The Rise and Fall of Startups.

The Rise and Fall of Startups.

The Start-up Culture.

-Niraj Dubey

 

The year 2015 saw the small sparkle of startup turn into a wildfire in India. This ‘Golden Year’ of startups witnessed every small idea with little potential being funded and backed by investors. Both national and international players like Shri Ratan Tata, Shri Mohandas Pai, Kalari, Sequoia, Accel, and many more through their investments presented confidence in the concept of startups. Their aid is seeding capital directed multiple industries like the Healthcare to bloom. A few businesses which in a very short time became a household name include Paytm, Ola, Flipkart, Cardekho, Zomato amongst many others. However, there were startups like SnapDeal which did not see as many mornings.

Startups basically aim to come up with a solution to certain problems in our society. Its audience might vary in quantity, age, gender and other categories. Above all, the service and its means of provision play a significant role in claiming and retaining the customers apart from the prime solution that it delivers. The companies like Flipkart, Ola, Paytm, etc. have their own strategies to retain their customers. The strategies include giving offers like cash back, coupons, movie tickets, etc. These strategies have helped them in retaining the customers as well as attracting new customers.

The year witnessed the overall tech start-up base in India cross 4750, having grown at 10-12% YoY. The country has moved up to 2nd position only after the USA and has the fastest growing base of start-ups worldwide. IBM Institute for Business Value and Oxford Economics found that 90% of Indian startups fail within the first five years. And the most common reason for failure is lack of innovation. 77% venture capitalists surveyed believe that Indian startups lack new technologies or unique business models. Reasons for this meteoric rise and equally quick fall in the sector could be attributed to a number of reasons such as aggressive use of an aggregator model, the rise in me-too startups with no clear idea, unique product or execution, and difficulty in conducting ease of business across states or even pan India. Startups slowly turned into a fashion or a trend which attracted many to invest without a concrete idea. Further, businesses especially those related to e-commerce, m-commerce, and hyperlocal services focused solely on user acquisition in order to prove the validity of the product in the market, overlooking that the next step, that is, the user retention was equally vital. It is important to note that an exceptional and novel idea with brilliant quality service is the key to customer retention, a key that most these startups lacked.

The issues plaguing the Indian startup ecosystem in general and a few sectors, in particular, have created an unrest among the investors who are no longer loosening their purse strings for every seed stage, early stage and late stage entrant around. They have become more cautious and are taking heed of shifting market valuations, user retention, unviable business models, and more before pouring in any money. The investors have become more sceptical and selective in making decisions about the investment in startups.

New businesses in the startup economy were supposed to fill the blue ocean space and solve real problems faced by real consumers. However, the basic premise of the new economy was built on business on freebies or discounts instead of addressing a real problem or need of the consumer. Businesses invested in addressing real needs are doing well and the remainder are struggling to survive due to a dearth of money for further growth of business built on discounts. Today, before launching any product or service, the owner focuses on a launch offer leading to diversion of the emphasis from chief business to deals. The failure to comprehend that a startup cannot exist for a longer duration if its business depends on offers and discounts has proved to be a huge reason for the downfall.

 

Investors are waiting to open their purse strings to the Next Big Idea. Even the Government of India has taken a step to encourage entrepreneurs. They have started the Startup India website in order to help young people. The secret sauce needed to make startup a success in the present economic climate is coming up with solutions for your audience, building for PMF (Product/market fit is the degree to which a product satisfies a strong market demand) attain growth through a sustainable business model instead of one based on wild valuation or unrealistic user growth and show real traction.

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