Why are Indian Startups Failing Miserably?

[hoshiarpurexpress]

In the past 2 years, the Indian start up ecosystem has seen an extraordinary rising in funding!! and all kinds of start up including edtech, Fin tech, Medtech all of them have received millions of dollars in funding!! and in just 1 year of 2021 alone, the Indian start up ecosystem saw $41.4 billion dollars in funding and the rise of 42 new unicorns! But as soon as 2022 started, suddenly, there is bad news from all directions, the losses of these companies have been piling up, mass lay offs have started with over 9,000 employees being laid off from reputed companies like Vedantu, Cars24 and Ola. Fundings have slowed down and even highly funded companies are going out of business!
So the question is Is the Gold rush of Indian start ups about to end?
How will this crazy start up crash affect the business eco-system of India?
And most importantly, what are the lessons that we need learn from the start up bubble of India?

Key points :
1. Similarity with DotCom bubble between 1999-2000 in USA where lot of non profitable internet companies were overvalued.
2. In 2016, huge number of users in India were connected to Internet(Thanks Jio), so lot of companies came into the market with are not Product market fit.

 

[MenInG]

The big guys, Infosys types are taking the lions share of the market so little ones have less air to breathe?

 

[hoshiarpurexpress]

The big guys, Infosys types are taking the lions share of the market so little ones have less air to breathe?

Lot of new startups are flooding the Indian market.. Mostly in Edtech, Medtech and Foodtech space.
There valuations are overhyped at this moment.. and some of their practices are predatory especially in Education Technology sector. BYJU's for example uses predatory market tactics, like making Indian parents feel that their kid will be left behind in todays market/competition and other kids are learning/progressing.

So, I feel we are at a stage where some sort of market churn will happen and only the Startups with solid base will grow. Infosys etc are more into Services and have only one product.

Pakistan also is seeing a lot of nascent startups grow because of increased internet penetration and I suppose 5-10 years down the line there will be something similar.

 

[Cricfan4eva]

I think investors ha dfomo in India so every start up was raising money easily in India pre-covid. Especially ed-tech and betting/fantasy companies.

You had unicorns every month. But covid's economic down turn and post war stress in world's economies have tightened the grip. So the investment flow has run dry and only start ups with solid plan and good books are continuing while rest have had to whittle down and rely on mass lay offs to compensate for the cut in funding.

 

[cricketjoshila]

Edtech Indian companies like Byjus wont last at this valuation.

 

[IndoorCricket]

Too many startups which are taking offline business online. This space is too saturated.

 

[sweep_shot]

Too many startups which are taking offline business online. This space is too saturated.

Yeah. Way too saturated. That's the issue.

 

[IndoorCricket]

The big guys, Infosys types are taking the lions share of the market so little ones have less air to breathe?

Infosys is an IT services company. Most of their clients are enterprises.

 

[daytrader]

World Startup Convention: The India start-up gala that exploded into a scandal

In March, hundreds of budding entrepreneurs descended on Noida, a suburb of India's capital Delhi, to attend a three-day convention that had dubbed itself the "world's biggest funding festival".

Eager start-up founders looked forward to rubbing shoulders with business leaders at the World Startup Convention (WSC), hoping that their 15-minute pitches would transpire into funding.

In 2021 and much of 2022, India's start-up ecosystem was flush with funds as companies raised record amounts, birthing unicorns and making overnight millionaires of several entrepreneurs. But global headwinds had made investors more cautious, drying up liquidity.

That's why expectations were high from the WSC. But within hours of the event kickstarting on 24 March, things plunged into chaos. Many participants and some sponsors have alleged that they were lured with false promises and cheated; the organisers deny this, accusing some of the entrepreneurs of disrupting the convention.

On Day 1 of the event, Sachin Chauhan and his team arrived at the venue raring to go. An entrepreneur from the northern state of Haryana, Mr Chauhan had bought passes for the event after seeing advertisements for WSC all over social media in February.

