As we step into 2020, I remind myself of my obligatory duty of publishing the famous failed startups from the year 2019.
And now, when the list is completed, I feel lighter. That’s a significant weight off my shoulders.
For days, I had been procrastinating and avoiding the 2019 list. However, as the year 2018 started approaching the fag end – our famous failed startups from previous years:
started reminding me of the top priority item on my to-do list.
So, here we are.
Let us welcome 2020 with the learnings from 2019. Learnings that are best learned from failures than successes.
Disclaimer – In addition to the startups, we have also included a few major businesses that closed in India in 2019. So, this year’s failed startups in India in 2019 is actually a comprehensive list of “famous failed startups and businesses in India (Year -2019).
Here is the list for you:
Launched on 26th October 2015, Viu is a Hong Kong-based over-the-top (OTT) video streaming provider from PCCW Media, a subsidiary of PCCW.
Viu has a significant presence in markets across Asia, Africa, and the Middle East. India was one of the critical markets for Viu because of the vertical growth expected in the video streaming industry in India.
According to a report by PWC, India’s video streaming industry is all set to grow at a CAGR of 21.82% to reach Rs. 11,977 crore by 2023.
Also, reports suggested that OTT is to see three times growth in the next three years. Till a specific point in time, Viu India was no exception to the given stats.
Viu had reached 6 million monthly active users in March 2017 from 4 million monthly active users in November 2016, which was a 50% growth in about 4 months.
Viu at present has not shut operations in India, but they are soon going to wind up. Their top management has already left, and most of the employee strength is on notice.
Reasons for failure
Viu, which launched it’s India operations in the year 2016, was a massive success across various markets but couldn’t succumb to the competitive and complex Indian market.
Although one of the executives mentioned that the decision was sudden, others argued that they could have seen this coming.
The top-level exits, downsizing of the team, rejection of new ideas or concepts were all hints to the shaky future of Viu India.
The primary reason for the failure of the company was the budget constraints. There was no way they were to compete with giants like Netflix and Amazon Prime.
“Netflix and Amazon are spending $5-10 million on one show in India, and we had a total content budget of $15 million. Even the marketing budget that was given to us was just $8 million. You cannot create a big OTT play with such a low budget,” .An employee told ET
Further, an investment was preferred in a country where their rank was high rather than in India, where it wasn’t.
To summarize it all – The cut-throat competition forced Viu to shut its Indian operations.
Business Television India (BTVI) (earlier also known by the names of Bloomberg TV India, Bloomberg UTV, and UTVi) was an English news channel in the Business domain. Business Broadcast News Pvt ran the channel. Ltd (BBNPL).
On 1 August 2016, after a decision between Business Broadcast News and Bloomberg LP to not renew their 7-year-old licensing agreement in early January, the channel was rechristened as BTVI from Bloomberg TV India.
However, On 31 August, the channel suspended broadcast without citing any reason.
Reason for failure
The reason for failure was one of the most common reasons responsible for a business’s failure in India.
The Channel had been going through a deep financial crisis for months.
The management tried their best to rescue the situation but failed. BTVI was even in talks with a South India based businessman to raise funds but could not seal the deal due to liabilities and various other factors, following which promoters decided to shut down the operations.”
Bad Financial Management led to the closure of BTVI.
Established in 2015, the hyperlocal delivery platform, Doodhwala, worked on a subscription model to deliver milk and groceries directly to your doorsteps.
The company offered a wide range of products ranging from milk to fruits and delivered the products before 7 AM daily.
The company believed that its unit economics were robust.
By lowering their delivery cost to Rs.3, Doodhwala positioned itself uniquely in a very competitive market where other players were struggling.
“We have done a great job of maintaining a steady month-on-month growth rate while scoring an 85 percent-plus customer retention,”
The company failed even after raising a recent seed investment of $2.2 million from Omnivore, a venture capitalist firm in place of a minority stake in the company.
The new funding came less than a year after the company raised an undisclosed amount in another Pre Series A funding from Thomas Varkey, a partner at Stonehill Capital, USA.
Reasons for failure
Although Doodhwala’s initial funding was without many hindrances, it failed to raise subsequent financing.
One of the biggest challenges facing Doodhwala was the presence of prominent players like BigBasket, who were absorbing smaller players in the given segment. BigBasket had consumed Pune-based RainCan and Bengaluru-based Morningcart for its micro-delivery service BBDaily.
Thereby, making it difficult for brands like Doodhwala to sustain on its own.
Furthermore, there were similar players like Milkbasket and Dailyninja are other players that have been in the market to raise funds, which made the market cluttered.
Swiggy has a presence in subscription commerce through its portfolio company SuprDaily.
Many experts believe that apart from the top three metros (Bengaluru, Mumbai, and NCR), the use of micro delivery platforms isn’t scalable and justified.
