12 failed startups in India in 2017 and what you can learn from them

Photo credit: Pexels

To an onlooker from outside, it may seem like the gravy days are back, judging from the billions of dollars that Japan’s SoftBank and Chinese tech giant Tencent poured into Amazon’s rival Flipkart, Alibaba-backed Paytm, and Uber’s rival Ola this year. But those are plays for market leadership in massive consumer segments. The picture is not so rosy at the other end of the spectrum where early-stage startups have struggled to raise follow-up funding.

Data from Tracxn shows 277 shutdowns this year, but there may be many more in the deadpool.

There may not have been as many spectacular flameouts this year as in 2016, but hundreds of startups disappeared quietly as investors turned more cautious in India.

Data from venture capital research firm Tracxn shows 277 shutdowns this year, but there may be many more in the deadpool. It’s hard to differentiate between lack of activity and companies being shut down.

Not surprisingly, ecommerce accounted for the largest number of shutdowns, followed by foodtech. Despite the fast growth in smartphone usage, monetization has proved hard in the consumer internet space. While the likes of Amazon and Flipkart can absorb losses with a long-term view, smaller players are forced to shut shop when the funding tap is closed.

Here are 12 of the biggest startup failures this year and lessons learned:

Stayzilla, RoomsTonite – budget accommodation

The most dramatic shutdown of the year was that of seven-year-old Stayzilla, which had raised US$33.5 million in total funding and billed itself as India’s largest homestay network. Tech in Asia was the first to notice something amiss when we searched for accommodation on the site and found that beyond a certain date all listed properties were “sold out.”

Co-founder and CEO Yogendra Vasupal put out a statement after the Tech in Asia report appeared, announcing a halt to Stayzilla operations “in its current form, and looking to reboot it with a different business model.” The story got grimmer after that – Vasupal landed behind bars when an ad firm went to court over non-payment of dues.

A homestay in a coffee estate in Coorg, India. Photo credit: Pixabay

The budget accommodation space has looked attractive because of the size of the Indian market and tourism potential of the country. But monetization has been hard. Stayzilla ran losses of US$14 million against a revenue of US$2 million in the financial year ending March 2016. The cash burn became unsustainable when investors turned more cautious this year and funding dried up.

Just days after Stayzilla, another player in this space – last minute hotel booking app RoomsTonite – shut down. It had raised US$1.5 million in angel funding.