What caused the downfall of once-mighty startups that have now gone into oblivion? What are the lessons we can learn from their story? The key points to building a powerful business capable of surviving in the toughest of times beyond the allure of unicorn valuation. What makes India’s Startup Valuations absurd?

What’s a Unicorn, and what’s the story behind it?

UNICORN: A company that has a net market valuation of at least 1 billion dollars(8300 Crores in INR) is considered a unicorn. It’s very rare to see unicorns and so it is to make a billion-dollar company that’s why if a company achieves a market cap of 1 billion dollars it is called a Unicorn because it is very tough to make a billion-dollar company similar to seeing a unicorn in your lifetime.

Remember the online shopping website shopclues.com, the online marketplace that promised its users a hefty discount and breathtaking deals? Or maybe you remember Quikr, the platform that promised to connect buyers and sellers across India, and it did as well. One recent example I can recall is of Paytm and how its inflated IPO created chaos among early investors. And snapdeal.com, once promoted by Bollywood superstar Aamir Khan is now running Google ads on their platform to earn a fortune. These all were once a billion-dollar company.

These companies were not once a brand among the masses but enjoyed a unicorn status and their founders were considered role models and enjoyed celebrity-styled fame. These companies were also given a huge valuation and were considered a billion-dollar startup reaching a valuation of over a billion dollars. But the question is where are these brands today?

The dark reality of these Indian startups is that these once-promising companies have faded from the limelight, their mighty and strange valuations are now degraded, their billion-dollar status revoked and now they are in the growing list of “Fallen Unicorns“.

“Fallen Unicorns” is a phenomenon that highlights the inherent volatility of the startup world in India and the challenges of sustaining high valuations in a dynamic and competitive market where you already have direct and indirect competition from a well-established brand.

For example, when Flipkart was created in India in early 2007, it was not a unique idea it was just a blueprint copy of Amazon.com, and initially, it did not get any competition and continued to grow its business but soon similar brands like snapdeal.com and Shopclues started to come into existence that resulted into customer diversification. Later when Amazon entered India in 2013 it captured the Indian market due to its trust and originality.

While Flipkart surely enjoys the status of being India’s biggest e-commerce company, it is still yet to be profitable and a 77% stake was purchased by the American giant Walmart in 2018. Amazon on the other hand is closely investing a lot in India and inching close to replacing Flipkart as India’s biggest e-commerce company. The valuation of Amazon gives it a huge benefit over other e-commerce companies that require additional investments to keep running.

If you want to be a successful entrepreneur focus on originality and making your product useful. Aiming for a billion-dollar status will not get you anywhere but if you make a usable product it surely will take off.

Few case studies of failed Unicorn Startups.

QUIKR

Quickr was once a leading online classifieds platform connecting sellers and buyers in various domains, The company achieved unicorn status in 2015, with a net market valuation of $1.5 billion. However, the company faced intense competition from other players in the market like Car Trade, OLX, and Sulekha, coupled with challenges in monetization and user engagement. As a result, Quikr’s valuation has reportedly dropped significantly, highlighting the importance of adapting to changing market dynamics and evolving consumer preferences in the business world especially for startups.

SHOPCLUES

Shopclues came up with an idea to cater to India’s price-sensitive customers, and it worked in India. In India price plays a major role in deciding whether the customer will purchase a product or not. From the customer’s point of view value comes later. Shopclues highly cashed on it and it gained the status of a unicorn in 2016 with a valuation of $1.1 billion. However, the company struggled to compete with major e-commerce giants like Amazon and Flipkart and lost much of its user base to it.

The company faced challenges in scaling, logistics, and discounted deals due to Amazon and Flipkart’s highly invested and supported business models. The company lost its core customers and its valuation dropped below the unicorn threshold highlighting the difficulties faced by smaller companies in a highly competitive market where big giants are ranging up with all of it’s efforts.

SNAPDEAL.COM

Snapdeal was created 3 years after the launch of Flipkart in India. The ecommerce sector of India was booming and the founders found a shorter way to earn a fortune. They copied the same blueprint of Flipkart and tried to cash upon it and somehow succeded. But the later entry of the original player Amazon in the Indian market with their huge capital outplayed Snapdeal and with time the once household name Snapdeal faded away into oblivion.

What went wrong with Snapdeal

• They could not cash upon India’s growing electronics market.
• Their rivals like Amazon(Apple products) and Flipkart(Android phones) managed to seal the deal for selling the latest tech gadgets.
• Unaccepted comments by the founder of Snapchat against India and people mistaking it for Snapdeal led to a fall in reviews for Snapdeal on Play Store resulting in throwing the Snapdeal app below in the search results.
• Unfortunately, a comment by Aamir Khan their brand ambassador related to intolerance in India led to their user boycotting the platform and eventually shifting to Flipkart and Amazon.
• Unfortunately, this promising company could never recover from these setbacks.

InMobi

InMobi became India’s first unicorn in 2011, reaching a valuation of $1 billion. It is a mobile advertising and marketing platform. While the company continues to evolve, the dynamics of the ad industry changed severely due to the introduction of many marketing agencies their core product placement was challenged which resulted in their valuation fluctuating over the years.

Why are these companies called Unicorn despite not making a profit?

The reason is the money invested in these companies, leads to the calculation of the overall market cap of the company. The money invested in a company by several methods is considered how much the company will be worth. It leads to finalizing the overall worth of the company. One more reason why these companies boast so much about being a billion-dollar company is they want to show their users they are worth their penny. Not all users look after their balance sheet while making an order from them.

Getting funding just because of some quick growth makes India’s Startup Valuations completely absurd. Paytm did not earn anything and had to launch an IPO with a very high valuation, but when launched the IPO failed.

Lessons learned

• Original (Amazon.com) will always be worth more than a copy (Flipkart and Snapdeal).
• Don’t work on your product because you want to be a billionaire, instead make your product better and usable and put forward the trust and security of your users with ultimate priority.
• It will take time, a lot of time but eventually, you will be successful.
• Protect your product. Snapdeal could not protect its product from unintended negative marketing due to its brand ambassador.

The key points for building a robust business

• Focus on your product and its placements.
• Study your competitors very well. I mean very- very well.
• Dedicate some time to researching the future growth potential.
• Don’t copy others you will only make it hard for yourself down the line
• If you are not passionate and want to become a billionaire quickly don’t do it.
• You want to do it because it is fascinating and want to achieve a billion-dollar status as soon as possible. Don’t!!
• Do it because it thrills you and you will continue to make your product even better during certain setbacks.
• Do not make any founder your role model.

What is absurd about India’s Startup Valuations and why many startups could not perform well?

The startup ecosystem differs from place to place and it’s not just about getting huge funding from a big company but also about making a robust product with high caliber. India’s Startup Valuations are absurd and if you compare it with other country’s startup ecosystems it seems absolutely corrupt and misleading.

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