4 Jan 2017

Rishabh Tripathi

2016 A Year of Startup Shut Down and What Enterpreneurs Should Learn From It

So 2016 is going to be over and soon there will be a " new Year " but lets hope that this time the new year is actually new for the startups unlike the 2016 which saw a huge number of startups shutting down even after raising funds. Even the biggies like Flipkart saw its valuation slashed down by Morgan Stanley. There are  several varied reasons for this shut down of no. of startups but here we bring to you 10 shut downs of 2016 and the reasons for their debacle .

1. PepperTap - Hyperlocal Grocery Startup

One of the most talked about and considered to be the biggest debacle or failure of Indian startup arena was that of this Gurgaon-based startup PepperTap . It was launched in 2014 and provided online shopping for groceries and household items . It was one of the most promising startups that the investors and VC's looked upto and why not would they do as from 1 grocery store in Gurgaon it expanded its business in 18 cities across India by mid 2015. Image result for peppertap
But the startup packed up its business in April 2016 and that too after raising a funding of US$ 50 million. Shocking right !!! Yeah but it had its valid reasons to do so afterall.

Why Couldn't Then PepperTap Able To Pepper After April 2016

Well if you analyse its situation you could find that the reason for its debacle was infact its expansion.
Yeah PepperTap grew too fast and too big but on a negative margin. At one point it was catering to 20,000 orders per day, yeah sounds amazing right! but what was happening actually was that it was losing large sum of money on each and every order.
Also it was not able to scale up its systems and operations to match the rate at which it was growing . Also when it tried to woo its customers through discounts most of the advantage was taken by the retailers who used to order in bulk so even this move went against it.
But PepperTap isnt the only one other grocery delivery startup have been shut down due to one or the other reasons . This area of grocery delivery startup offers very thin operating margins so if the startup does not figure out this problem one time or the other it will fail. But there are some big players who have played really smart through all this like the BigBasket which has its inhouse inventory and its own brand product

2. GoZoomo (Zoomo)- A Used Cars Marketplace

GoZoomo , which started couple of years ago , was aimed at being peer-2-peer used car marketplace in the area where people showed minimal trust. The used car market in India is much of uncertainty and lack of trust from the consumers side and its even right from buyers point of view as the buyer is not actually aware of what he's getting, wether he's getting a car repaired after the accident or a stolen car with changed chesis number or if he's paying the right price for this used car. So trying and aiming to solve this problem GoZoomo was launched and much to the expectations it grew way too fast with 100 transactions per month within 3 months of operation. Also agter a seed funding of US$600,000 last year it raised US$7 million in round A funding.
 
So shutting in even after having the money in the ccount is a decision which everybody thought was unusual or too early to call off, but this is what GoZoomo founder Arnav Kumar said " The right thing to do is to treat the capital respectfully and deploy it where there is a better chance to create huge value. 

The Problems GoZoomo Could Not Zoom Into

GoZoomo was providing standardized services as in terms of inspection  and quality of used cars but what i could not standardized was the price . Now this is one of the important but largely uncertain factor that bothers the consumer. The price told to the buyer by the inspection team was not considered trustworthy by the buyer and before buying the car he will absolutely check on other selling sites like that of Quickr and OLX where obviously the cars were cheaper but here the consumer compromises with the quality, as Arnav puts it " What was happening was people looked at the cars ,liked the quality but could not decide on the price". 
Another problem that GoZoomo faced was that of conversion from listing to transaction. At a time the site had quite a good number of viewers and transactions but the rate of conversion from listing to transaction was too low to about 20%.  

3. Truckmandi- A Truck Aggregator Which Failed

Truckmandi was a marketplace for trucks where transporters and truck owners could directly connect to the customers who need their services . The online tuck booking startup which was founded by former Snapdeal employees to transform the sector which was still largely unorganised and offline unfortunately had to shut down its business .


The company was running quite good before it went out of business. It has monthly run rate of approx one crore which was growing at the rate of 400%. They had 500 partner companies using their technologies and 300 transporters and truck owners connected with them. Also in 2015 it had raised $2 million in series A round of funding.
While the exact reasons for its shutdown were not reported neither by company nor by its founders but its assumed to be the uncertainty of this sector . Logistics is a space that separates the wheat from the chaff quickly. “It is not just about booking a truck,” said the founders of Truckmandi.

4. Buildzar - Startup which Failed Due To Digitization
Biuldzar was a marketplace for building materials in Delhi NCR. It was an online one stop shop for all types of home construction solutions.It catered homeownersuilders, architects, and designers and aims to make the home-building experience smooth and hassle-free.The platform offered full range of construction materials, including cement, steel, sand, bathroom fittings, electricals, tiles, paint, bricks and blocks, stone aggregates, water tanks, and more.


Why Buildzar Was Not Able To Build Up?

