Your mentor will always guide you to learn from your mistakes, but we learn even better from others’ mistakes. Indian start-up ecosystem fights a new wave every day. While the starting months of the year had news on dry funding, the recent news of Facebook and TLabs joining hands to support mobile-based start-ups in India again cheered up the budding entrepreneurs. Both these entities have shared the vision of building on the knowledge and learning's of in-house senior mentors to engage and educate entrepreneurs. Keeping up with the enthusiasm of the entrepreneurs, there failures should also not be masked. We should not only be celebrating the successes and ignoring failures. The recent case of Stayzilla, where the founders are being accused of committing fraud and embezzling funds, let’s learn from the failures of some top startups:
PepperTap: Lack of technology to support the rapid growth, the rush to open too many stores online far too quickly, website crashes, technical glitches, too many discounts, etc are some prime reasons that were shared as the failure reasons. For PepperTap, sticking to their two-hour delivery promise which became a key differentiator for them. To fulfil this, they had to build a spare capacity in every one of the 17 cities in which they were present. So, though PepperTap scaled back operations many cities, due to which the average value of sales increased twice over and retention rate soared 400%; the timeline and path to profitability were still looking long. SO even though it had $51.2M in 4 rounds from 7 investors, PepperTap had to shut its operations.
Dazo: An app-based service that curated and delivered meals, had to suddenly shut down its operations in October 2016, a year after it started. The Co-Founders had shared that they were short on capital and at some point even felt that we were lagging behind other players and decided to quit. A lot of foodtech startups have rolled back their operations and the major reason being is running out of funds. Though food-tech firms attract large investments, however, many have found it hard to raise funding past the Series A round.
FranklyMe: The company received seed funding of $600K from matrix partners; undisclosed amount in pre series A from undisclosed investors. It was a video micro-blogging platform. The startup also had a B2B offering, where it made mobile and desktop web Q&A widgets for news, content sites. The startup stated that it had to shut shop as it was not able to achieve sustainable product/market fit. It also raised an undisclosed Pre Series A round of funding from new as well as existing investors.
Purple Squirrel: Purple Squirrel was an Ed-tech startup that connected students with industry partners for field visits, workshops and hands on practical experiences. The failure reasons of the startup was continuous dipping sales and increasing cash burn rate. Ed-tech startup sales cycles are long and traditional institutions are slow to adopt innovation from outsiders. Purple Squirrel, with US$2 million of funding, shut down earlier in the year. Finding ways to monetize in a space where consumers are used to free stuff online, and building differentiated products and services are some prime reasons for the Ed-tech startup failures.
These are very few causes of startup failures and startups are experiments. We need to understand that experiments are not failures, not if they are done properly. Things look quite rosy at the top, but not so much for establishing startups beyond series A and B. There are very few startups, those are attracting funds anymore. 2015 was one of the best year as it saw the launch of almost three to four startups a day. We secured third position in the world in terms of number of startups. A huge amount of money was poured into the startups and that too on very high valuations. The year 2016 also observed an increase in the start-up foundation, but there was a fall in the ticket size. Even the funding was not proportional to success. It was a mix of raising money and simultaneously moving towards closure. Let’s see how the year 2017 shapes up!
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