10 Failed Startups in India Which Raised Enough Funds

Do you remember the “Make in India” campaign initiated by our honorable Prime Minister in 2015? This initiative aimed to boost Startups and Entrepreneurship. Because startups are the hub of novel innovations that generate brilliant solutions as well as employment opportunities. Hence, they contribute significantly to the economy and development of a nation. However, sustaining a startup is equally difficult as raising a child. Entrepreneurs are under immense pressure to run their companies successfully. 

According to the data from Mint, Indian startups faced a huge challenge in the year 2022. Despite getting massive funds from venture capital, angel investors, and institutional investors, couldn’t cope with economic uncertainties at the global level. Unfortunately, some of them couldn’t survive anymore and were shut down in the same year. This article discusses some of the major ones which failed even though they raised enough funds. 

A Brief Overview

Details Of Each Startup

Shop X

It was a B2B e-commerce startup (based in Bengaluru) that shut down on August, 22. It provided different types of services to grocery stores and retailers of small and medium enterprises. The services included-

• Logistics
• E-commerce solutions
• Supply chains
• Credit lines
• Recharges (mobile recharge & DTH recharge)
• Travel bookings (Flight tickets & Bus tickets)
• Bill payments

The key investor (VC) was Nandan Nilekani. Along with him, the other investors were Fung Strategic Holding, Rajesh Ranavat, and Kewal Nohria. Together they provided an enormous amount of USD 60 million. Despite getting high funds, it took multiple loans from Fung Investment. The poor business model of Shop X was chiefly responsible for its failure. Neither it was able to generate enough cash flow, raise new capital, nor able to repay the debts. Due to the low margin profile, it had to close down the business.

Pepper Tap

It was an online shopping platform on which customers could buy groceries from local markets and their goods were delivered to their homes. It aimed to reduce the rush in the markets and the number of intermediaries. Being a unique service provider in the food & beverage industry, it received funding of USD 50 million. The reasons which dissolved were-

• Entered the market without proper preparation.
• Faced huge competition from its competitors like Big Basket.
• Problems in inventory management i.e. due to lack of inventory, they needed to pay extra money for it along with technology and operations.
• Failed to acknowledge the needs of their target audience.
• High costs and low profits.

Stayzilla

The business concept of “Stayzilla” was to stay in any zila (district) of the country. It aimed to provide a budget-friendly homestay platform within the country. It was established in 2005 as “Inasra” and later renamed in 2010 as “Stayzilla.” It covered more than 50,000 hotels and guesthouses all over the country. Their primary sources of revenue were commission per transaction and advertisements on their website. It was quite successful in the initial days of its operation but over the course of 17 years, it fainted among other contemporary companies providing homestays in India. Although it received a fund worth USD 33.5 million but still couldn’t survive the competition. Finally, it filed for bankruptcy in September. The key reasons for its failure were-

• Expensive operation costs as compared to its competitors.
• Mismanagements in customer service.
• Rise of complaints by the guest and the host.
• Being one of the first companies in the sector of homestays and travel, it had to educate the audience. 
• Basic services like the latest technology, optimum logistics, and public goods were absent.
• Unable to earn the threshold revenue.

Lido

Lido learning is one of the first Ed Tech companies in India established in 2019. Its motive was to revolutionize the traditional education system where children could learn from their homes through online platforms like animated videos, interactive games, lectures, regular tests, etc. However, with the course of lockdowns in a pandemic, this concept was not novel anymore. The whole country got familiarized with online teaching.

It received an investment worth USD 20.5 million. The angel investors were Vijay Shekhar Sharma (Paytm founder), Mukesh Bansal (Myntra founder), Anupam Mittal (Shadi.com founder), Ananth Narayanan (Medlife founder), and Ronnie Screwvala (UpGrad founder). Even after having angel investors, it was unable to perform well in the private education sector. The major reasons were-

• Many investors left the company during the pandemic.
• Improper management.
• Teachers and employees were not paid on time.
• Massive complaints (by ex-employees and teachers) against Lido on social media platforms.
• Negative feedback from customers due to lack of refunds and not up-to-the-mark service.

