oppn parties Is the Startup Space Getting Squeezed in India?

News Snippets

  • Centre appointed former SC judge A M Khanwilkar as the new Lokpal. It also named three judicial and three non-judicial members of the Lokpal panel
  • A 9-judge Supreme Court bench started hearings on whether states are entitled to tax mineral-rich land in their respective states
  • Taking note of the huge disparity in charges in government and private hospitals for most treatment procedures, the Supreme Court asked the Centre to strictly enforce the CGHS rates or warned that the court would have to step in
  • Calcutta HC ruled that regardless of a woman employee being regualr or on contract and whether her contract permitted maternity leave, employers cannot deny childbirth and maternity leave to any women employee as it 'seeks to create a class within a class which is not permissible'
  • Sebi asks MF companies to disclose more risks associated with their small and mid cap funds
  • Vodafone Idea board approves Rs 45000cr funding infusion
  • NCLT clears Hinduja acquisition of Reliance Capital at Rs 9650cr upfront payment within 90 days of approval of resolution plan
  • Stocks returned to winning ways on Tuesday: Sensex gained 305 points to 73095 and Nifty 76 points to 22198
  • Commonwealth Chess championships: Mitrabha Guha wins title by scoring 7.5 points in 9 rounds
  • WPL: RCB beat Gujarat Giants by 8 wickets
  • Bengal starts paying MNREGA workers out of own funds as Central disbursement is stopped due to alleged 'discrepancies' in accounts
  • ISC chemistry paper postponed to March 21 just hours before start of exam due to "unforeseen circumstances"
  • Ghajal legend Pankaj Udhas passes away. he was 72
  • Calcutta HC says that there is no stay on arresting TMC leader Shahjahan and he should be arrested immediately
  • With latest data showing big fall in consumption of food and cereal, the government might rejig retail inflation data
Cross-voting in Rajya Sabha elections enables BJP to snatch seats in UP & Himachal /////// Congress government in Himachal in trouble as some MLAs revolt
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.
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.