According to WSC's website, top Indian politicians including federal transport minister Nitin Gadkari and health minister Mansukh Mandaviya were among the chief guests. Other guests included state chief ministers and ministers, all from the governing Bharatiya Janata Party (BJP). Mr Gadkari's Twitter and Instagram pages had posted about his planned speech at the event.

Short promo videos featured popular influencers such as Ankur Warikoo, Prafull Billore, Raj Shamani and best-selling author Chetan Bhagat. The publicity material said that 1,500 venture capitalists, 9,000 angel investors and 75,000 start-ups were expected to participate. It was billed as a platform to meet potential customers, network and pitch directly to investors.

Mr Chauhan, co-founder of the bike servicing and repair app Apna Mechanic, spent 20,000 rupees ($244.4, £196.3) to buy tickets for himself and four colleagues.

They arrived with a presentation for potential investors. Their excitement, however, didn't last long.

"Hours went by and we barely saw any investors," he told the BBC.

Bherav Jain, founder of the start-up Reproc, had travelled thousands of kilometres from the southern Indian state of Tamil Nadu.

"The crowd was full of start-up founders," Mr Jain said. "I don't think there was a single person [there] who was an investor."

...
https://www.bbc.com/news/world-asia-india-65200441

 

[cricketjoshila]

World Startup Convention: The India start-up gala that exploded into a scandal

In March, hundreds of budding entrepreneurs descended on Noida, a suburb of India's capital Delhi, to attend a three-day convention that had dubbed itself the "world's biggest funding festival".

Eager start-up founders looked forward to rubbing shoulders with business leaders at the World Startup Convention (WSC), hoping that their 15-minute pitches would transpire into funding.

In 2021 and much of 2022, India's start-up ecosystem was flush with funds as companies raised record amounts, birthing unicorns and making overnight millionaires of several entrepreneurs. But global headwinds had made investors more cautious, drying up liquidity.

That's why expectations were high from the WSC. But within hours of the event kickstarting on 24 March, things plunged into chaos. Many participants and some sponsors have alleged that they were lured with false promises and cheated; the organisers deny this, accusing some of the entrepreneurs of disrupting the convention.

On Day 1 of the event, Sachin Chauhan and his team arrived at the venue raring to go. An entrepreneur from the northern state of Haryana, Mr Chauhan had bought passes for the event after seeing advertisements for WSC all over social media in February.

According to WSC's website, top Indian politicians including federal transport minister Nitin Gadkari and health minister Mansukh Mandaviya were among the chief guests. Other guests included state chief ministers and ministers, all from the governing Bharatiya Janata Party (BJP). Mr Gadkari's Twitter and Instagram pages had posted about his planned speech at the event.

Short promo videos featured popular influencers such as Ankur Warikoo, Prafull Billore, Raj Shamani and best-selling author Chetan Bhagat. The publicity material said that 1,500 venture capitalists, 9,000 angel investors and 75,000 start-ups were expected to participate. It was billed as a platform to meet potential customers, network and pitch directly to investors.

Mr Chauhan, co-founder of the bike servicing and repair app Apna Mechanic, spent 20,000 rupees ($244.4, £196.3) to buy tickets for himself and four colleagues.

They arrived with a presentation for potential investors. Their excitement, however, didn't last long.

"Hours went by and we barely saw any investors," he told the BBC.

Bherav Jain, founder of the start-up Reproc, had travelled thousands of kilometres from the southern Indian state of Tamil Nadu.

"The crowd was full of start-up founders," Mr Jain said. "I don't think there was a single person [there] who was an investor."

...
https://www.bbc.com/news/world-asia-india-65200441

BBC and its third rate hit job reporting.

Some pvt organisation advertised this event and organised it. It was a no name organisation.

This was not some govt or industry supported event but a con job. Not once did the BBC mentioned this. Rather they tried to make it look like India''s start ups are finding no investors.

 

[DeadlyVenom]

BBC and its third rate hit job reporting.

Some pvt organisation advertised this event and organised it. It was a no name organisation.

This was not some govt or industry supported event but a con job. Not once did the BBC mentioned this. Rather they tried to make it look like India''s start ups are finding no investors.

I think you are always just trying to pick fights when none exist.