Udayy

Another Ed Tech firm that paved its way on the list of failed startups is “Udayy.” Launched in 2019, the firm “Udayy” offered live learning classes to school children. Also, it received a significant amount of funds worth USD 13.5 million. However, it was unable to continue its operations due to which it dissolved completely in April 2022. Although it offered severance pay to all of its employees. The chief reasons for its collapse were-

• Low quality of Zoom meetings
• Low retention of customers
• Unsuccessful turnovers
• High labor costs

Protonn

At the beginning of 2022, a SaaS startup Protonn shut down its operations despite being backed up by Matrix Partners. It aimed to provide video marketing, hassle-free call scheduling, live-interactive sessions, single dashboard business management, and live and interactive video sessions. The angel investors were renowned personalities associated with successful companies- Binny Bansal (Flipkart), Kalyan Krishnamurthy (Flipkart), Neeraj Arora (Whatsapp), Sujeet Kumar (Udaan), and Kunal Shah (CRED). Even though it received large seed funding of USD 9 million, it hardly survived. According to the economic times, Protonn failed to find the right product that could fit into the market for a successful business. 

Crejo Fun

Here comes another Ed Tech startup after Liddo and Udayy that drastically failed due to the reopening of schools and the pandemic. It was an online platform specially designed to teach extra-curricular activities to the students like dance, arts, public speaking, chess, etc. It was launched in 2020. With this unique idea, it received significant funding worth USD 3 million through seed financing. Its business collapsed as soon as the schools reopened. The firm should have had alternatives to sustain the ongoing competition from schools.

HotelsAroundYou

HotelsAroundYou is another startup failure similar to Stayzilla. Established in 2013, this travel & hospitality agency closed in May 2017. Even with the last funding worth USD 1 million, it could not survive among its fellow competitors like Goibibo, Oyo rooms, Airbnb, MakeMyTrip, Nightstay, etc.  The primary reasons for its failure were-

• Unsatisfied customers. Because they faced problems while using the services and app of this company.
• Inability to raise further rounds of fundraising. 
• Improper segregation of hotels in the tourism and hospitality industry- Normal hotels, luxurious hotels, short-term apartments, and short-term rental apartments.
• Inefficient marketing strategy due to which they could not target the specific audience.
• Lack of PAN (Presence across the Nation) India network creation.

GoNuts

A celebrity engagement platform- GoNuts shut its operation in 2022. Although it successfully raised $ 850K from investors like Pankaj Chaddah, Ramakant Sharma, and LetsVenture it could not sustain the worldwide economic slowdown. You must have heard how and why profitable companies are laying off employees. Similarly, several Indian startups are also shutting their operations because of a failure in raising a fresh funding round in the market. Apart from the economic slowdown, another key reason for the dissolution of GoNuts was the stagnancy of the audience. This means the target audience of this media & entertainment firm was not increasing.

Qin 1

This ed tech startup serves to provide online classes on coding, app development, cyber security, ethical hacking, and the English language, especially to students in the age group of 6-18 years. It also came under the wave of economic slowdown due to which it couldn’t raise the funds further. Even after raising enough funds worth $472K from the VCs (Venture capitalists) in seed funding rounds; it faced unfeasible acquisition scenarios. 

Conclusion

As per the discussion, you must have observed that the most common reasons for the failure of startups were failed business models, improper management, poor customer service, and not being in sync with the lifestyle and demand of the target audience. However, there are multiple ways to bounce back from the startup’s failure. You can take guidance from the experts and plan better with effective marketing strategies and R&D. Other than that you can find alternative sources of income to recover the losses. Opportunities knock on the door of smart workers, you just need to pick the right one to take your venture to the next level!