India’s unicorn story may have slowed down and a large number of start-ups may be freezing in the funding winter, but there is a good story unfolding as well. The number of startups that have shut shop fell by a whopping 73% in 2023 compared to 5,640 in the previous year.
According to data provided by Tracxn, only 1,514 startups have ended up in the `dead pool’ – euphemism for shutting down in the start-up world – in 2023. In 2021, the number was 4,424.
Some of the companies that ended in the dead pool in the past years include Zipgo, Niki, GramFactory, Crejo.Fun, FoodyBuddyCherryTin, FrontRow and Crater.Club among others.
Market experts believe that these are signs that the industry is maturing and access to capital continues. “The decline in startups closing shop is a testimony of a strong eco-system. There is an increase in access to capital, reducing risk of failures. Most importantly, founders are now able to avoid mistakes, which were being made 10 years ago, and build robust business models,” Shashank Randev, founder/venture capitalist of early-stage venture capital firm 100X VC, told FE.
According to Abhimanyu Bisht, operating partner of proptech venture fund Spyre, building a company through 2022-23 was ‘coming of age’ for entrepreneurs. Those who survived have only got stronger with better unit economics and robust business models. “The next two years will see startups being built by new ideology of founders, who have an established and long-term vision for their business with profitability hard-coded within, he added.
There was a 33% drop in funding for Indian startups in 2022 compared with 2021, a report by PwC said. In 2023, funding further declined across all stages by 73%.
“The year 2023 has been a slow year for startups on the funding front. Several factors like geopolitical tensions, inflation, rising interest rates and recession have contributed to a slow growth in the world’s third-largest startup ecosystem,” Nikhil Parmar, founder of Impactful Pitch and angel investor in over a dozen startups, said.
Now there is a wealth of precedents, data and guidance is available to aspiring entrepreneurs. Many founders today have either worked in other start-ups or are embarking on their second entrepreneurial journey. This accumulated experience has provided a solid foundation for new ventures, reducing the likelihood of failure.
“Additionally, platforms like Shark Tank have played a role in highlighting key focus areas for entrepreneurs, further contributing to their success,” Anisha Patnaik, founder and managing partner at LexStart Partners said.
Further, there has been an emphasis on governance, sustained growth, backed by wealth of information on consumer behaviour, market trends and competitive landscapes.