Wondering to know the answer to the question of why startups fail in India, this post will clear your all doubts and confusion.
The startup used to deliver milk, eggs, grocery, bread, and other FMCG products. This venture delivers these basic things at a very low delivery cost.
The startups were a subscription-based startup and also has raised funding of $2 million from omnivore in exchange for a minority stake.
The startup was successful in getting initial funding but later they could not handle costs.
The second reason is competition from big market firms like the big basket, milk basket, and daily ninja, super daily.
When Doodhwala gets closed then an email was sent to its subscribers that now Fresh to home will continue the services of delivery of existing Doodhwala's customers.
Failure of startups is one of the main problems that today's India's ecosystem is facing. According to a report by IBM about 90% of startups fail in its first five years of working.
The major reason why startups fail in India is lack of innovation and lack of funding.
But the question is that who is responsible for all these. Is it founders or government or investors. So in this article, we will study this case only.
Why startups fail in India features-:
1. Lack of funding.
2. Lack of innovation.
3. Lack of a business plan.
4. Shortage of cash in the business.
5. Lack of government support.
6. Lack of focus on the target market.
7. Not getting funding on time.
8. Lack of talented manpower.
9. Inability to solve a consumer problem.
10.Lack of flexibility.
1. Lack of funding.
2. Lack of innovation.
3. Lack of a business plan.
4. Shortage of cash in the business.
5. Lack of government support.
6. Lack of focus on the target market.
7. Not getting funding on time.
8. Lack of talented manpower.
9. Inability to solve a consumer problem.
10.Lack of flexibility.
1. Lack of funding
Funding is the lifeblood of a business. Without it, the survival of business has minimal possibilities. So in starting entrepreneurs collect money from family and friends and invest in their business.
But later when a startup needs angel investors for funding, it is very difficult to persuade investors because of competition in the market.
Sometimes startups do not get investment because the investor does not like their idea and business model.
So because of this businesses are unable to acquire professionals and experts as they are very expensive. Startups have to acquire low quality raw material to run their businesses.
And the ultimate result is the crash of business and consumers do not accept their low-quality product in the market.
2. Lack of innovation
In India, new startups follow the copyright approach. They copy the developed startups of western countries and start their business in India.
Some of them are successful but 9 out of 10 startups fail. This is because our ecosystem and western country's ecosystem is different.
Our ecosystem is similar to china but founders fail to understand it. There is merely any startup that is the creation of India and is spread all over the world.
Flipcart is a copy of amazon. OYO is a copy of Airbnb. Ola is a copy of uber. Ninjacart is a copy of Instacart. If you search on google about all of these you will get that they are loss-making companies.
3. Lack of a business plan
Business planning meaning strategy of growth of business in the coming years. The founders of startups fail do write an efficient business plan.
They identify the problem in the market, give a solution in the form of product, and for one year they see growth in business.
But after one or two years they are confused about what to do. They do not have future plans of expansion, innovation in product, or launching a new product.
There is a famous saying that "Failing to plan is planning to fail".So your business plan should be ready in advance only.
But one thing to take care of is that your business plan should be flexible which means that if later changes are needed in plan than changes can be implemented immediately.
4. Shortage of cash in the business.
Shortage of cash in business meaning that in balance sheet your business is earning profit but in hand, you don't have cash.
In simpler terms, it means a lack of working capital. Working capital is needed to cover day to day expenses.
But due to negative working capital startups are unable to cover its expenses. Working capital is also needed for taking loans to pay the interest rate.
If your business has a negative cash flow than your business is likely to shutdown.
5. Lack of government support.
The Indian government has launched a startup India scheme in 2016. This scheme was started to help new startups grow. The government planned to give funding and other benefits to new startups.
But according to a survey of 33000 startups,80 percent said that they get no support from this government scheme.
5o percent of them said that they were the victim of corruption and slow bureaucracy system
Corruption also plays a bigger role in the failure of a startup.
Without bribe, completing the legal procedure of a startup is difficult. Slow bureaucracy also plays a bigger role in the crash of the startup. Government employees take a long time to complete the files of the new venture.
Our infrastructure system is also very bad. We do not get proper electricity in the office and the proper road to our way to the office.
6. Lack of focus on the target market
The target market is the group of consumers whom you want to sell your product or service.
In the starting stage, many startups do not know their target market. They want to earn revenue fast so they focus on the entire market which increases their cost.
Insufficient to handle costs many startups in the early stage have to quit their business. So if you focus on the target market then you will be able to build a good startup.
Example-Maruti Suzuki only focuses on middle-class people. Apple focuses on rich people only. Redmi focuses on the middle class and lower class group.
