In 2022, as many as eight Indian startups folded their operations after they failed to raise capital
Five out of the eight startups that were shut down during the year were from the edtech space
Several unicorns and big tech companies had to dissolve their cash-guzzling verticals
Undoubtedly, the Indian startup ecosystem has witnessed phenomenal growth in the last five years, thereby becoming the third-largest startup ecosystem in the world after the US and China. What further boosted the momentum of Indian startups was the record-high capital infusion in the country in 2021.
Then came 2022, which will be remembered in the times to come for all the wrong reasons. Although 2022 started with a bang, with 13 unicorns emerging between January and March, the onset of the Russia–Ukraine war, rising global inflation, and the fears of a looming recession marred most of it.
At this point in time, investors started tightening their purse strings due to which Indian startups were left with no other option but to cut costs to stay cash rich. As a result, news of layoffs, consolidations, and startup shutdowns started making headlines almost every other day.Download Annual Funding Report 2022
Unfortunately, the year witnessed a record eight VC funded startups shutter their operations, as they failed to secure funds from investors. The list of these startups is as follows:
- In January, Matrix Partners-backed SaaS startup Protonn terminated its operations after failing to find the right product-market fit
- Edtech startup Udayy became the second edtech startup this year to shut its operations in April
- Super Learn, a Bengaluru-based edtech startup, called off its operations in June, due to a dearth of funds and diminishing investor confidence
- In June, Matrix Partners-backed startup Crejo.Fun shut down its operations as it failed to raise a new round of funding
- Citing fund crunch, Nandan Nilekani-backed B2B ecommerce platform ShopX filed for bankruptcy in August.
- Ronnie Screwvala-backed edtech startup Lido Learning filed for bankruptcy in September after it failed to get acquired
- GoNuts, a celebrity engagement platform, ceased its operations in September as it failed to grow its target audience. Even the investors were not keen to infuse more funds.
- Qin1, a K12-focused edtech startup, closed its operations seeking a new round of funding
Apart from shutdowns, several startups pulled the plug on their cash-guzzling verticals to curb rising costs to extend cash runways. For instance: edtech giant Unacademy, which is currently valued at over $3.5 Bn, had to shut down its medical test preparation platform, USMLE, earlier this year. Bhavish Aggarwal-led OLA dissolved three of its verticals – Ola Dash, Ola Play, and Ola Foods.
It is pertinent to note here that even international companies gave up their India operations in 2022. While Singapore-based ecommerce giant Shopee shut down its Indian operations amid market uncertainties in March, US-based buy-now-pay-later (BNPL) startup Sezzle informed its India merchants in April that it was planning to shut down its operations in the country as part of a restructuring plan.
Indian Startup Shutdowns Of 2022
Lido Learning: The First Major Shutdown Of 2022
Since the beginning of the year, K12-focused edtech startup has been making headlines for all the wrong reasons. The Mumbai-based edtech startup, Lido Learning, became the first tech startup to lay off its employees in 2022. It pink-slipped over 150 employees in February. The startup also failed to secure a new round of funding after one of its investors backed out. Following this, the startup’s founder, Saahil Seth, explored a merger opportunity with Vedantu and Reliance.
Unfortunately, the acquisition talks fell through and the startup eventually filed for bankruptcy in September. Lido was backed by Unilazer Ventures, Anupam Mittal, Vijay Shekhar Sharma, BACE Ventures, 9 Unicorns, and Mukesh Bansal, among others.
SaaS Startup Protonn Returned Money To Investors As It Failed To Find The PMF
The Matrix Partners-backed SaaS startup, Protonn, was the first startup to announce the plans to shut down its operations in 2022. The startup, which was founded by ex-Flipkart executives Anil Goteti and Mausam Bhatt in 2020, had to dissolve its operations within two years after it failed to find the right product-market fit.
As per media reports, the founders didn’t agree on pivoting their business model either. In July, the startup raised $9 Mn in a seed round led by Matrix Partners India, 021 Capital and Tanglin Venture Partners.
