Was 2023 the year that startups failed in India?

Sridhar Sachidanand
Nilabja Banerjee

The Indian startup ecosystem faced formidable challenges in the 21st century. Despite the government’s push to bolster the startup culture and Indian entrepreneurship, many startups unfortunately failed to keep their heads above the water.

Here we examine what led to the crash and burn of a few popular startups that did not make the cut.

Intriguing paradox

The Indian startup scenario has seen rapid expansion over the last decade. Increased funding activity, government assistance and a burgeoning pool of enthusiastic and talented entrepreneurs has fuelled this growth.

However, a survey revealed that over 90% of startups do not survive beyond their first five years of operation. This means that of the 1,300 startups that were launched in 2023, over 1,000 of them might go belly-up before 2025. And those that survive may face insurmountable challenges going forward.

Nevertheless, India has become the third largest nation in producing unicorn startups (startups with a valuation of over $1 billion). India currently has close to 75,000 startups creating 7.46 lakh jobs. But the startup environment is ridden with retention issues because 2022-23 has not been a good year in terms of startup hiring rates.

Notable Failures

Lido Learning was a Mumbai-based Edu-tech startup that provided K12 education services to students. Sadly, it was one of the startups that failed in 2023. In the first two quarters of 2022, Qin1, an Edu-tech startup based out of Noida, ceased operations. Established in Bengaluru in 2006 by IIT Delhi graduates, Guruji.com also failed to survive intense competition.

RoomsTonite was another startup that could not make it through 2023. Turant Delivery was a promising startup that unfortunately shut operations in 2023. Roder was another casualty in the Indian startup environment in 2023. Yumist, a popular food delivery startup, had to shut shop in 2023. Udayy was another Edu-tech startup that went under.

Among the other Indian startups that did not rise in the Indian economy were: FrontRow, DUX Education, Friyey, Mojocare, Fipola, ShopX, GoNuts, and BabyBerry.

Why do startups fail?

Lack of funding is by far the most common cause for startup failure. Depleting capital over time causes tech companies to ‘strike-off’ (get deregistered). Coupled with high spends and inability to raise following rounds of funding certainly makes the startup to shut down.

A faulty sales and marketing strategy is another recipe for startup failure. The danger here is that the fledgeling tech company continues to lose money with each transaction.

Poor customer service and low-quality products are also another cause of failure. When this happens, the enterprise loses out on repeat business.

Startups that fail also tend to lose focus and spread themselves too thin. Getting into too many verticals without resources simply does not make sound business sense. A startup needs to have fail-proof business and revenue models – without which it is bound to crash-land. Scalability and addressing the market need are the imperatives here. A startup needs to be ready to adapta to every change in the market vagaries, or it is most likely to fail.

These companies must address leadership and team building issues quickly. Finally, legal hassles can burn startups to a cinder. They need to be adequately addressed or avoided as much as possible.

Global tech failures

The global technology space is filled with fantastic achievements, and startling failures. Industry behemoths and startups suffer the same fate caused by bad decisions, thousands losing jobs and billions of dollars going to waste.

Startup malfunctions are not typical to India alone. Many tech-giants like cryptocurrency exchange FTX, Twitter, Google, Spotify, and Meta have also been served a bitter pill by the markets they are in. Across the globe, NFTs and self-driven cars (Ford & Volkswagen invested in Argo AI) were just a big bonfire.

There are reasons why ‘visionary’ and ‘futuristic’ products fail. Experts say that these products lack uniqueness, were rolled out late, marketed inadequately, and had bugs. A recurring trend is that many of the failed products were built on brilliant ideas but were ill-timed.

Silver lining

However, not all about the Indian startup ecosystem is gloomy. There are a handful of them that did savor success. For example, 82E, a self-care brand launched by Bollywood actor Deepika Padukone aims to make skincare joyful, simple, and effective. This business has been doing well.

Absolute, a startup focusing on agriculture and food production provides actionable insights to farmers based on data from sources such as sensors and satellite feeds. The company has made the cut. Agnikul Cosmos, a Chennai-based startup develops and manufactures orbital launch vehicles. They have emerged somewhat successful as well.

For every story of failure and shutdown, there are also stories of successes to look up to!