In the past few years, India experienced its biggest-ever start-up boom, with entrepreneurs founding thousands of companies. Now the country is getting its own version of a dotcom bust.
In the latest sign of the downturn, a Bengaluru-based firm has put together India’s first Deadpool list, a catalog of dead or dying startups similar to the F**ked Company website created in the aftermath of the internet bubble. The US site, set up in 2000, was a parody of the magazine Fast Company and chronicled the dotcom collapse. Also known as the dotcom deadpool, it shut down in 2007.
The India list, compiled by Tracxn Technologies Pvt, identifies nearly 800 fading or dead startups in almost every segment of technology, including e-commerce, online education and mobile software. Investors, recruiters and larger companies looking to pick up talent or technology assets on the cheap pay a subscription fee to Tracxn for the list and other research. The site isn’t available to the general public. “The Deadpool list is a sign of the times," said Neha Singh, co-founder of Tracxn.
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F**ked Company gave people a public forum for discussion as venture money dried up and startups crashed. Laid-off employees shared internal memos and skewered their bosses for incompetence and selfishness. The site’s founder, Philip ‘Pud’ Kaplan, fueled the conversation with black humor and merciless corporate obituaries.
India is now seeing venture investments slide after surging to a record $8.9 billion in 2015, according to the research firm Preqin. The pace dropped to $2.7 billion in the first two quarters, the London firm said.
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The boom pushed the number of technology-enabled startups in India to more than 19,000, according to the Ministry of Finance’s Economic Survey published in February. The Deadpool list shows that, besides the innovative players, there are scores of copycat companies, especially in e-commerce and other categories favoured by venture capitalists. “You can’t be the 50th online laundry operation and hope for success," said Ravi Gururaj, founder of QikPod, a Bangalore-based parcel locker start-up backed by Accel Partners and Foxconn Technology Group.
Tracxn identifies candidates for the Deadpool by tracking multiple metrics including shrinking team size, suspended operations and declines in user traffic. The list was introduced a couple of months ago and is steadily growing longer. “There are the dead and then there are the walking dead," said Gururaj.
This month, the e-commerce portal AskMe said it would suspend operations, leaving 4,000 employees scrambling for jobs. The site’s parent GETIT Infoservices Pvt had raised about $300 million from investors, including Malaysia’s Astro Entertainment Networks Ltd., but it hit a cash crunch and hasn’t been able to raise additional capital. Workers protested Monday in front of AskMe’s offices in Gurgaon, calling for compensation. Chief Executive Officer Kiran Murthi didn’t respond to requests for comment.
PepperTap, a hyper-local grocery started in Gurgaon, got more than $50 million in funding and expanded to nine Indian cities. But as funds began to dry up, it cut jobs and then shut down in May, less than two years after its launch. Its two co-founders did not respond to multiple requests for comment.
Sahil Baghla raised $1.1 million for his start-up Bluegape from investors including Times Internet Ltd, the digital arm of the Times Group (HT Media, which publishes Mint, competes with the Times Group). Last year, the start-up unveiled a mobile content platform app called Murmur that quickly gained popularity. Revenue was a challenge however and it closed earlier this year.
Founders of a dozen other prominent Deadpool start-ups declined to comment for this story.
Even for those that have gained significant market share, success is not guaranteed. The India fashion site Jabong.com raised money from Rocket Internet SE and AB Kinnevik and gained enough traction for a valuation near $1 billion. But with the downturn, Jabong was squeezed and sold to the country’s largest online retailer, Flipkart Online Services Pvt, for a mere $70 million. People in tech circles have begun to use the verb “jabonged," meaning to sell your start-up far below its peak valuation.
Girish Mathrubootham, founder and CEO of cloud-based customer service provider Freshdesk, said he sees the Deadpool list as an opportunity to acquire valuable start-ups and compatible technologies at reasonable prices. “We have made six acquisitions and are just initiating the process for our seventh," said Chennai-based Mathrubootham. “Dying and regenerating is healthy for any ecosystem."
The list is also fertile ground for hard-to-find talent. Kiran Karthikeyan, vice president at a Hyderabad-based start-up called Xploree, said there are benefits to hiring from dying companies. “Those who’ve worked in failed start-ups are risk-takers," he said. “They are invaluable additions to a start-up team."
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It’s a sign of changing attitudes in India. Job security has long been so coveted that entrepreneurs would get low priority in the traditional arranged marriages. But with the success of local players such as Flipkart and ANI Technologies Pvt’s Ola, ambitious young people now have aspirational role models.
“In Silicon Valley, failure is a celebrated thing," said Singh, an alumnus of Stanford University who worked with Sequoia Capital before setting up Tracxn. “Risk-taking is newly becoming an acceptable choice in India." Bloomberg