The topography of the startup ecosystem here in India and elsewhere in the world is known to be topsy-turvy. It couldn’t have been more true than this place and time in history. The meteoric rise of the entrepreneurial spirit has been reigned in for the moment by a continually fluctuating financial space, by conflicts in Europe and more so by a general inflation and recession in major parts of the world including India. More so this development one hopes diminishes as we move further ,though the insurmountable problem still and will persist. That being putting one’s mind and heart to the core of the issues their company faces, the daily transactions, the work-life balance and other onerous tasks related to expansion and acquisitions. Here, though, we are going to recount the very fascinating ride ‘The Indian Startup Vehicle’ has had with its highs and the many lows, the challenges companies face today, and with relevant examples detailing the successes and failures of the same.
The startup culture, not taking into account the recent downturns, had been on a high with a massive inflow of funds and a prodigious output of entrepreneurial creativity. As on 30th June 2022, a total of 72,993 emerging startups had been registered by the Department for Promotion of Industry and Internal Trade. From a meagre 471 of them in the year 2016 it had a whopping rise of 15,400%! The Government says it is the result of its own programs to promote and boost that emerging trend. The year 2021 and the first half of this year 2022 produced profound riches for the startup communities with windfall gains and an equally eventful funding scene with about $10 billion pumped in the companies. A record 44 Indian startups achieved the Unicorn status ($1 billion valuation). With a combined valuation of about $450 billion and with about 750,000 people working across its scene it is the third largest startup ecosystem just behind US and China in this aspect. It was predicted that about 75 new unicorns would be joining the 106 companies Unicorn Club but now this dream seems to have dried out. Innumerable companies have persevered in this scene and have made it to the top. We shall elaborate the stories of two companies here.
Purplle- Founded in the year 2011, it is a Mumbai based e-commerce startup focused on beauty-oriented products and appliances. Became India’s 102nd Unicorn after it raised $33 million in a Series E funding. Features a range of products from both legacy and new age beauty companies, having more than 1000 brands and over 60,000 products. Its revenue has fluctuated from the start itself. Its growth in a way mirrors the state of the economy itself. It has continuously evolved, has had setbacks, has had conflicts but still in the end got what it deserved, the Unicorn status.
Lenskart- It is an Omni channel India origin Global optical prescription eyewear retail chain, based in New Delhi. It has more than 500 stores strewn in over 40 cities of India. Ratan Tata, Kris Gopalakrishnan, Wipro’s Chairman Azim Premji have invested in Lenskart. The Financial backers include TPG Growth, International Finance Corporation and Adveq Management. Well it is also mindful to add that it was not until the year 2018 that the company became profitable. In 2020, it generated a Total Revenue of ₹1,000 Crore. In June 2022, Lenskart announced the acquisition of a majority stake in the Japanese eyewear brand Owndays. The deal was worth US$ 400 million. So we can see the slew of experiences both good and bad this company too has had, but it slogged and has become one of the most famous and known brands all across India.
One can draw many similarities from both of these companies. Both have continuously expanded, in case of Lenskart adding stores in case of Purplle, its online space. Both have found the right investors, the type of investors one could trust and don’t have the tendency to ditch a good idea in its formative stage itself. Then the demonstration of a fine level of advertisement on Television and other social media platforms too. In fact, Lenskart has Katrina Kaif as its Brand Ambassador. The choice itself speaks of its market sense. Both have powerful leaders at their helm. Peyush Bansal the cofounder of Lenskart has become one of the most well known entrepreneurs in the whole country. They are guided by a sense of motivation and purpose which is absolutely necessary for the growth of any firm. Then the well placed business decisions concerning expansion and acquisitions too have added to their success in quite a profound way.
The Recent Slump and Downturn- The startup funding in India declined about 40% between April and June. Even globally a recession is underway. Multiple reasons are believed to be behind this. Geopolitical instability, Russia-Ukraine conflict, Inflation, Supply Chain disruptions and many other factors have all contributed to this problem. The overall macroeconomic scenario coupled with a general sense of insecurity in the Stock market have seen considerable job losses and squeezing up of funds. After 3 consecutive quarters of raising more than USD 10 billion, the total funding in the Indian startup ecosystem fell to just about $6.8 billion. Only 4 startups in India attained Unicorn Status in the 2nd quarter of calendar year 2022, mirroring a global trend in decline in the number of new unicorns. The funding fell 72% in July. July recorded just 77 deals worth around $2.6 billion as compared to 136 deals of $9.6 billion in the same month last year. Only one company The Fintech startup One card achieved the Unicorn status. Cumulative job losses at the startups this year stood at about 10,000. Mass layoffs were observed in different sectors owing to the gloomy market conditions and other downwards trends.
Startups that are failing and have failed
It is reported that about 90-95% of all startups in India fail within five years of their launch. Intense competition, constricted supply of funds, non availability of the right investors and inner mismanagement are some of the reasons for their failures. We will take examples of the understanding of this fact.
iProf- Founded in the year 2009, it was an edtech platform which delivered educational content for school kids. It included in its catalogue videos, digitised notes, and practice questions on a 7-inch touch screen. Also offered a supplementary learning module priced at around ₹15,000. Overall it was a nice service based company but there were several problems that led to its closing. The first was the reluctance of schools to accept their study material which was little different from the traditional textbooks offerings. The second was the rival Byju’s stupendous rise in the Edtech industry. Its market share collapsed against the rising behemoth and it closed down eventually.
Coinsecure- It boasted of being the fastest and largest online bitcoin exchange platform in India. Its aim was to have a company built on a profound sense of integrity and also engaged in imparting blockchain knowledge to the Indian people. Unfortunately, a hack in April 2018 led to the theft of about $3.3 million leading to it being one of the shut down companies in India. Since this incident it has been in financial straits and can hope for a miracle to survive.
Causative reasons for their failures are basically situational. Unseen future events and insufficient market knowledge as we can notice here led to their eventual downfall.
Conclusion- The startup industry is in a tremendous flux,in a change which is non predictable but offers a lifetime of opportunities if tapped the right way and with a right mind. Having the right mindset and bracing for tumultuous periods is a tough ask but it has to be done nevertheless. Only success awaits if you have all that is required!