Page 22 - Top 10 India's Financial Startup 2019

Lessons to learn from Indian

startups that failed

ndia has the third largest startup ecosystem in the world with several disruptive models,
unique ideas and unicorn companies. However, did you know that nearly 80-90% of Indian
Istartups fail within the first 5 years of their inception? This is despite the fact that several
of these startups had novel ideas, some were receiving big investments and touted as high-
potential startups, some were backed by the who’s who of the corporate world, yet they failed
and were forced to shut down.
Here are a few reasons seen as one of the major contributors to startup failures.

Why startups fail in India? The top 7 reasons
#1 Lack of innovation and uniqueness:

The lack of innovation and uniqueness for these failed startups permeated from one or many
of the following weaknesses:
• Absence of unique and cutting-edge product/ service/ solution that could withstand the
aggressive competition in the market.

• Operated in markets where copycat products came up almost instantly.
• Inability to leverage technology (especially deep tech such as AI, ML, sentimental
analysis, automation, etc.) well-enough to distinguish their products/ services/ solutions
amidst the copycats and competitors in the market.

• Replicated a western idea/ solution without customizing it for the Indian context and the
market needs

• The lack of innovation and uniqueness only meant that the startups could not scale up
and/or find sufficient investments.
#2 Copycat and/or weak business and revenue models:

The business and revenue models of the startup are critical in deciding its economic and
commercial viability. One of the biggest mistakes that startups end up making is focusing too
much on the solution and less on the business and revenue models. Inefficient and weak
business and revenue models led to improper resource allocation, incorrect pricing, high cost
to customer, low lifetime value to customer and so on.

#3 Pre-mature expansion/ scaling up:

Premature scaling up/ expansion is a silent killer for many startups. This is because several of
the failed startups considered the short-term spikes in key metrics including profitability as a
sign that they were ready for expansion even though they were not performing as efficiently in
reality (as suggested by their business models). As a result, they made the mistake of scaling
up/ expanding their operations and burning a lot of their revenues and investments in hiring