Nandan Nilekani-Backed ShopX Failed, Couldn’t Generate Enough Cash Flow
The B2B ecommerce startup operated by 10i Commerce Services had to shutter its shop and file for bankruptcy in August. In an RoC filing, the startup informed the board that it was unable to generate enough cash flow or raise new capital by selling its stakes.
Founded by Amit Sharma and Apoorva Jois, the startup had raised a total funding of $56.4 Mn across multiple rounds since its inception. The startup was backed by Infosys cofounder Nandan Nilekani and Fung Investments.
Edtech Startup Udayy Shut As CAC Rises After Schools Resume
Gurugram-based edtech startup Udayy became the second edtech startup to have ceased its operations this year. The startup, which offered English and mathematics lessons to children from Kindergarten to class XII, saw its customer base fall soon after schools in India started reopening.
Founded by Saumya Yadav, Maharak Garg, and Karan Varshney in 2020, the startup was marred by rising customer acquisition costs and a lower retention rate. This eventually led to the founders pulling the plug on the startup in April.
To date, the startup has raised $13.5 Mn from Alpha Wave Incubation, Info Edge Ventures, Norwest Venture Partners, Kunal Shah, and other angel investors.
Diminishing Investors’ Interests Led SuperLearn To Wind Down Operations
Founded in 2022 by Kunal Bhatia and Ricky Gupta, edtech startup SuperLearn stopped its operations in June this year after schools began to resume. SuperLearn was an after-school extracurricular program for children.
In a post, Bhatia said that they had to shut down the operations of the startup due to a paucity of funds and diminishing investor confidence. Bhatia added that the startup was left with capital that would sustain the company only for a couple of months. During its stint, the startup raised $330K from Incubate Fund and angel investors Vishal Bharghav, Rohit Razdan, Padmanabhan Thangarajan, Anuraag Gupta, and Karan Talwar.
Celebrity Engagement Platform GoNuts Folded As TAM Remained Flat
Mumbai-based celebrity engagement platform GoNuts folded its operation in October. The startup facilitated its customers with a custom message from their favourite celebrities. The startup’s founder and CEO, Vinamra Pandiya, said that the factors such as the inability to secure funds and the target audience not growing over the past three years led him to shut the company’s operations.
In its entire journey, the startup raised $848K (INR 7 Cr) from investors, including former Zomato cofounder Pankaj Chaddah, Livspace founder Ramakant Sharma, and LetsVenture, among others.
Qin1 Shuts Shop As Acquisition Talks Fell Through
Noida-based edtech startup Qin1 exited its operations in the first half of 2022. The startup, which was founded by Ishaan Gupta and Aarti Gupta in 2019, offered classes on coding games, stories, and animation, fundamentals of computers, app development, Python with AI, fundamentals of cybersecurity, and hacking.
According to the founders, the startup had to shut its operations due to funding issues and ‘unfeasible’ acquisition opportunities. The startup had last raised an undisclosed amount in a pre-series A round from Venture Catalysts. It was also backed by Ankit Bhati of Ola and Sundeep Sahini of Rocket Internet.
Fund Scarcity Ends Operations Of Crejo.Fun
In June, the Bengaluru-based edtech startup, Crejo.Fun, informed its employees that it will cease its operations completely. In a town hall meeting, the founders of the startup, Ankit Agarwal and Vikas Bansal, told their employees that they had to wind down the company’s operations due to a severe shortage of funds and the reopening of schools.
In its lifespan, the startup, which claimed to help children discover their passions and interests, raised $3 Mn in a pre-seed round from Matrix Partners and 021 Capital.
Big Techs, Startups Shut Down Struggling Verticals
Apart from startups shutting their operations completely, there were several big tech companies that dissolved their verticals that were burning cash without adding much to their revenue streams. The list of these companies is as follows:
Amazon Shuts Amazon Food, Distribution, Edtech Venture Amid Market Uncertainty
In November, US-based ecommerce giant Amazon shutdown three of its verticals – Amazon Academy, Amazon Foods, and Amazon Distribution. Amazon Academy entered India last year as a test preparation platform for entrance exams such as JEE, NEET, and boards exams, among others. It offered curated learning material and live lectures.