I read the article and at no point was I under the impression that the start ups were finding no investors. It was very clearly written to show that this was a con job but it seems like both the public and some govt officials got duped.

 

[MenInG]

Two Indian-origin executives of a Chicago-based start-up have been convicted by a federal jury in the US of running a USD 1 billion corporate fraud scheme that targeted the company's clients, lenders and investors.

Following a 10-week-long trial, jurors on Tuesday found health technology company Outcome Health co-founder and former CEO Rishi Shah guilty on 19 of 22 counts, co-founder and former president Shradha Agarwal guilty on 15 of 17 counts and former chief operating officer Brad Purdy guilty on 13 of 15 counts.

Shah, 37, was convicted of five counts of mail fraud, 10 counts of wire fraud, two counts of bank fraud and two counts of money laundering.

Agarwal, 37, was convicted of five counts of mail fraud, eight counts of wire fraud, and two counts of bank fraud, while Purdy, 33, was convicted of five counts of mail fraud, five counts of wire fraud, two counts of bank fraud, and one count of false statements to a financial institution.

The defendants face a maximum penalty of 30 years in prison for each count of bank fraud and 20-year imprisonment for each count of wire fraud and mail fraud.

Shah faces a maximum penalty of 10 years in prison for each count of money laundering. A sentencing hearing will be scheduled at a later date.

A statement issued by the Justice Department said on Tuesday that the company installed television screens and tablets in doctors' offices around the US and then sold advertising space on those devices to clients, most of whom were pharmaceutical companies.

According to evidence presented at the trial, Shah, Agarwal, and Purdy sold advertising inventory the company did not have to Outcome's clients, then under-delivered on its advertising campaigns.

Despite these under-deliveries, the company still invoiced its clients as if it had delivered in full.

Shah, Agarwal, and Purdy lied or caused others to lie to conceal the under-deliveries from clients and make it appear as if the company was delivering advertising content to the number of screens in the clients' contracts.

Purdy and others at the company also inflated metrics that purported to show how frequently patients engaged with the company's tablets installed in doctors' offices.

According to the trial evidence, the scheme targeting the company's clients began in 2011, lasted until 2017, and resulted in at least USD 45 million of overbilled advertising services.

Shah, Agarwal, and Purdy were also convicted of defrauding the company's lenders and investors.

The under-delivery to the company's advertising clients resulted in a material overstatement of the company's revenue for the years 2015 and 2016.

Shah, Agarwal, and Purdy used inflated revenue figures in the company's 2015 and 2016 audited financial statements to raise USD 110 million in debt financing in April 2016, USD 375 million in debt financing in December 2016, and USD 487.5 million in equity financing in early 2017.

The trio lied to investors and lenders to conceal their ongoing under-delivery of advertising campaigns for clients.

The USD 110 million debt financing resulted in a USD 30.2 million dividend to Shah and a USD 7.5 million dividend to Agarwal; the USD 487.5 million in equity financing resulted in a USD 225 million dividend to Shah and Agarwal.

The verdict represented a stunning fall for the three who were once young stars of Chicago's tech scene. And it may have implications for others in the tech community, with parts of the case focusing on the line between startups' typical growing pains and fraud, the Chicago Tribune reported on Tuesday.

A spokesperson for Shah said in a statement: “Today's verdict deeply saddens Mr. Shah, and he will exhaust every avenue to overturn this result”.

Theodore Poulos, an attorney for Purdy said in a statement: “We are profoundly disappointed with the jury's verdict in this complex and nuanced case, particularly given the plethora of evidence adduced at trial, which showed that certain critical information was intentionally withheld from Brad Purdy." Lawyers for Agarwal declined to comment on Tuesday, the report said.

Three other former employees of Outcome pleaded guilty prior to trial. Ashik Desai, the former chief growth officer pleaded guilty to one count of wire fraud.

Kathryn Choi, a former senior analyst, and Oliver Han, a former analyst, both pleaded guilty to conspiracy to commit wire fraud. Desai, Choi, and Han will be sentenced at a later date.

NDTV