Startups that shut down in 2016

While 2015 saw launch of three to four startups a day, the second quarter of 2016 witnessed a lot of layoffs and shutdowns. Lack of funds, plummeting sales and rising competition were the major seasons for the shutdowns. Here are the startups that shut their shops in 2016.

TinyOwl – Food-ordering firm TinyOwl shut down its operations in May in all cities where it was operational except Mumbai. The move was, however, said to be temporary as the company wanted to re-brand itself and return with a better product.

Dazo – an app based service that curated and delivered meals, has suddenly shut down its operations in October this year. Several food delivery startups have taken a hit in 2016 primarily because they were struggling to raise fresh funds of funding and do not have money to sustain operations beyond a few months. 

PepperTap – On demand grocery delivery startup PepperTap rolled back its consumer centric app in April 2016. The move to shut down its operations came due to pressure from rivals including Grofers and BigBasket, which raised substantial funding. It had also acquired another budding hyperlocal grocery marketplace, Jiffstore, but all were in vain.

Fashionara – Bangalore based company closed its business in May 2016. It scaled business in apparel, accessories and footwear segment. Unsuccessful attempts to raise money or find buyers were forcing some of the fashion portals which had resorted to deep discounting to lure customers but were confronted with a cash crunch to close or scale back their operations.

Purple Squirrel – An EdTech financial startup, backed by Matrix, closed down business in 2016. The Mumbai based startup was launched to connect students with industry leaders and big companies for industrial exposure and training. However, it was forced to shut down due to continuously dipping sales and increasing cash burn.

AskMe – The consumer internet search platform shut down in August. The shutdown left about 4000 of its employees jobless. A variety of reasons, from weak technology to aggressive acquisitions, are said to be responsible for the online retailer’s failure.

Zupermeal – This startup allowed users to pre-order food from nearby restaurants. It closed its operations in May after just eight months of raising seed funds from the celebrity chief Sanjeev Kapoor. It had raised an undisclosed amount from overseas investors in October 2015.

AUTOnCAB – Gurgaon based autorickshaw booking app AUTOnCAB has shut down its operations owing to stiff competition from its heavily funded rivals. The company reportedly was in talks to raise fresh funding for a long time but failed to seal a deal.

GrocShop - The Mumbai based startup offered grocery shopping from the comfort of homes or offices at competitive costs. It reportedly failed to find a profitable growth model in a segment which was otherwise attracting investors in droves.

FranklyMe – It was a micro-blogging website launched in 2014, with the premise of letting people expresses themselves through videos. It has raised $600k seed funding from Matrix partners. Despite the fact that it has been a well-funded company, it failed to capture the market attention and closed down all operations in February 2016.

Disadvantages of Cashless Payments

In continuation of last article, here are the disadvantages of Cashless Payments:-

Higher Risk of Identity Theft – Since we are culturally not attuned to digital transactions, even well educated people run the risk of falling into phishing traps. With the rising incidence of online fraud, the risk of hacking will only grow as more people hop on to the digital platform. Besides, the latest move by the government to remove the two-factor authentication process for online transactions up to 2,000 will not help.

Losing Phone – Since one will be dependent on phone for all transactions on the move, losing it can prove to be a double whammy. It can not only make susceptible to identify theft, but one could also be rendered helpless in the absence of physical cash or any other payment option. This can be especially problematic if you are travelling abroad or in smaller towns or villages with lack of banking infrastructure or other payment options.

Another drawback is that you need to keep your phone constantly charged. If the phone dies on you, you will be stranded, particularly if you are in the middle of an important purchase or dealing with an emergency.

Difficult for Tech Unsavvy – India has a low Internet penetration of 34.8%, and only 26.3% of all mobile phone users have a smartphone. The digital medium may prove a challenge for the tech unfriendly people, who will need more time to adapt or the availability of other options to conduct transactions.

Overspending – While there is no denying the convenience of card or mobile wallet transactions, it could open a spending trap for an unsuspecting population. Using cash instead of cards or mobile wallets acts as a natural bulwark for people who find it difficult to control their spending.