The competition forced Doodhwala to shut shop.
An email was sent to Doodhwala subscribers mentioning that FreshToHome, which is an online platform for fresh meat and seafood, will continue to service Doodhwala’s customer base in Bengaluru.
Started in 2012, Russsh was an on-demand delivery service offering first mile and last mile solutions to individuals and businesses.
“Services like RUSSSH are easy to market at a very low cost. It is not possible for every restaurant or grocery store or medicine shop to have its delivery mechanism in place. RUSSSH fills that gap from the demand side.”Ajay Ramasubramaniam, Director of India, Zone Startups,
Although the model looked quite promising, the founder did find it challenging to convince VCs about raising funds based on the concept.
The founder further mentions, “We’re a single-founder company, and investors are always wary of funding such startups. We went through the market-not-accepting-us phase. Now, I think we’ve reached a self-sustaining model, and need funds to expand our technology, talent, and operations.”
RUSSSH claims to have completed 300,000 tasks to date. Its delivery fleet consists of 60-80 executives at any given time.
About 150 tasks were processed daily, and that goes up to 200-odd during the festival season.
The average task fee was Rs 300 and could go up to Rs 1,500 depending on the location, travel time, value of content to be delivered, etc.
(source – https://yourstory.com/2019/06/startup-mumbai-task-management-service-russsh-shutdown)
Reasons for failure
Self-funded Russsh lacked the capital to take on bigger competitors in the space.
Since it lacked the capital, it couldn’t offer great discounts like other emergent players. A prerequisite to succeed in the discount-driven Indian Market.
Commenting on the reasons for the shutdown, founder Bharat Ahirwar mentioned, “Although we have shut down on a positive note, one of our biggest reasons to surrender was not being able to get the right team on board. Our inability to raise any kind of funding also forced us to be merely stuck in Mumbai. It is difficult when a company is run by a single founder.”
Aditya Birla Idea Payments Bank (ABIPB)
Launched on February 22, 2018, Aditya Birla Payments Bank Limited (ABPB) was the fourth payment bank to get a license from RBI.
The venture was a JV in between Aditya Birla Nuvo Ltd. and Idea Cellular in which Aditya Birla Nuvo Limited held 51 percent shares. The remaining 49 percent were with Idea Cellular.
On 20 July 2019, Aditya Birla Payments Bank announced that it would Shut operations subjected to the receipt of requisite regulatory consents and approval.
Reasons for failure
As observed by RBI, the key reason for operating profit of such banks being negative was large capital expenditures involved in setting up the initial infrastructure, leading to high operating expenses.
Further, there is still a considerable section in India that prefers traditional methods while transacting, and there hasn’t been complete awareness and comfort with the technique.
There were also lending limitations and other limitations, such as investing only in government securities, which offer lesser returns as compared to other avenues such as mutual funds.
All the above cumulated to an unviable business model for ABIPB and led to its shut down.
In 2013, Vodafone launched M-Pesa mobile money services in India.
Vodafone Group said M-Pesa grew revenues by 20.7 percent to €0.75 billion and represented 12 percent of Emerging Consumer service revenues in fiscal 2019.
As a matter of fact, the growth from M-Pesa helped Vodafone in supporting the telecom business in Africa.
M-Pesa had more than 8.4 million customers in India, according to data on the Vodafone website dated January 5, 2017.
Reasons for failure
According to Vodafone Idea CEO, Balesh Sharma, regulatory changes for the payments bank business and deterioration in the health of the telecom sector were the key reasons for the failure.
According to the SBI report,
-PBS face stringent regulations on both the asset and liability side. On the asset side, they face a blanket ban on any type of lending. On the liability side, they cannot accept deposits higher than Rs 1 lakh. Besides, the capital requirement is quite steep, with capital to risk-weighted assets ratio of 15 percent.
-The future of payment banks is uncertain and would require government support to achieve their objectives.
-Only 4 PB’s are operational out of the 11 licensed players.
Starting in August 2017, Koinex quickly established a name for itself as India’s largest cryptocurrency exchange company that maintained a high standard of service in trading of digital assets.
As per Koinex’s site, there were over a million registered users, over 3 Billion Dollars of Trade volume, and over 20 million orders executed before they closed.
Reasons for failure
In an emotional blog post published on Medium, Koinex co-founder Rahul Raj said that the last 14 months had been tough to operate a digital assets trading business in India, on account of the closure of bank accounts holding user deposits.
Raj also mentioned that their operations were regularly disrupted owing to delays by government agencies in clarifying the regulatory framework for cryptocurrencies.
The crypto exchange had been facing denials in payment services from payment gateways, along with blocking of transactions for the trading of digital assets.
