Our Biggest Learning from Startups in 2016

January 1, 2017

If we believe the various internet information outposts, 2016 has not been a great year. It would certainly seem so in the case of a few well-funded, marked to succeed startups.
2015 was a year which saw a massive increase in the startup crowd in India, a year witnessing the opening of 3 to 4 companies a day. It was perhaps this overcrowding that spelt doom for even the most promising in the year that was to come.
At the beginning of the second quarter, May to be exact, food ordering firm TinyOwl seceded operations in all cities except Mumbai. TinyOwl, founded in 2014, suffered heavily from a lack of funds and all it’s efforts in cutting costs by reducing the workforce by 600 workers were in vain.
This period of the year proved fatal for another delivery startup. PepperTap, the on-demand grocery delivery startup shut down its consumer-centric application in April due to their inability to compete with its recently and heavily-funded competitors, Grofers and BigBasket.
Though the above two shutdowns could also be attributed, to a certain extent, to the lack of experience of the founders, another major shutdown, Fashionara, can certainly not claim the same. Led by former Reliance Trends CEO, Arun Sirdeshmukh and former Times Internet CTO, Darpan Munjal the startup raised $4 million yet were unable to capture the market share, eventually resorting to deep discounting to lure consumers yet ultimately shutting down operations, again in May.
The above three startups could also attribute their failure to an overcrowding of the market yet even niche products are sometimes unsuccessful. AskMe, a consumer internet search platform ended its reign in August due, most probably, to a severe cash crunch caused by the unplanned exit of it’s principal investor, Astro Holdings. In hindsight, the idea, though certainly a good one, was not executed well. The company were running operations on the back of weak technology, which ultimately led to their premature demise.
From these, and many other shutdowns over the past year, we’ve concluded that the following factors were to blame:

1. Funding isn’t everything: Several large players fell due to their overspending and lack of better organization of funds.

2. Marketing Matters: Many great ideas fail, not because their product isn’t promising but because the public has no knowledge that they even exist. Better marketing strategies can curb this factor.

3. Cash Crunch: While funding alone is not an omen of success, a lack of funds is certainly a death blow.

4. Too much, too fast: Explosive growth, though certainly impressive, can be hard to cope with. A drastic operational scale up necessitates a larger spending to attract consumers and failure to achieve this is definitely a nail in the coffin.

5. Investor Pressure: India has been experiencing what may be termed as a gold rush in the case of investments. Yet even angels expect returns, causing startups to resort to strategies they might otherwise avoid to appease their investors.

6. Market Saturation: With the explosive increase in startups in the country, the competition has quickly turned cutthroat and companies resort to heavy discounting to attract the masses.

7. Talent Shortage: While most ideas are indeed brilliant, there is a certain something missing in their execution. The Indian startup community shrinks from seeking outside help and ultimately delivers a product inferior to their plan.

8. Too Little, Too Late: Several companies, in a last-ditch effort to save themselves from sinking, resort to expanding their business at inopportune times and instead of increasing their profits, merely increase operational costs and end their run.
At Padrea, we assess each factor at play in the market, and advise our clients accordingly to ensure a significantly greater chance of success. Many of the above death-blows can be avoided simply through guidance from an experienced source. Need a hand? Connect with us at hello@padrea.com