oppn parties Is the Startup Space Getting Squeezed in India?

News Snippets

  • Former Pakistani cricketer Shoaib Akhtar proposes an Indo-Pak ODI series to raise funds for fighting coronavirus
  • Maharashtra government says many Tablighi Jamaat members who attended the Markaz and returned have gone into hiding
  • West Bengal government identifies hotspots in Kolkata and the rest of the state, inclined to extend the lockdown in those places only
  • Prime Minister Modi holds a video conference with floor leaders of opposition parties, hints at extending the lockdown
  • UP seals hotspots and makes masks mandatory
  • Masks made compulsory in Mumbai, violators will be arrested
  • ICMR says an infected person can infect 406 people in 30 days without social distancing and lockdown
  • Stock markets make a smart recovery. Sensex up by record 2476 points on global cues
  • Schools, colleges and shopping malls likely to remain closed for a further period of one month, says empowered group of ministers
  • PM Modi tells BJP workers that India is in for a long battle against the coronavirus and there is no scope to feel tired or defeated
  • PM Modi asks ministers to focus on exports and new areas and sectors
  • PM Modi asks ministers to prepare business continuity plan post the lifting of the lockdown
  • Corona cases in India cross 4000 and the death toll stands at 124
  • The government decides to double the testing of corona suspects from 10000 now to 20000 in the next three days
  • Flipkart assures employees that there will be no job or salary cuts due to the COVID-19 pandemic
COVID-19: 773 new cases and 32 deaths in the last 24 hours, reports the health ministry
oppn parties
Is the Startup Space Getting Squeezed in India?

By Sunil Garodia
First publised on 2016-05-31 11:18:29

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.