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6Th September 2016
Despite reports claiming that a Start-up
Deadpool is an Indian reality, with as many as 800 new tech ventures closing
shop or on death row in the past 3-4 years, the government contends it is only
a lean phase and far from a bust. The
Total Investment & Insurance Solutions
"I don't see any bust or any such thing.
Start-ups are in various fields, like healthcare, etc. Maybe the dotcom phase
is not doing well right now. There is no bust, only a lean phase,"
Department of Industrial Policy and Promotion Joint Secretary Shailendra Singh
told IANS.
Data analytics firm Tracxn Technologies had
recently compiled a list of close to 800 technology start-ups founded post-2011
that have failed or are shutting operations.
The list is similar to the one created by a
website called F**ked Company after the internet bust of the early 2000s. The
site itself was a take-off on a magazine called Fast Company and compiled a
list of dotcom failures that came to be known as the Dotcom Deadpool.
On the Tracxn list -- what could be called a
Start-up Deadpool -- for example, is online grocery store PepperTap, with
$51.2-million funding, which has confirmed it is shutting down core operations,
while start-ups like BeStylish, a fashion accessory online store, with $10
million funding, is already down and out. The Total Investment & Insurance Solutions
"To make any detailed statement on the
reasons for failure of these start-ups, we need to study the report. We will be
talking to Tracxn this month to find out about the basis of the report, the
reasons for failure, and analyse," Singh said.
Talking about the likely reason for the
failure of these start-ups, he said it could be their inability to scale up
during a global slowdown. The Total
Investment & Insurance Solutions
"All start-ups need to be scaled up. In
the global slowdown -- seeing the grim market situation -- the scaling up is
not possible. But it is not a cause of worry as these are cyclical changes. But
it (failure of 800 start-ups) is only a small story," he said.
Tracxn, the Bengaluru-based firm, also says
that the failure to scale up is one of the likely reasons for the shutdowns, as
in the case of e-commerce and food technology start-ups that face a surge in
digital marketing expenses due to increased competition.
"But they (the start-ups) failed to
scale up due to standardisation or funding issues. Bigger players like
Flipkart, PayTM, Snapdeal offer a better variety and price due to their scales
and the amount of funding," a Tracxn spokesperson told IANS. The Total Investment & Insurance Solutions
"Replicating the foreign model without
indigenisation, focusing on customer acquisition without becoming
self-sustainable and 'me-too' syndrome of copying a popular format has led to
many failures of startups," says Amit Jindal, Partner, Felix Advisory.
"The Start-up Deadpool though is a
reality but not a cause of worry," added Nikhil Donde, Managing Director
of consultancy firm Protiviti India.
"Experiementation and innovativeness are
the keys to success for any start-up. The start-ups which failed (did so)
either due to lack of funding, faulty business model or were mistimed against
the market demand," Donde told IANS. The Total Investment & Insurance Solutions
On being asked if funding could be one of the
reasons of failure, Industry Ministry's Singh said, "No, funding is not an
issue. Funds are constantly coming in through angel funding and venture
funding. Government is also making available about Rs 2,500 crore funds every
year for start-ups. In fact, it will be difficult for start-ups to absorb all
the funds."
According to research firm Preqin, $8.9
billion investments in 2015 were made in India via venture funds. But so far in
2016, only $3.2 billion has been invested in start-ups by venture capitalists.
"The funding surely saw a slight
slowdown. For instance, in the first half of 2015 $2.9 billion was invested,
while in first half of 2016 only $2.1 billion was invested. But the overall
funding scene is not as grave. The early-stage activity has notably increased
with many more micro funds and angels stepping up," Tracxn co-founder Neha
Singh told IANS. The Total Investment
& Insurance Solutions
Overall, it looks healthy for the eco-system
because more number of companies are getting launching capital, but with more
later-stage investors being cautious, it is forcing companies to rethink about
getting their economics right early on in a more sustainable manner, she said.
Confident that the Indian start-ups story is
still intact, Singh said: "We are regularly interacting with start-ups.
There is a big boost to start-ups. We have to provide the right ecosystem for
the start-ups, a common platform and hand-holding." The Total Investment & Insurance Solutions
The silver lining for the failed start-up
teams is that corporates are looking at hiring of experienced entrepreneurial
teams. The Total Investment &
Insurance Solutions
"Most founders of deadpooled companies
have people with strong hands-on experience in knowing what works and doesn't
in a practice area or market. Failure is no longer a taboo, and the
entrepreneurial mindset is highly valued among investors and corporates,"
Tracxn said.The Total Investment &
Insurance Solutions
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