Startups That Failed to Rise in the Indian Economy in 2023
In 2023, a number of startups faced tough times and were unable to survive in the competitive business landscape. This article takes a closer look at the top 5 startups that encountered challenges and ultimately closed their doors during the year.
We will explore the reasons behind their failures and extract valuable lessons from their journeys. These stories serve as a reminder that in the ever-changing world of startups, success is never guaranteed, and setbacks can offer opportunities for growth and learning.
1. FrontRow
| Total Funding Amount | $ 18 MN |
| Valuation | $ 49.9 MN |
| Founding Year | 2012 |
| Reason for Failure | No Product Market Fit |
FrontRow, an ed-tech startup backed by Lightspeed, has decided to cease operations in 2023 after realizing that the market for its services in creative arts and sports education was not as substantial as expected.
Despite amassing over 1 million app downloads, the company struggled to find a strong demand for its celebrity-taught classes in fields like cricket, comedy, and music. The founders, Ishaan Preet Singh, Mikhil Raj, and Shubhadit Sharma, acknowledged that around 90% of startups face challenges, and they don't harbor regrets about their decision.
The pandemic initially provided an opportunity for growth, as people had more leisure time, but it ultimately revealed the limited market potential. After significant layoffs in October, FrontRow's workforce dwindled from 350 employees to just 30.
The startup had raised approximately $18 million in funding, with a valuation of $49.9 million in October 2021. The company has now ceased operations, with a potential 20% return on capital. The co-founder emphasized that startup success is elusive, with only a small percentage finding lasting traction.
2. DUX Education
| Total Funding Amount | $ 271 K |
| Valuation | $ 1.4 MN |
| Founding Year | 2020 |
| Reason for Failure | High Competition and No Demand |
DUX Education was an Indian after-school tutoring platform for K-12 students. They offered small class sizes with a maximum of 10 students to provide personalized attention and followed the school syllabus, preparing students for tests and exams.
They emphasized two-way communication and concept building, using data for adaptive learning. Monthly feedback sessions and parent-teacher meetings kept parents informed about their child's progress.
However, DUX Education faced challenges that led to its downfall. Firstly, a lack of funding hindered its growth and innovation. Secondly, the demand for ed-tech products decreased after the pandemic, impacting their user base.
Despite their quality services and rigorous tutor selection process, these financial and market challenges proved insurmountable, ultimately causing DUX Education to close its doors.
3. Friyey
| Total Funding Amount | $ 31.9 K |
| Valuation | $ 407 K |
| Founding Year | 2019 |
| Reason for Failure | No long-term Clients |
Friyey, a Pune-based co-working space platform, has ceased operations due to financial constraints amidst dwindling demand. Founded in 2019, it offered shared workspaces in partnership with restaurants, pubs, and clubs during their morning hours. However, the company struggled to secure long-term clients because most office workers typically worked until at least 7 PM, causing difficulties in scaling up.
The CEO, Yogesh Thore, announced the closure on LinkedIn, expressing gratitude to customers, investors, and team members. Friyey had garnered over 500 restaurant partners and served more than 24,000 remote workers.
Despite appearing on Shark Tank India and receiving seed funding in 2020, the startup couldn't weather the funding challenges. The Indian startup ecosystem faced a funding decline, making it harder for Friyey to sustain its unique business model. Ultimately, Friyey's inability to attract long-term clients and secure sufficient funding led to its closure after four years of operation.
4. Mojocare
| Total Funding Amount | $ 23.7 MN |
| Valuation | $ 67.1 MN |
| Founding Year | 2020 |
| Reason for Failure | Fraudulent Practices |
Mojocare, an online health platform addressing issues like hair, weight, and sexual wellness, initially succeeded but eventually failed due to fraudulent practices and financial irregularities. The founders admitted to fudging numbers, leading to a forensic audit that uncovered financial irregularities and unsustainable operations.
They had inflated their revenue by selling products to relatives' companies and re-entering them into inventory. This deceit was driven by a focus on Gross Merchandise Value (GMV), a vanity metric in e-commerce. High GMV looks impressive but doesn't guarantee profitability, as it often requires increased spending on marketing.
Mojocare, competing in sexual wellness, reported massive revenue growth in FY22, but its expenses surged, resulting in a significant net loss. The company's fall was due to its pursuit of misleading metric and unethical financial practices, leading to its closure and the termination of 150 employees.
5. Fipola
| Total Funding Amount | $ 12.8 MN |
| Valuation | $ 74 MN |
| Founding Year | 2016 |
| Reason for Failure | Unable to Raise Funds |
Fipola was a meat processing and retail company known for its top-notch meat products, sourced directly from farmers, and maintaining rigorous hygiene standards. They offered a diverse range of meats, from free-range chicken to seafood, both online and in stores.
Regrettably, Fipola faced challenges that led to its closure. Despite a strong start, they struggled to secure the necessary funding to expand their operations. This financial constraint hindered their growth and ability to meet increasing demand. Moreover, the highly competitive nature of the meat processing industry made it tough for Fipola to establish a solid position in the market.
Ultimately, due to financial limitations and stiff competition, Fipola had to shut down its operations. Despite their commitment to quality and direct sourcing, these obstacles proved too difficult to overcome, resulting in the company's closure.