Besides, a high penetration of the digital payment system is contingent on the fact that the same amount of cash does not come back into circulation. If it does, people are more likely to switch back to the former ease of using cash as it is a habit that they may find difficult to break.

Advantages of Cashless Payments

As the country moves towards a cashless environment after demonetization, the initial awe and confusion have given way to a flurry of concerns. To incentivize the move towards a cashless economy, the government has come up with a rash of discounts and freebies on digital transactions. There are certain advantages of Cashless Payments.

Convenience – The ease of conducting financial transactions is probably the biggest motivator to go digital. You will no longer need to carry wads of cash, plastic cards, or even queue up to ATM withdrawals. It’s also a safer and easier spending option when you are travelling. It will be especially useful in case of emergencies. One have the freedom of transact whenever and wherever one want.

Discounts – The recent waiver of service tax on card transactions up to Rs 2,000 is one of the incentives provided by the government to promote digital transactions. This has been followed by a series of cuts and freebies. It’s a good time to increase your savings if you take advantage of these. For instance, 0.75% discount on digital purchase of fuel means that the petrol price in Delhi at Rs 63.47/l can be brought down to Rs 62.99/l with digital payment.

Similarly, saving on rail tickets, highway toll or purchase of insurance can help cut your costs. Add to these the cashback offers and discounts offered by mobile wallets like Paytm, as well as the Reward points and loyalty benefits on existing credit and store cards, and it could help improve your cash flow marginally.

Tracking Spends – If all transactions are on record, it will be very easy for people to keep track of their spending. It will also help while filing income tax returns and in case of a scrutiny, people will find it easy to explain their spends. Besides the tax, it will have a good impact on budgeting.

Budget Discipline – Various apps and tools will help people analyze their spending patterns and throw up good insights over a couple of years. Controlled spending could also result in higher investing. If the same amount of cash does not flow back into circulation and people continue to use mobile wallets and cards, it is likely to bring down the latte factor. There is a lesser chance of budgetary leaks and unaccounted for spends sneaking into your budget at the end of the month.

Lower Risk – If stolen, it is easy to block a credit card or mobile wallet remotely, but it is impossible to get your cash back. This is especially true while travelling, especially abroad, where loss of cash can cause great inconvenience. Besides, the futuristic cards evolve to use Biometric ID, it can be extremely difficult to copy, making it a very safe option.

Small Gains – It may not seem like much of an advantage, but being cashless makes it easy to ward off borrowers. Another plus is that you can pay the exact amount without worrying about not having change or getting it back from shopkeepers.

Sectors badly hit due to Demonetization

In a bid to promote cashless and digital economy, PM Narendra Modi announced demonetization on November 08. Modi scrapped old Rs 500 and Rs 1000 notes, saying this will crack a whip on black money hoarders and encourage more and more Indians to open bank accounts. Since Demonetization, banks have received at least Rs 6 Trillion and this figure is likely to go up. Many sectors were hit as people faced cash crunch and did not have new notes to spend. Sales of daily and luxury items were also hit due to Demonetization. Here are few sectors that have been impacted due to note ban.

E-commerce – The sales of e-commerce companies came down to 60-70% and there was a significant drop in orders, especially the cash-on-delivery ones. Despite rolling out multiple offers, the online marketplaces have seen a drop of sales costing as much as Rs 10 Lakh too.

Smartphone Makers – Mobile phone makers and sellers are facing a tough time as people have no cash to buy phones. Many have delayed their phone launches due to demonetization.

Automobiles – In November, utility vehicles sales are likely to go down 40-50%. Sales of two wheelers and luxury cars are the worst hit.

Travel and eating out – Travel sector has been hit as foreign travellers coming in are in a fix over note ban. Even Indians are not opting to travel overseas, due to demonetization. Restaurant reservations in Delhi – NCR have gone down by 28%.

Movie Theatres – Although people have started booking tickets online, even the entertainment faced the brunt of demonetization. Many of the movie halls saw a drop in viewership when demonetization was announced.