The year 2015 and the first quarter of 2016 has brought polar changes in the startup ecosystem and has unquestionably changed the speaking points around it. If funding and scaling were the bombilation of early 2015, acquisitions, layoffs, and shutdowns have surely taken over in 2016.
This year, the startup ecosystem has seen a 40% diminution in funding compared to last year. But in this occasion with the outgrowth in the number of funding proclamation, things seem to be getting better, although it may be too soon to deduce .
Deficiency of funds and emerging competition had clearly been the major ground for the shutdowns and exits. Although the market till now, has been snatched by the big names, with the crunch in funding it will now be the commencement for the smaller players.
The on-demand grocery major PepperTap shut its doors in April this year. The Gurgaon-based company rolled back its consumer-centric grocery app by the end of April. Navneet Singh, CEO of PepperTap, confirmed media channels about the shutdown.
PepperTap has raised over $51 million in risk capital from blue chip investors including Sequoia Capital, SAIF Partners, and e-commerce major Snapdeal. According to YourStory, the lack of demand and poor unit economics forced PepperTap to back out from the business.
Launched in November 2014 by Navneet and Millind Sharma, PepperTap had previously closed operations in six cities including Mumbai, Kolkata, and Chennai. Softbank-backed Grofers also backed out from nine cities in January this year to conserve cash and keep a tab on burn rate.
Used car marketplace GoZoomo, which had shown much promise in tackling the problem of mistrust in this space, shut down. The two-year startup raises US$7 million from top VCs and gathered buzz around when has more than half of it left in the bank, but decides to return the money to its investors.
The founding team of three IITians decided that the unit economics were not adding up, despite several iterations in the business model. They looked at the data objectively and took the tough decision to shut shop instead of burning VC money on an unsustainable business.
Alok Goel, MD of SAIF Partners, points out that returning so much money to an investor sets a new standard in the Indian startup ecosystem. “This is probably the first time an entrepreneur is announcing this kind of a decision. Typically, when something is failing, an entrepreneur would try to show that his company is being acquired, while internally the story might be totally different. But these guys are sharing a lot of things in a transparent manner and taking this mature decision of returning the money.”
Bangalore-based fashion retailer, Fashionara, shut down its operations in May this year. The company was founded by former Reliance Trends CEO Arun Sirdeshmukh along with Darpan Munjal, former chief technology officer at Times Internet Ltd, in 2012.
The company was backed by Lightspeed Venture Partners and Helion Venture Partners, and had raised over $4 Mn Series A. There was also news about the startup raising $7-8 Mn in the year 2014 and shifting to a marketplace model from being a pure-play fashion portal.
The company’s net sales jumped five-fold to INR 32.86 Cr. in the financial year 2014-15. But its net loss widened to INR 32.13 Cr. from INR 21.11 Cr. in 2013-14.
It had a 25,000-sft central warehousing facility in Bangalore from where it ships out the products to key cities like Delhi, Hyderabad, Mumbai and Pune through various air and on-the-ground logistic tie-ups.
4. Purple Squirrel
Purple Squirrel, a Mumbai-based ed-tech company shut down its operations in lieu of continuously dipping sales and increasing cash burn rate. In spite of raising a bridge round in January, the company was left with only INR 3 crores, with a burn rate of INR 1.2 crores per month.
This resulted in the layoff of 40 people and the resignation of many, out of a staff of 120, according to BS. The company has raised over INR 15 crores to date and was under pressure to achieve a target of Rs 30 crore by 2015-16.
The startup was incubated in September 2013 by IIT Bombay. The founders Aditya Gandhi and Sahiba Dhandhania, the aim was to take graduation students on industrial visits – either day-long workshops or week-long trips, across the country.
In April 2015, it raised an INR 12 Cr in funding from Matrix Partners. Prior to this, it had raised an undisclosed amount of funding from Mumbai-based venture capital investor India Quotient.
5. Bite Club
Gurgaon-based online marketplace for chefs prepared meals, Bite Club, halted its operations in July this year. Founded in November 2014 by Prateek Agarwal, Aushim Krishan, and Siddharth Sharma was a marketplace to connect chefs and consumers. It had a daily changing menu that customers can order from via their mobile or the web app.
Founder Prateek Agarwal, told media, “We are on a temporary halt. While scaling up we faced certain problems repeatedly. So we thought it is better to take a step back, resolve all the problems and then start the operations again.”
Prior to this, in December 2015, Bite Club raised an undisclosed amount in Pre-Series A round of funding from growX ventures. Besides, The Phoenix Fund via Enablers and existing investors Powai Lake Ventures also participated in this round.
Before that, in March 2015, it raised INR 3 Cr. funding from Powai Lake Ventures and angels including Aneesh Reddy (Capillary Technologies), Ashish Kashyap(Goibibo Group) and Alok Mittal (Canaan Partners).
Zeppery was founded in 2015 by Srivastava and Lalit Vijay. Srivastava is an alumnus of Ram Murti Smarak College of Engineering and Technology, Bareilly while Vijay is an alumnus of IMS Engineering College, Ghaziabad.
“We were trying to copy, Tapingo, a US-based startup, but realized that this model is too early for the Indian market and the customer retention costs were too high. We have, therefore, decided to move on,” said Utkarsh Srivastava, co-founder, Zeppery.
