Navigating the Turbulence: A Recap of Indian Startups and Shutdowns in 2023

26 Dec 2023 , 12:51 PM

As we reflect on the close of 2022, subtle signs of distress in the Indian startup ecosystem hinted at a shift. The shutdowns of eight startups during that year, initially perceived as a return to market sanity post the funding boom, took on new significance in 2023. This year witnessed a wave of closures, impacting both smaller players like edtech platform DUX Education and crypto platform WeTrade, as well as high-profile ventures like crypto platform Pillow and edtech startup FrontRow.

Investors, cautious in 2022, found themselves re-evaluating strategies in 2023. Global interest rate hikes led to drying funding taps, creating a challenging environment for startups reliant on external funding. The blow was intensified by stringent government regulations, including heavy taxation on profits and GST levies, particularly affecting the crypto and real money gaming sectors.

Predicting a continuation of the trend in 2024, industry experts anticipate the emergence of startups with robust financial metrics. However, 2023 will be remembered as a year dominated by shutdowns, prompting Inc42 to compile a list of Indian startups bidding farewell to the ecosystem.

Notable Shutdowns in 2023:

ZestMoney:

• Valued at $450 million in September 2021.
• Failed turnaround plan (ZestMoney 2.0) following the collapse of an acquisition deal with PhonePe.
• Wound down operations due to scrutiny from the Reserve Bank of India (RBI) on buy now pay later (BNPL) businesses.

Online Real Money Gaming:

• Regulatory challenges, including a sudden 28% GST on online real money gaming from October 1.
• Shutdowns of companies like Quizy, MPL-backed Striker, and operational halts like Fantok.
• Pillow, a crypto investing platform, also shut down due to difficult regulatory conditions.

Anar (B2B Startup) and FrontRow (Edtech):

• Anar shut down in November due to continuous changes in its business model.
• FrontRow returned unused capital, acknowledging overestimation of growth potential in the post-pandemic world.

GoMechanic:

• Raised over $50 million but faced downfall due to overstated revenues and fund diversion.
• Investors demand a more thorough due diligence process to prevent similar issues.

Mojocare (Healthcare Startup):

• Found overstating revenues to achieve growth targets.
• Investors demanded the return of funds.

While investors foresee continued startup closures in 2024, the reasons are expected to differ. The current challenge is attributed to limited access to capital, ultimately paving the way for the construction of higher-quality startups. Despite the setbacks, the Indian startup ecosystem remains the third-largest globally, with over $8 billion raised in 2023 and an impressive $140 billion since 2015, highlighting its immense potential.