7. Not getting funding on time
Lack of capital is one reason but not raising capital in time is another reason for the failure of the business.
Some startups ask funding too early and get rejected and some startups ask funding too late that investors get less return from business.
A startup should ask for funding at right time to grow its business effectively.
8. Lack of talented manpower.
Two businesses can have the same technical, physical resources but two businesses cannot have the same people skills. People or employees are the ones who can make your startup a billion-dollar venture.
But in starting if you hire unskilled employees than definitely your foundation of business is going to get affected.
While hiring employees you have to also check their attitude towards the organization. Their desires and goals should match with the organization.
In India, many ventures in starting hire cheap labors to save cost and later they release their mistakes
9. Inability to solve a consumer problem
What is a startup? A startup is an idea or solution to solve the burning problem of a consumer. The bigger the problem, the bigger will be the profit of your company.
But in India many ventures start their business with the profit motive and if you see their business than you will get to know that they are not solving any problem of consumer.
If you are not solving a consumer's problem than your startup is not healthy.
Example-Ola solves the bad taxi problem of consumer, OYO solves bad hotel service problem.
10. Lack of flexibility
Today business environment and consumer demand are changing rapidly. So the businesses which bring continuous change to their business are successful.
In India 9 out of 10 startups are unable to maintain pace with changing consumer demand. Because of this competition comes and disrupts the market.
Example-Reliance communication owned by Anil Ambani or Airtel. Jio comes into the market with new technology and had disrupted the market.
Reliance communication and Airtel didn't implement changes in their company and had lost a big market share.
So, these were the reasons why startups in India fail. Now below I will be telling you some real-life examples of failed startups in India.
So, these were the reasons why startups in India fail. Now below I will be telling you some real-life examples of failed startups in India.
Failed startups in India 2019
Below we will discuss some important case studies and examples of failed startups in India 2019-:
Failed startups in India 2019 features-:
1. Doodhwala.
2. Koinex.
3. Doctoral.
4. Wooplr.
5. Russia.
6. Mr needs.
7. Tinmen.
8. Loanmeet.
Failed startups in India 2019 features-:
1. Doodhwala.
2. Koinex.
3. Doctoral.
4. Wooplr.
5. Russia.
6. Mr needs.
7. Tinmen.
8. Loanmeet.
1. Doodhwala
Doodhwala was founded in 2015 by Akbar and Akash Aggarwal. It was a micro delivery business that started in Bangalore.The startup used to deliver milk, eggs, grocery, bread, and other FMCG products. This venture delivers these basic things at a very low delivery cost.
The startups were a subscription-based startup and also has raised funding of $2 million from omnivore in exchange for a minority stake.
Reason for failure of Doodhwala
The second reason is competition from big market firms like the big basket, milk basket, and daily ninja, super daily.
When Doodhwala gets closed then an email was sent to its subscribers that now Fresh to home will continue the services of delivery of existing Doodhwala's customers.
2. Koinex
Koinex was founded in 2017 by Rakesh Yadav, Rahul Raj, and Aditya Naik. It was a digital asset exchange service platform.
Within 4 months of operation, Koinex has recorded $265 million in trading volume and 40K plus users within 24 hours. Koinex was India's fastest-growing startup in this field.
Reason for failure of Koinex.
The founders of Koinex told that the company was closed due to a lack of government support. The formal banking institutions were regulated to exit relationships with online digital assets exchange companies.
They told that the government was not clarifying proper regulatory framework for cryptocurrency exchange platforms. They even took the case to the supreme court but no favor was given to them by the court.
They were not getting services of banks due to regulation of Reserve bank of India on April 6,2018 on cryptocurrency exchange companies.
3. Doctalk
Doctalk was founded in 2016 by Goenka, Chamakura, and Aluru. It was a platform that connects patients with doctors. The patients can chat with doctors, a prescription can be exchanged, and in return the doctor's charges fee.
In 2017, Doctalk has raised $5 million in funding from Matrix Partners India, Khosla ventures, and others. It has also raised funding from Y Combinators.
Reason for failure of Doctalk.
The reason for the failure of Doctalk was that they were unable to pivot. Pivot means changing the startup's business model.
So Doctalk changes its business model from chat to electronic medical record solution.
But their business planning for the new business model was not efficient and ultimately Docktalk co-Founder Akshat Goenka had to step down as CEO and nearly 100 people were laid off last year in November.
4. Wooplr
Wooplr was founded in 2013 by Arjun Zacharia Sabharwal. It was a fashion discovery and social commerce startup. It was started in Bangalore
Since April, Wooplr has made massive job cuts. The employees who were asked to leave were provided a one-month salary package free.