The company’s food delivery platform, which as a pilot project was only operational in Bengaluru, will now be shuttered by December 29. Further, Amazon will also be discontinuing its distribution segment, Amazon Distribution, which was operational in Bengaluru, Mysore and Hubli.
Ola Pulled The Plug On Car Reselling, Grocery Selling Verticals To Focus On Core Biz
Bhavish Aggarwal-led Ola has shut down three of its verticals this year. In June, the startup closed its used-car marketplace Ola Cars and quick commerce platform Ola Dash. While Ola Cars was launched last year, Ola Dash was relaunched this year to compete against Swiggy’s Instamart, Zepto, Dunzo, and Blinkit.
The company said that the startup wants to focus on its core business that is providing taxi services and electric vehicles. In November, Ola said that it will soon dissolve its ride segment Ola Play, an in-cab infotainment service. Ola Play was launched in 2016.
Chinese Phone Maker Discontinued Its Fintech Offering Mi Pay & Mi Credit
Earlier this year, Chinese smartphone maker Xiaomi pulled down its digital payment app Mi Pay and digital lending app Mi Credit from Play Store, along with its app store GetApps.
Launched in 2019, Mi Pay enabled Indian consumers to make UPI-based transactions, whereas Mi Credit, the digital credit app, offered low-interest credit between INR 5,000 and INR 1 Lakh.
Flipkart Shuts SMART Fulfilment To Trim Sellers’ Cost
Bengaluru-based ecommerce giant Flipkart shut down one of its seller services, SMART Fulfilment, earlier this year. Flipkart started SMART Fulfilment in 2019 to help sellers make faster deliveries.
In an email sent to the sellers using SMART Fulfilment, Flipkart said, “In order to help you in reducing your cost of doing business and improving your order processing experience, we are discontinuing SMART Fulfilment.”
ShareChat Pulls The Plug On Its Cash-Guzzling Vertical Jeet11
Indigenous social media platform ShareChat in November pulled the plug on its fantasy gaming platform Jeet11. Sources informed Inc42 that Mohalla Tech Private Limited, the parent company of ShareChat, started Jeet11 two years ago to foray into the online gaming market.
However, the startup shut down its operations and decided not to burn any more cash on it.
Unacademy Closes Test Preparation Platform As It Failed To Achieve PMF
Earlier this year, edtech giant Unacademy launched the USMLE® test preparation programme. The course was designed to help Indian MDs (Doctor of Medicine) clear the United States Medical Licensing Examination (USMLE®) in the US.
However, four months after the launch of the programme, the startup decided to terminate the course in a bid to cut down on cash burn as the initiative couldn’t generate returns.
Will 2023 See More Startups Shutting Down?
Unfortunately, industry experts and several large investment banks anticipate that the worst is yet to come as the global economic growth will further slowdown in 2023. Big VC firms, such as Sequoia Capital, BEENEXT, Red Point Ventures, and Y Combinator, have cautioned their portfolio companies to cut expenses to increase their cash runway as the funding winter is expected to last another 12 to 18 months.
Sector-wise, edtech, one of the most impacted sectors of 2022, is expected to see more shutdowns in 2023. With the effects of the COVID-19 pandemic waning, the troubles of the K-12 segment are likely to continue in 2023 as well.
The last two years have seen an enormous rise of D2C brands in the ecommerce segment. However, at a time when people are spending cautiously and there is no surety of fresh capital infusion from investors, D2C brands in risky zones will either be acquired by Thrasio-styled ventures or will have to shut their shops.
Further, cash-guzzling sectors such as ecommerce, hyperlocal delivery, and consumer services are either going to see record acquisitions or shutdowns due to a dearth of funds or competition. In the coming months, investors will focus on generating return on their investments, pressing startups to find ways to emerge profitable or cut costs, either by shutting down cash-burning, unscalable verticals or layoffs.
Indian startups that today enjoy unicorn status on the back of investors’ money will be impacted the most, followed by soonicorns. As of now, close to 20 out of the total 108 unicorns in India are profitable.
Experts say that the next 12 months are going to be crucial for the Indian startup ecosystem. Startups that last raised funds in or before 2020 and are in the market hunting for more will likely be acquired at lower valuations or be thrown out of business.Download Annual Funding Report 2022