The road to success always comes with a few roadblocks. The year 2016 saw many such roadblocks in the way of the India’s ever-growing startup industry. Though many industry experts are hopeful that the startup industry will bounce back with full force next year, this year for sure wouldn’t be an important one to remember as far as the Indian startup industry is concerned. Here’s a list of 10 snags that derailed the industry’s success this year:
The year saw many promising startups like Tiny Owl, Peppertap, and AskMe etc. shutting down their shops for several reasons. It is interesting to note that almost two years ago, the Indian industry was booming like anything with experts predicting a bright future. In fact, in order to burst India’s startup bubble, Data analytics company Tracxn Technologies even put together a list of nearly 800 dead and dying startups in the Indian startup ecosystem.
The one thing that kept the Indian startup sector always in news this year were the numerous controversies that marred the sector. One of them was the Ringing Bells controversy that involved the company initially making a promise of providing India with the cheapest smartphone till date at Rs 251, but later backing out on its words. Another biggie which made headlines for wrong reasons this year was Fashion portal Jabong. During a forensic audit commissioned by German ecommerce investor Rocket Internet, it was revealed that some of the former top executives of the company had been involved in corporate governance violations.
3) Unfortunate Divorce at Mu Sigma
The unfortunate divorce between Mu Sigma’s founder-chairman, Dhiraj Rajaram, and his wife Ambiga, the company’s CEO, ended up raising deep concerns about the future of the data analytics company which is one of India’s ‘unicorn’ startups.
4) Campus Chaos
The year saw almost 30 startups, including biggies like Flipkart and Snapdeal, being banned from placements at the IITs and IIMs after they had unceremoniously revoked job offers to some of the students. This particular epsilon put an end to sheen that startups can chart exceptional success stories.
5) Valuation Markdowns
The year 2016 saw valuations of some of the biggest startups in India being marked down by a sustainable margin. While four consecutive markdowns by a Morgan Stanley managed mutual fund brought down Flipkart’s value to $5.54 billion from $15.2 billion when it last raised money in July last year, Japan-based SoftBank ended up writing down a whopping $555 million in Ola and Snapdeal. Zomato’s valuation was also halved to $500 million by HSBC. It is important to note that markdowns points towards the presence of fundamental problems with the business. This makes it a difficult task to raise more capital. The prior higher valuations of the Indian startups meant that the sector wasn’t that stable as it was being seen.
6) Sebi Crowdfunding Warning
Securities and Exchange Board of India (Sebi), India’s capital market regulator issued an investor-interest warning notice this year, which questioned the legality of equity crowdfunding platforms that serve the startup companies. The notice almost declared several digital equity crowdfunding platforms such as Tracxn, Grex, LetsVenture, and Equity Crest etc. as unauthorised and unregulated. It is important to note that such platforms have emerged as a vital alternative source of funding for startups, and helped almost 200 startups raise a whopping Rs 400 over the period of last two years.
7) The infamous PayTM Modi Advertisement
The morning of 9th November, 2016, a night after the honourable Indian Prime Minister Narendra Modi delivered the demonetisation news to the entire nation, e-wallet company PayTM came out with page-long advertisements carrying the PM’s name and photo with the message that the company pledged its support for the government’s demonetisation announcement. This ended up irking Delhi Chief Minister Arvind Kejriwal as he questioned if the company had got any benefits from the PM Modi.
8) Uber versus Ola
A healthy competition pushes every competitor to perform to their best, but the competition recently turned sour for ride-hailing services Uber and Ola, when the prior issued legal notices to Ola for a whopping $7.5 million in compensation for lost of revenue and goodwill, accusing that its Indian-based competitor has been involved in making about 94,000 fake user accounts with Uber and then using these accounts to make more than 405,000 false bookings. Ola defended the claim by saying that the case is a completely false and fabricated and is a part of Uber’s revenge strategy after Ola had accused Uber of violating a court order regarding adoption of clean-fuel cars in the Indian capital, Delhi.
In an effort to cut costs, build better balance sheets and acquire more competitive edge, several Indian startup biggies laid off hundreds of its employees. This includes big names like Zomato, Ola and Snapdeal.
10) Nikesh Arora’s sudden Exit
The sudden exit of Nikesh Arora, president of Japan’s Softbank, an investor who has invested billions in several Indian startups and was mulling on investing more, wasn’t a good sign for the Indian startup industry. After Arora’s exit, Softbank marked down its investment in Ola and Snapdeal by $555 million.
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