In the past few years, the Indian startup ecosystem has witnessed the unprecedented glory of growth along with innovation and major investments. However, at the same time, even million-dollar fundings and years of strategic planning haven’t been able to save several startups from dying a premature death.
In 2016, the major reason behind a large number of startup shutdowns was cited to be lack of funding. However, in 2107, Inc42 analysed that the lack of market demand was the primary reason for startup shutdowns.
A recent CB Insights report said that 42% of all startups that start out enthusiastically thinking they are going to change the world are actually not needed at all. Thus result: a high-level of startup shutdowns.
Another recent report by Nasscom further said that around 25% of Indian startups found themselves in the valley of death this year due to failure in raising follow-on funding rounds mostly beyond Pre-Series A.
Other factors such as failure to scale, a weak business model, high cash burn, as well as external factors such as GST rollout and the continued impact of demonetisation also led to startup shutdowns in some industries according to the Nasscom 2017 report for Indian startups.
In Inc42’s 21st episode of Ask Me Anything (AMA), we hosted Siddharth Talwar, co-founder and partner of Venture capital firm Lightbox.
Talwar has been part of the Indian startup ecosystem for nearly two decades now and has hands-on-experience of being an entrepreneur and an investor supporting consumer technology startups.
In the AMA, we asked Sid Talwar his perspective on the reasons why startups fail in India.
Talwar believes that for a startup to succeed, the founder/s need to believe in their idea/plan and build on it. He also identifies the need for flexibility and quick decision-making as the way for startups to go forward.
“I think if you try to understand market superficially, you will fail. India is complex with different layers and if you don’t study the market, you are not going to understand it. Every layer brings different element for the understanding of what the problem is, but it’s not so simple,” Talwar explains.
Talwar, who’s insights are drawn from his years of experience in the field, believes that there are many factors — understanding the problem, understanding why the problem is there, and understanding why this is the solution to the problem that contribute to the success of a startup. There is, however, no one reason for failure.
Stay tuned for our next article on Ask Me Anything with Sid Talwar!