For a while, India has enjoyed the boom of startup enterprises that brought heavy funding from investors within India and abroad. The big startup bubble burst at Silicon Valley, CA, USA; experts had long been predicting the end of an era that outshone the far reaches of Indian entrepreneurship. As a result, many brilliant ideas died out, some funded, some non-funded startups saw the closing of their dreams in a spectacular fashion. Is this the end of the “Big Indian Dream?” Let’s find out.
What is startup bubble burst?
When startup enterprises are valued too high differing highly against the real financial progress, that’s when the bubble is set to burst! The same happened to the quickly progressing Silicon Valley back in 1999.
How does the startup bubble burst affect new entrepreneurs?
It doesn’t affect new & budding startup wannabes. As long as, you have a working business model that is practical and sustainable in the Indian markets, and has an economic gain on value, it will kick off and sustain any market ups and downs.
There are still active investors all over India, and even abroad who are willing to invest in a well-predicted and robust business model.
So, one tip of advice, before you approach investors for a significant amount of money, do a trial run to check whether your idea will work on a small-scale, and record the observations, just as you did at your Engineering college.
Once you do a trial run, do it again and again, and yet again, at different locations, & the regions different from yours.
Because, if you want to launch a tech-based product, you want to make sure it is useful all over India and not restricted to one particular region.
What are the factors causing startup bubble burst & who’s affected?
While many crucial factors can cause the failure of a startup enterprise, the most common reason, and this is something known by every Venture Capitalist and even stock brokers, is that Inflated Valuations are the real reasons for startup bubble burst.
When the market is over-estimated, VC’s and other firms putting up equity in a startup tend to inflate its real valuation purely for the sake of monetary gains. For instance, Flipkart valued at $15.2 billion in 2015, but a foray into the matter conducted by the investment firm Morgan Stanley in February 2016, found that the Indian eCommerce giant’s original valuation was somewhere around $11 billion.
Did it stop there? No!
Following Morgan Stanley’s findings, other firms such as Valic, Fidelity, T Rowe Price & Vanguard Funds, conducted their research only to mark down one of the most famous Indian e-retail stores to $5.5 billion which happened early December 2016.
Another major case was Zomato, which is one of the world’s most famous restaurant finding, and food delivery service provider had its valuation marked down by 50% to $500 million by HSBC in May 2016.
The year 2016 has truly been the year of startup closures and job layoffs for the working staff at these companies. Peppertrap, which was a grocery delivery app, who received funding from Sequoia Capital and Snapdeal, had to shut down its delivery operations and turned to providing logistical support.
Working on the same page was Grofers, another grocery delivery enterprise shut down its operations in 9 Indian cities.
By the end of 2015, Zomato fired 300 staffers, as well.
Snapdeal laid off 200, Flipkart-700. Ola’s acquisition from 2015, TaxiForSure, fired 700 employees.
AskMe Group shut down its operations leaving more than 4,000 people unemployed, and it was reported that the employees weren’t paid for a couple of months around that time.
Also, Quikr laid off 150 staffing personnel from their January 2016 acquisition, CommonFloor.
Another online apparel and accessories selling eStore named Fashionara, based out of Bangalore, launched by ex-Reliance Trends CEO Arun Sirdeshmukh and ex-CTO (Chief Technology Officer) of Times Internet Ltd, Darpan Munjal back in 2012 closed the business this year May 2016. The company raised more than $4 million from Helion Venture Partners and Lightspeed Venture Partners.
FranklyMe, a video micro-blogging website joined the list of failed startups, incorporated by Abhishek Gupta and Nikunj Jain in 2014. It obtained a seed funding from Matrix Partners and raised $600,000.
So, What Now?
What comes next, is the ‘wait N watch’ game. We must wait until the “next big thing” sweeps the nation off its feet and stands firm not only in its exaggerated valuations but also in its values, corporate structure, and above all a very sound business model that is sure to succeed and sustain the rough terrain of Indian markets.