In India, Nearly One in Every Two New Startups Fails

Starting a company has become much easier than it was a few years ago. Everyday we read about a new startup coming up in some or other part of the country. While we do get to read about their glorious debuts, it’s their hardships and sad exits that we often don’t get to know much about. Now, a study done by Xeler8, a market research firm, has put some hard facts about the Indian startup industry on the table.

The study revealed that 997 (43.7%) of 2,281 startups have had to a pull a plug on their operations since the June, 2014. Companies dealing in sectors such as eCommerce, logistics, analytics and food tech are finding it really hard to save the day because of too much competition. While a few sectors are finding it way too hard to keep their wheel spinning, companies in sectors such as banking, financial services and insurance (BFSI) are able to find themselves investors who are ready to bid bucks on them. Currently, topping the list for angel investors and Venture Capitalists is the Fin-tech sector, followed by health-tech in the second place and online recruitment coming at a close third.

The Xeler8 study reveals that many augmented reality (AR) and virtual reality (VR) ventures had to bite the dust last year. The study also talks about a new upcoming trend in the industry where when a startup fails in one niche, they try to make things work in some other related field.

“Some startups who failed when they dabbed their hands in logistics and e-commerce are now taking to SaaS (software as a service) and analytics given their tech background,” said Xeler8’s founder Rishabh Lawania in a statement.

After facing an array of failures in the past, Augmented reality (AR) and Virtual Reality (VR) have still somehow managed to arrest the interest of investors, all thanks to the runway hit game Pokemon Go. The game by Niantic is a testimonial of the fact, if AI is used intelligently one can make billions in no time at all.

According to Lawania, Internet of Things (IoT) is also climbing up the growth and popularity ladder much quicker than others. All that the investors want is a niche expertise and if you have got that, the field is yours.

The study calculates the average age of the failed startups to be 11.5 months. The ventures having some sort of funding survived for a long duration among the 2,281 startups that went live after June 2014. Out of the 997 failed ventures, only 32 had raised funds. Some of the famous names in the list include Frankly.me, Investo Presto, Eazymeals, Autoraja and TalentPad.

The Xeler8 study also reveals that higher regulation seems to be working out pretty well for survival of Indian startups. NBFCs, Wallets, MFIs and fintech ventures have lesser probability of ending up as a failure as they come with better capital adequacy, solid expertise and traditional backing. “Even crowd funding is highly regulated by Sebi. Of the 45-odd crowd funding platforms in India, 11 are doing really well. So I’d say in India, regulations are no hindrance to the startup ecosystem,” said Lawania in a statement.

A large percentage of failed startup entrepreneurs end up jumping on the 9 to 5 corporate job bandwagon or join other startups. Only 1 in every 5 (22-24%) start a new venture. The study calculates the average age of the captains of these failed startups as just 27.3 years.

So, starting a company might be easy but making it survive the test of times seems to be a tough job, it seems.

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