How Start-Ups Die!

They were to inherit the earth. Start-ups, the playfield of the young and the restless, have had a hard reality check. What gives?

- Arindam Mukherjee

We don’t know the ceremonial rites followed at the collective ‘start-up funeral’ in Bangalore last month—was it cremation, or burial? And if the latter, was it in foetal position, in padmasana or standing upright? Upside down, nose first, may have been appropriate for some of them. That would visually match the steep clines observed on the performance graphs. Yes, many of them are still fighting. And yes, in India we believe in rebirth. But the story of the post hype years is most elegantly caught in some startling data.

Last week, there were talks of the beleaguered e-commerce major Snapdeal getting some much-needed oxygen supply from the funding arm of Softbank. The piece of statistic to zoom in on was the valuation: the seven-year-old company, set up by two Wharton and IIT-D alumni, was being considered at under $3 billion. That’s less than half of the $6.5-7 billion it commanded when it last raised funds just a year ago, in February 2016. This came weeks after Snapdeal sacked some 600 people and wound down some of its non-core businesses like Shop.

In December 2016, after running it for four years, India’s largest e-commerce company Flipkart pressed the shutdown button on DigiFlip, a company it had started to sell computers and accessories. Around the same time, Flipkart’s logistics arm Ekart discontinued its hyperlocal delivery and its courier service. This January, a Fidelity-managed mutual fund pegged the valuation of Flipkart at $5.56 billion. Just a year-and-a-half ago, in May 2015, at its peak, Flipkart commanded a valuation of $15.5 billion. An erosion of $10 billion in less than two years (to get the scale, that’s more than the whole NREGA outlay for 2017-18).