oppn parties Is the Startup Space Getting Squeezed in India?

News Snippets

  • Trouble brews in Bihar JD(U)-BJP alliance as Bihar police asks special branch officers to keep tabs on RSS activities
  • Trust vote in Karnataka assembly today. With rebel MLAs deciding to stay away after the SC order, the Congress-JD(S) government is likely to fall as it does not have the numbers
  • Amit Shah says the government will identify and deport illegal immigrants from all parts of the country
  • Reports from Pakistan confirm that Hafiz Saeed has been arrested and sent to jail
  • After the SC order, Karnataka Speaker says he will go by the Constitution in deciding on the resignations of the 16 MLAs
  • Rebel MLAs say they will not attend the trust vote on Thursday
  • Supreme Court rules that rebel MLAs cannot be forced to attend the assembly and vote in the floor test
  • Both the Centre and the Assam government have sought re-verification of up to 20% of draft NRC data
  • Pakistan opens its airspace for Indian planes
  • Dilapidated building collapses in Mumbai, killing more than 10 people while many were still trapped
  • Kulbhushan Jadhav case verdict to be delivered today by the ICJ
  • A Vistara flight landed in Lucknow with just 5 to 10 minutes of fuel left in the tank
  • Supreme Court to decide on Karnataka MLAs plea today
  • Karnataka alliance to face floor test on Thursday
  • China says that the next Dalai Lama will be appointed by it
International Court of Justice agrees with India, stays Kulbhushan Jadhav's execution. It asks Pakistan to allow consular access to the accused.
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Is the Startup Space Getting Squeezed in India?

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
Indian technology firms and high flying startups are facing a squeeze. The latest to create a flutter is L&T Infotech. It has cancelled the job letters it issued to many students as part of campus placements in 2015. Before this, ecommerce frontrunner Flipkart has ‘deferred’ the joining dates of its campus recruits. “Deferred" in most cases can be construed to mean cancelled. While this can be for a number of reasons, all indicators point to the fact that technology firms and startups are facing the worst time of their existence. It also means that campus placements with these firms will lose a lot of sheen.

Flipkart has been the worst hit in terms of damage to its brand equity in the investment and job market. First, its valuation has been successively downgraded – even by those who are invested in it for a long time. Realizing that the deep discounting model is not effective and profits are still a long way in coming, Morgan Stanley Mutual Fund Trust, which holds a percentage of Flipkart, lowered the valuation of the startup by 15.5% to $9.39 billion. Hence, Flipkart is now valued at almost 62% of $15 billion it was valued a year ago. Burning investors’ cash in giving huge discounts to customers without showing a clear business plan to bring in profits has made investors wary. Funds will not be easy to come by now.

Already, Fashionara, a high end ecommerce startup for selling garments, has closed shop. Zomato has scaled down its operations in nine countries including US in order to focus on profitable markets to consolidate revenues under pressure from investors. Food delivery startup TinyOwl has chosen to cater to just the Mumbai market for the time being, closing operations in all other locations. Helpchat has phased out the chat module of its app. Snapdeal lost its chief product officer, Anand Chandrasekharan, who left to strike out on his own.

Faulty business models, ill-conceived expansion policies and illogical hiring policies have now made startups unattractive to both investors and job-seekers. As valuations for existing firms go down, it will become tough for newbies to find investors willing to put their money in the absence of a solid business model that shows profits within a given time frame. Excesses, whether in payment of salaries, advertisement, discounting and expansion, will no longer be treated with patience. Along with technology and innovation, accounting will play a huge role in future investments in startups.