Delhi-based startup Inweone Technologies Pvt. Ltd, which runs Zeppery, is now working on a micro-delivery logistics business and is building a new team.
All seven employees of Zeppery have quit and the firm will be hiring a fresh team for its new business. Co-founder Lalit Vijay has also exited the company.
Home food delivery startup ZuperMeal apparently closed down its operations in May eight months after it raised seed funding. ZuperMeal had received $2 million (about Rs13 crore) in seed funding from celebrity chef Sanjeev Kapoor, Saxena and two unnamed foreign investors in October 2015.
The Mumbai-based startup connected home chefs to consumers via its app. It had claimed to have 150 homemakers on its platform to cook 60 to 70 meals a day, at a net margin of 15%.
The online food ordering business in India is estimated at Rs 5,000-6,000 crore, growing about 30% month-on-month, according to a report by India Brand Equity Foundation. The sector includes restaurant aggregators, food-ordering platforms, delivery-only players, proprietary meal sellers and cloud kitchens.
Mumbai-based FNB City Media Pvt. Ltd, operator of hyperlocal nightlife mobile app Happitoo suspended operations after finding it difficult to raise fresh investment and achieve positive unit economics, co-founder Hemant Jain told TechCircle.
Happitoo last year raised Rs 50 lakh (nearly $77,000) in angel funding. Jain, who founded Happitoo in September 2013 along with Ravi Raj Meena, said that raising funds on time is critical for nightlife aggregators as it is an operation-intensive business.
“We couldn’t scale up and reach a minimum threshold of downloads. Whatever funds we had dried up in building the product for a larger geography,” said Jain, who has joined as the business head of digital operations and senior executive vice president at Lokmat Media Pvt. Ltd.
Flashdoor, a Bangalore-based on-demand laundry service platform pulled down its shutters just a few months after it raised funding from former Flipkart executives Ankit Nagori and Sujeet Kumar. In November 2015, it had raised an undisclosed amount from Nagori and Kumar. Traxcn Labs had also participated in that round.
“We have moved on from Flashdoor. We had tested various business models and the return on investment was not that great. And profitability was not possible until we reached a large scale which also required us to invest a lot of money in the business,” said Ankit Agarwal, founder of Flashdoor.
Agarwal added that Flashdoor Internet Services Pvt. Ltd, which runs the platform, had employed 10 people and all of them have sought jobs elsewhere. Flashdoor worked on a curated marketplace model and operated its own logistics service to collect laundry from customers. The startup recorded 1,500 transactions a month in November 2015 and planned to take the count to 30,000 by March 2016.
10. Truck Mandi
Three months after Delhi-based truck aggregator TruckMandi announced that it is going to rejig its business model as it was finding it difficult to operate, the startup shut down its operations.
TruckMandi, run by Fixinnov Technology Pvt Ltd, connected logistics services providers with customers for inter-city trucking services. It was founded in October 2014 by former Snapdeal executives Singh and Jain, along with former TCS executive Nishant Singh Jadon.
n 2015, TruckMandi had raised under $2 million (Rs 13.3 crore) in pre-Series A funding from JustEat India founder Ritesh Dwivedy and other investors.
TruckMandi started out as an online platform where transporters could bid for trips while paying the company a commission on every booking. The company soon had leading business houses such as Jindal Stainless Steel, Fedders Lloyd, Bonn Biscuits, Pushp India, DHL Supply Chain and A-One Containers, amongst others, as its clients.
MealHopper, a startup which connected local cooks with users for homemade meals, run into rough weather in the latest instance of a food-tech venture struggling to survive despite attracting investors.
The Gurgaon-based startup, run by MealHopper Technologies Pvt Ltd, stopped taking orders on its website and app as it faced financial constraints and operational difficulties. It couldn’t be immediately ascertained whether the company has completely shut shop.
The startup, which began operations last year, had raised $100,000 in seed funding in October from ixigo.com co-founders Aloke Bajpai and Rajnish Kumar with participation from other angel investors. It had nine employees at the time.
The company claimed to deliver about 100 meals a day in November last year and also planned to launch operations in three more cities by March 2016. It operated on a marketplace model wherein it roped homemakers to share meals with paying customers.
Autorickshaw-hailing app AUTOnCAB shut down its operations as it couldn’t sustain its business due to stiff competition from its heavily funded rivals, its co-founder and CEO told.
“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.”
AUTOnCAB, operated by New Delhi-based NGA Technologies Pvt. Ltd laid off 40 employees in the process. The company was running operations in six cities—Noida, Ghaziabad, Gurgaon, Kota, Chandigarh, and Jaipur.
AUTOnCAB had raised $1 million in funding from US-based Maan Ventures and an unnamed private investor. The app, which was started in March 2014, was available on Android and iOS and facilitated on-demand hailing of autorickshaws.
In September 2015, it acquired hyperlocal grocery delivery startup BigZop for an undisclosed amount. At the time, it aimed to facilitate one million rides by expanding to 200 cities by the end of 2016.
To compress the deep pockets, along with an unbelievable product, entrepreneurs now also need a sustainable business model. High cash burn and dependency on investors may not be an endurance strategy anymore. New maneuver or survival strategies will emphatically help the ecosystem to move on from funding, discounts, and other cash burn marketing gimmicks and render a stability.