oppn parties Is the Startup Space Getting Squeezed in India?

News Snippets

  • The Army conducts an operational alert exercise in eastern Ladakh
  • The IAF reopened the Vijaynagar advance landing ground, an airstrip in Arunachal Pradesh near the Chinese border
  • Amit Shah says he never sought to impose Hindi
  • Government bans the manufacture and sale of e-cigarettes in India
  • Mamata Banerjee seeks an appointment with Home Minister Amit Shah today
  • Bengal CM Mamata Banerjee meets PM Modi in what she later described as a government-to-government meeting
  • Supreme Court sets a deadline of October 18 for completing the hearings in the Ayodhya case
  • Pakistan rejects India's request for use of its airspace when PM Modi flies to the US later this week
  • Crude prices fall sharply as Saudi Arabia assures normal production in a few weeks. Prices fall by 5.4% to $65.30 per barrel
  • Sensex tumbles 700 points over fears that rising crude prices will deal a body blow to the tottering Indian economy
  • As Rajeev Kumar fails to appear before the CBI despite several notices, the agency forms a special team to locate and apprehend him
  • S Jaishankar says Pakistan is not a normal neighbour and its behaviour is a "set of aberrations"
  • External Affairs Minister S Jaishankar says PoK in Indian territory and the country hopes to have physical jurisdiction over it one day
  • Barasat Sessions court near Kolkata rejects Rajeev Kumar anticipatory bail application citing lack of jurisdiction as the reason
  • PM Modi celebrates his birthday with Narmada aarti and later has lunch with his mother.
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
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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.