When the company started the transactions were good enough but the unit economics was not son impressive and the consumer traffic and revenues did not gained momentum. Also as the India was digitising and most of the the transactions were done cashless the real estate sector was hit , where cash transactions are priority to avoid various taxes, and thuhs due to this effect the buyers and consumers became scarce on Buildzar and it had to shut down its operations.

5. Autoncab- An Autorickshaw Hailing App
Autoncab was launched in 2014 as an autorickshaw aggregator . While there were many cab services in India only few offered the autorickshaw option,and it was from here that the Autoncab  decided to build on. The company was offering its services in 6 cities- Noida , Ghaziabad, Gurgaon, Kota , Chandigarh , Jaipur. It had also raised $1million in funding from a US based investor.

Why It Had To Shut Down?
As the founder of Autoncab had put it “Uber and Ola have been offering a lot of discounts and incentives,” Vinti Doshi said. We did not want to burn cash unnecessarily. It is just a game of burning cash at the moment.” So it was just a game of remaining or sustaining in the competition which Autoncab failed to do . It could not successfully scale up its operations and being new in the space was not able to woo customers by its incentives .The on-demand auto-rickshaw hailing market is dominated by Chandigarh-based Jugnoo and Ola. Jugnoo, which claims to have 12,000 autos in its network, is present in 35 cities. Ola was operating in 24 cities under its brand as of 30 April 2016.

6. DateIITians- An Online Dating App Exclusively For IITians And IIMians

DateIITians was an online dating app founded way back in 2012 by Layak Sing ,an IIT kharagpur student in his final year of engineering.In college it went viral and become one of the top five websites with Alexa rank of 507 in India.In 2012 it was just a website and was working on its app model. DateIITian came up at the time when online dating was unheard of in India and this novelty gave it a boost.The site claimed to have received five million hits within three months and tens of thousands of verified users.

Why It Had To Shut Down After 5 Years Of Operation?
Although DateIITian was a hit in after few years of its foundation but it was not able to cope up when new players like Tinder took the charge. Also it was about the cultural identity in India that had put the hinderance. Although dating and all has made the place in minds of youngsters but it will still take 3-5 years for this to happen in masses. Also there are direct matrimonial sites doing their business which have to some extent put some restriction on the dating apps.

7. Doormint- An Online Laundry Startup
Doormint was an online laundry marketplace. It changed itself from on-demand services marketplace to an online marketplace to scale up its business. It also raised Rs 60 lakh in funding from Powai Lake Ventures  . The business model of Doormint was so impressive that it got selected in the first batch of Google Launchpad Accelerator.

Why Could Not Doormint Reach Every Door And Corner ?
Although Doormint was selected for the first batch of Google Launchpad Accelerator it could not get hold of its unit economics . Also another factor which Doormint founders overlooked was the cheap home services available in India as Dhobi and a large no. of still trust their family dhobi so even if they would try the new startup they would eventually be backing their home dhobi. Another aspect was the cost and price. The cost of processing
clothes,pickup,drop logistics and packaging were difficult to recover through prices.

8. AskMe- An Ecommerce Marketplace
AskMe was an ecommerce and listing startup who was in race with the biggies like that of Flipkart and Snapdeal and later on Amazon to join the race. At the time of shutting down it had $300 million in funding and was considered to be the unicorn in the business.
The top Management of the company had kept the lid over the slowing business and revenues of the startup.AskMe was a listing site for small vendors before vendoring completely into the ecommerce business. But even in the listing business it failed to setup a managed and organized system for vendors to sell online.  The suspension of business was never formally announced, leaving scores of employees still waiting for their salaries and vendors for their dues. This is the saga of AskMe’s downward spiral.

9. TinyOwl, ZuperMeal- Food Delivery Strtups
Food delivery startups even when the startup sector was on the boom did not showed much promise and then one can imagine what could have happened in 2016 which is seen as worst year for the startup.According to the reports TinyOwl has raised US$15 million last year in February. 

But the negative margins , unreliable quality from the tied up restaurants could not be compensated by the service provided by both the startups. Also high costs of logistics and a oversaturated market helped in their downfall.

10. Fashionara- Fashion Ecommerce
Its the area with too many of the same type of "in India too" startups with minimal of their differntial idea and works more on the repeated model either of their own or of some other abroad startup. Fashionara , an online fashion marketplace had US$8million in funding from the investers.

 The reason for their shut down could be easily analysed as being nothing different from any of its rivals. The only way to woo the customers in this market is the luring discounts you can offer to them even by comprising by the price but any how you have to burn the investors money to give discounts or else see your customers going to some other portal . This is what happened with the Fashionara which adopted a Flash sales model. It could only lure customers with deep discounting. Once the cash ran out and no more investors were in sight, it had to shut shop.