customers. But they provided no details on glitches.
The only statement received from the company was to tech circle. As per the owners “We will look into the issue, identify it and get back to you.”
The confusion remains – whether the company has just halted its operations or has shut down?
And that concludes the list of failed startups/companies from the year 2018.
On an ending note, I have an interesting survey to discuss.
According to the survey conducted by the Institute for Business Value and Oxford Economics, 90% of Indian startups fail within five years of starting the business (now, that’s exciting news 😊) and the most common reason for this failure is lack of innovation. (source: https://www.forbes.com/sites/suparnadutt/2017/05/18/startups-in-india-fail-due-lack-of-innovation-according-to-a-new-ibm-study/#34aee34e657b)
The survey also found that Indian entrepreneurs lack pioneering innovation (come on guys – don’t you know we have startup India to help us pioneer initiatives? Sorry, I am not winking. I have promised to stay away from sarcasm).
The findings of the survey go a step ahead, claiming Indians copy ideas and start them without understanding the concepts.
You got to be kidding me….Are you telling us that Ola, Flipkart, Paytm, Zomato are not original concepts?
I am sure some overzealous soul did the survey. But then this survey does not stop here. They go a step further with 3 more observations :
- During 2016-2018, businesses providing consumer services, ecommerce and financial services were the ones that faced maximum closure.
- Businesses that needed massive investment and acquisitions faced a shutdown.
- Policy logjam, high competition and inability to perform under pressure are also reasons for the shutdown.
I don’t have much to comment on the first two points other than a minor observation – financial services were what you called as “the startup domain” where every VC wanted to have a company in their portfolio.
Has the sector seen a downfall before even we could say cheese?
Let me not be a party spoiler because I live in an era of optimism. An age where we are surrounded by the positivity of million dollar exits and startup founders turning millionaires overnight.
However, the positivity is dampened by the policy logjam by our hard-working government, which has energetically worked hard to help us jump 65 ranks in a time of 4 years.
From 142nd in 2014 to 77th in 2018.
I have still not lost 1 kg of weight in 4 years, and our government has cut so much bureaucracy flab.
You must congratulate them – we have jumped 65 places.
Now, that’s no mean achievement. Time for a beer!
By the way, do you think the number calls for celebrations?
Because even after jumping so many places, we are abysmally placed low in terms of “ease of doing business”.
The more I think about the ease of doing business in India – the more I could think of 100 reasons which are an obstruction to running our businesses smoothly in India.
By the way – I have a piece of BIG news to give you. (why am I writing like Donald Trump 😉?)
I have started a new unpredictable chapter in my life. A chapter that is bound to change a lot of things I do at lessons at startup.
The start of this new chapter makes me terrified and insecure.
All, I have with me is my experience, confidence and a loyal readership at lessons at startup to keep me going.
Quoting Mokokoma Mokhonoana “In fiction: we find the predictable boring. In real life: we find the unpredictable terrifying.”
In my next blog, I will share the BIG news!
Until then, keep sharing and spreading the good word.
Always remember “Sharing is Caring”. That’s what my kids teach me every day (although I find it hard to share my share of chocolate with them – I still have to live by the rules).
You, my dear friend, have to share the article to spread the Good Word!