3 Biggest Failures of the “Startup Era”

Of all the startups that come into existence, only a handful of them makes it to its next five-years. It may sound a bit cold but that also gives us a strong reason to prepare better for the future. This article highlights a few startup fiascos to help entrepreneurs and managers relate the basics of business management with real-life examples. The common thread in these businesses was that they were all internet-based and could not survive for too long. These failure stories also signify the role of startup business consulting in providing professional and experience-based guidance to budding entrepreneurs.

ZuperMeal

ZuperMeal was a Mumbai-based app and website based home-delivery service of home-cooked food from nearby places. It was founded in July 2016. The innovative service was based on connecting consumers with home cooks/chefs. The home-delivery food venture was funded by celebrity chef Sanjeev Kapoor and it also raised funds from other foreign investors in October 2015. The fund raised was close to the tune of Rs.13 Crores. But the company had shut down within a year of coming into existence. Here’s our assessment of what possibly might have gone wrong with ZuperMeal.

ZuperMeal looked like a great platform for homemakers and for those who have a passion for cooking and intending to take it up as a profession or a business. But for the customers, the only USP was that they were getting home-cooked food. Customers would seek home-made food under very limited conditions. Some of these are –

When they are away from home
When they cannot or don’t want to cook at home for some reason
Special occasions

The first category shows promise in terms of the size of the market segment. Although statistics of customer demographics support urbanisation people who are located away from their home (students, working professionals etc) would look for a more permanent solution like setting up their own kitchen and cooking on their own or hire tiffin or dibba services for different reasons like economy and timeliness.

The second and third category scores low on the frequency of need for home-cooked food. People often prefer restaurants for special and rare occasions which deliver quality food albeit at higher prices (people don’t mind paying higher prices for their fancy food on rare occasions).

People often prefer restaurants for special and rare occasions which deliver quality food albeit at higher prices (people don’t mind paying higher prices for their fancy food on rare occasions)

How many people would have preferred ZuperMeal over regular tiffin or dibba services which also provide home-cooked food and are also easily available in prominent and growing cities?

Input Sources: [(1), (2), (3)]

Fashionara

Fashionara was a Bangalore-based online fashion and lifestyle e-tailer. The company was founded in 2012 with a funding of $4 million in Series A. The company offered fashion and lifestyle products of several brands through its app and web-based platform. It registered net sales of INR 32.86 crores in the financial year 2014-15. The company also added the home-furnishing line in its portfolio in the year 2015. It operated through a central warehouse facility (measuring 25,000 sq ft appx.) from where it used to ship its products to different markets across the country through a network of logistical tie-ups.

It is believed that Fashionara faced a heavy cash crunch and failed to attract funding. In an industry where competition is already intense with the presence of players like Flipkart, Amazon, Myntra, Jabong etc, Fashionara resorted to flash sales and deep discounting that left deep cuts in its pockets.

It was hard to see how was Fashionara was different from its competitors or in terms of its offerings. Clearly, there was a lack of innovation or any strong USP. Nothing appeared wrong with the basic business model but competition in retail e-commerce is just way too hot to get away with just the basic

Input Sources: [(4), (5)]

Pets.com

Established in 1998 and headquartered in San Francisco, Pets.com was an online retail company offering pet food and accessories over the internet. That was almost 20 years back from now; at the peak of the dot-com boom. Pets.com was an interesting concept for its time. In a lifespan of fewer than three years, the company was fiercely competitive and seemed to have acquired a strong growth trajectory. It acquired one of its rivals (petstore.com); it went public (raised about $80 million) and it spent millions on marketing campaigns. Interestingly, Amazon had a 54% ownership stake in the company. In November 2000, the company opted for liquidation.

Many dot-com players not only survived the IT bubble burst of the early 2Ks but also managed to grow after the market stabilised. One such prime example is Amazon. Pets.com could have done much better in managing the affairs of the company and quite a few right things at its inception. The key problem area with Pets.com was its lack of market research and analytics.

Although Pets.com revolved around an innovative concept it seems to have failed to accurately define its customers and market segments which resulted in misdirected promotional efforts and eventually hurting the company in achieving its anticipated sales figures

Input Sources: [(6), (7), (8)]

If we observe carefully, we can see that in all of the three aforesaid cases, the core problem area was in the business planning stage. These companies did not focus enough on understanding the product requirements, customers and market segments, competition and on developing a strong USP. And the rest is history. It is always a good idea to talk to a professional startup business consultant to discuss and brainstorm a startup business plan before jumping into action.

To learn more about business planning and business basics, click here How to make a business plan and Basics before starting a business