“Multiple delays by the government agencies in clarifying the regulatory framework for cryptocurrencies despite our pending writ petition in the Supreme Court of India, coupled with regular disruption in our operations, the final decision has been taken after duly considering all the latest developments in the crypto and blockchain industry in India,”Koinex co-founder Rahul Raj
In August 2016, Doctalk was started as an app to Doctors with patients.
Through Doctalk, you could send messages to your doctor, store medical files, get detailed prescriptions, save your medications, etc.
In India, healthcare is still offline, and Doctors faced the constant problem of patient follow up and calls.
To make this process seamless, Krishna Chaitanya Aluru came up with the idea of Doctalk.
It built an electronic medical record (EMR) solution, which helped doctors write prescriptions digitally and provide customized prescription templates.
Doctalk had raised roughly $5 million from Matrix Partners and Khosla Ventures and was also backed by Y Combinator, Vy Capital, Liquid2Ventures, Venture Highway, Altair Capital, and some angel investors.
Reasons for failure
The reason for the company’s shutdown was it’s an inability to pivot.
Which meant it did not have a plan B in case it’s initial business model did not succeed.
The planned transition into the electronic medical record solution (EMR) business from the existing business model didn’t yield the acceleration that is needed,” said one of the people. “Subsequently, the company has shuttered the entire health-tech concept and laid off a majority of its employees,” said another person.
In 2015, Sunil Kumar co-founded Loanmeet after he realized that a large section of borrowers could not get personal and business loans from banks and other financial institutions due to lack of credit history, insufficient documentation, or other reasons.
When capital is to be deployed by financial institutions, the size of the firm plays a considerable role. In such a scenario, Loanmeet attempted to revolutionize banking at the grass-root level.
“Our focus is to use data to build credit models, enabling us to make quick credit decisions. We are a focused fin-tech platform, and we see tremendous opportunities in offline inventory financing business.”Sunil Kumar, co-founder of LoanMeet
LoanMeet used to finance working capital requirement, B2B marketplace financing, cash credit line, and channel financing in the range of Rs 5,000 to 5 lakh for short term period ranging from 15 days to 9 months.
It has raised an undisclosed amount of seed funding from Chinese investors and entrepreneurs Cao Yibin and Huang Wei, and Madhusudan, CEO of KrazyBee.
Until Jan 2017, Loanmeet was growing well at about 50% month over month.
Reasons for failure
The lending market is an overcrowded market dominated by established players, and Loanmeet couldn’t sustain the competition.
As a result, it failed to raise further investment.
“LoanMeet had tried raising further investment. However, investors were not convinced as lending enabling market has been overcrowded with several deep-pocket players,” said two sources. The company also laid off about 15 people in the past couple of months.
One of the prominent reasons for failure in lending space is that most of the lending companies are good at solving credit access problems. However, they don’t do in-depth research beyond collecting information from customers where lies the deep root cause of customers not getting funded by banks.
Companies I wish would shut down in India:
I am getting over ambitious with this list, but since it is my blog and I have the power vested in me by the noble readers of the blog – I need to vent out my frustration at a company.
A company that has bled us dry for years and still. Manages to run on taxpayers’ money…sorry – blood.
Started in July 1979 as Tata Airlines, Air India is India’s national aviation company and is known to be the third most significant airlines in India.
In 1949, the Government of India bought 91% of Air India shares.
Later on, it bought a majority stake in Air India, making Air India a government company.
Once upon a time, Air India was the largest airline in the subcontinent accounting for 5% of total traffic before the politicians and bureaucracy burned it to ground.
What went wrong?
The failure of Air India was a combination of government mismanagement, poor decision making, and financial crisis.
The merger with Indian Airlines was a primary reason. The combined loss of Air India and Indian Airlines in the year 2006-07 was about Rs.770 crore, which increased to about Rs.7200 crore by March 2009.
The number of employees per aircraft was way above the required limit. Thereby, leading to increased cost and reduced efficiency.
The merger also caused havoc for both airlines as the work cultures of Air India and Indian Airlines were utterly different.
Add to above, the added burden of senselessly buying planes without assessing the need for them.
There was no proper planning as to the routes on which the planes were to fly.
According to sources, there came a time when not even 20% of the routes chosen were profitable.
To everyone reading this blog, please write to the Indian government to close this blood-sucking parasite before its too late (well! it is already too late).
On an ending note, as expected – we (the Indian startup ecosystem) sucked at Innovation.
Despite being the third-largest business ecosystem, India lacks innovation. A reason attributed to the failure of most of the businesses and startups in the country.
India also happened to be ranked pretty low on the Global Innovation Index.
Premature scaling (almost like putting the cart before the horse) and not solving a market need were the other top reasons why startups failed.
Phew! And that finished our list of failed businesses and startups from the year 2019.
Until I publish the same list next year, bye-2 | Shaaba Khair | Adieu | Namastey!