25 failed startups in India in 2016 and what you can learn from them

After the irrational exuberance of 2015, when hedge funds and VCs were falling over themselves to back internet businesses in India, there’s been a sobering down this year. Software industry body Nasscom noted a 20-30 percent decline in funding.

Startups big and small have felt the withdrawal pangs. Flipkart struggled to raise funds and saw its valuation slashed repeatedly. Japanese giant SoftBank wrote down US$550 million in its biggest India investments, Snapdeal and Ola.

More than 1,000 startups shut down in India this year.

Several others just folded up. As many as 1,000 startups shut down, more than half of which were founded in the Indian startup ecosystem’s takeoff period of 2013 and 2014.

Some were startups solving real problems that simply ran out of runway as VCs tightened their purse strings and hedge funds fled the scene. Others found, to their dismay, that me-too business models borrowed from the West don’t always work in India. Several got gobbled up in low-value acqui-hires.

The reasons for the failures were varied, and there’s a lot to learn from them. Here’s a selection of startups that closed this year, based on data from venture capital research firm Tracxn along with our analysis of the lessons we can draw from their experience.

See: 10 reasons why startups fail – from the confessions of founders

Peppertap, LocalBanya, GrocShop

Hyperlocal grocery delivery startup PepperTap has the dubious distinction of being the biggest failure of 2016. The Gurgaon-based startup had raised over US$50 million, including a US$36 million series B round led by ecommerce player Snapdeal in September last year. And yet, less than a year later, it shut down.

“We operated on a negative margin per delivery, and in such a scenario, the path to profitability looked very distant – at least two to three years,” PepperTap founder and CEO Navneet Singh told Tech in Asia. It’s not the only one: LocalBanya, which raised US$5 million, also floundered and bit the dust. A third significant flop was GrocShop, founded by IIT Bombay alumni and selected by Google for mentoring.

See: 11 failed startups in India in 2015

Essentially, grocery delivery startups have been ‘buying’ customers, who pay no convenience fees to get the groceries delivered to their doorsteps. Also, when a discount is offered to acquire more customers, it’s the local retailers who grab the cheap groceries from these apps, thus defeating the intention to acquire more customers.

iProf, Purple Squirrel

Zoomo (GoZoomo)

AskMe

Doormint

TinyOwl, ZuperMeal, BiteClub, Zeppery, iTiffin

Fashionara, Ladyblush

Klozee

Truckmandi, Parcelled

Buildzar

Shotpitch

Autoncab

FranklyMe, Murmur

DateIITians, Cogxio