Reason for failure of Wooplr
One of the major reasons for shutting sown of Wooplr is the lack of funds. The competition of Wooplr was able to merge with other businesses and was able to arrange finance easily.
Due to a lack of finance, this startup was unable to cover its cost and ultimately has to close down its services.
5. Russsh
Russsh was founded in 2012 by Bharat Ahirwar. Russsh is an on-demand service solution offering first mile and last mile solutions to individuals and businesses.
It was a promising startup and founders claim that they have completed 3,00,000 tasks before shutting down.
Its delivery consists of 60-80 executives. They were completing 150-200 tasks daily.
The main reason for their crash of Russsh was lack of funding. They were unable to convince the venture capitalist for finance.
Because of this, they were not able to give discounts like the competition was giving.
The founder also claimed that the team was also not correct.
People pay the subscription and Mr need provides them groceries in return.
It was a good startup that did 10.000 delivery in Delhi only.
The major reason for the failure of Mr need was lack of funding. The startup was unable to acquire funds to cover its cost.
The second reason is competition from the big basket and gofers. They were huge companies with huge funds and Mr need was unable to compete with them.
This startup was started in Hyderabad. This startup provides a meal in minimum Rs 65 which was it is one of specialty.
The startup was also funded by Zomato.
Tinmen's co-founder told to Inc42 that the reason for the shutdown is lack of funds and money. They were unsuccessful in raising funds from investors.
The second reason is competition in the market.
Loanmeet was involved in arranging working capitals requirement, B2B market place financing, cash credit line, and channel financing of RS 5000 to RS 5 lakhs period ranging from 15 days to 9 months.
Loanmeet was closed because they were unable to raise capital from the market as investors worry about the overcrowded market.
The second reason is that many companies were giving credit better than this startup. They don't even have deep information about the customer's needs.
Its delivery consists of 60-80 executives. They were completing 150-200 tasks daily.
Reason for failure of Russsh
Because of this, they were not able to give discounts like the competition was giving.
The founder also claimed that the team was also not correct.
6. Mr need
Mr need was founded in 2016 by Hitashi Garg, Yogesh Garg, Ravi Wadhwa, and Ravi Verma. It was a delivery platform.People pay the subscription and Mr need provides them groceries in return.
It was a good startup that did 10.000 delivery in Delhi only.
Reason for failure of Mr need.
The second reason is competition from the big basket and gofers. They were huge companies with huge funds and Mr need was unable to compete with them.
7. Tinmen
Tinmen was founded in 2015 by Mukesh Manda and Chaitanya Degala. It was like other delivery startups only but its USP was that it delivers home-cooked food for working professionals with no delivery cost.This startup was started in Hyderabad. This startup provides a meal in minimum Rs 65 which was it is one of specialty.
The startup was also funded by Zomato.
Reason for failure of Tinmen.
Tinmen's co-founder told to Inc42 that the reason for the shutdown is lack of funds and money. They were unsuccessful in raising funds from investors.
The second reason is competition in the market.
8. Loanmeet
Loanmeet was started in 2016 by Sunil Kumar and Ritesh Singh.Loanmeet was involved in arranging working capitals requirement, B2B market place financing, cash credit line, and channel financing of RS 5000 to RS 5 lakhs period ranging from 15 days to 9 months.
Reason for failure.
The second reason is that many companies were giving credit better than this startup. They don't even have deep information about the customer's needs.
Questions and answers
1. What percentage of startups fail in India?
Although India also produces successful startups according to a report by IBM 90 % of startups fail in its first five years of working. The main reason for this failure is the lack of funding and lack of innovation.
2. Why did Timberland fail in India?
Timberland is shoes making company especially producing hiking shoes and other gears. The main reason for its failure is competition from woodland which is also in the same segment of producing shoes.
3. Who is the youngest CEO in India?
Suhas Gopinath is the youngest CEO of India. He is an Indian entrepreneur who is the founder and CEO of Global Inc which is an IT company. He became CEO of the company at the age of 17 only.
At this time also he is the world's youngest CEO.
Conclusion
So I hope you like this article on Why startups fail in India. We have discussed reasons and examples also so that you can learn from these startups and you don't repeat these mistakes in the future.
In my opinion to solve this problem government should focus on improving the startup India scheme. They should also give tax benefits and should improve the bureaucracy system.
If you like this article so please share it on Facebook, Twitter, Pinterest, and other social media platforms.If any doubt contact me through vinayakganesh15@gmail.com
In my opinion to solve this problem government should focus on improving the startup India scheme. They should also give tax benefits and should improve the bureaucracy system.
If you like this article so please share it on Facebook, Twitter, Pinterest, and other social media platforms.If any doubt contact me through vinayakganesh15@gmail.com
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