India’s startup scene is booming, but with rapid growth comes frequent failures. A 2016 IBM-Oxford study found that 90% of Indian startups fail within five years. Many of these collapses aren’t due to bad ideas but avoidable errors. Below are five critical startup mistakes every Indian founder should watch for, with real examples and lessons from those who faced significant challenges.
1. Growth Without Financial Discipline
Startups chasing scale often burn through investor money without sustainable models. Snapdeal is a prime example. Backed by SoftBank, it spent extensively on marketing and expansion. At its peak, it had $500 million in reserves but still struggled when sales plateaued and regulations limited discounting. This led to difficult decisions like mass layoffs and a failed merger attempt.
PepperTap, yet another grocery delivery startup, expanded fast as well but had operational cost issues. With increasing losses, the company was shut down by 2016. Both the cases refer to managing cash flow, burn rate, and customer acquisition cost.
2. Governance Challenges and Financial Reporting Issues
Accurate financial reporting is necessary to maintain investor confidence. In 2023, GoMechanic acknowledged inconsistencies in its revenue reporting. An independent audit found disparities, leading to funding setbacks and staff reductions.
Financial governance issues also contributed to BharatPe’s difficult period. Claims of operational irregularities led to changes in leadership. These incidents demonstrate the importance of transparent processes and strong internal controls.
3. Ignoring Legal and Regulatory Compliance
Trouble with the law can arrive unannounced. In 2017, the Stayzilla founder was temporarily arrested following a scuffle with a supplier, illustrating how business disputes can get out of hand if not treated with caution. The episode was a lesson in the importance of proper legal procedure during shutdowns.
Zebpay, the top crypto exchange, was compelled to close its shop in India after an RBI notice curbing banks’ access to crypto companies was issued. Without a payment infrastructure, the business became unviable. Startups that run in regulated business domains always stand the risk of policy changes.
4. Workplace Culture and Leadership Conduct
Housing.com’s former CEO Rahul Yadav received widespread attention for his outspoken style and unconventional leadership. Public disagreements with investors and a highly visible management style led to his exit, affecting the company’s momentum.
At BharatPe, leadership approach and workplace culture reportedly led to internal challenges. These examples show that founders play a key role in shaping company culture. Effective leadership requires humility, communication, and team alignment.
5. Maintaining Customer Trust and Ethical Marketing
Following an investigation, some of WhiteHat Jr.’s advertising materials were taken down after receiving public criticism. The company’s public relations approach changed as a result of backlash against lawsuits that targeted critics.
Byju’s sales strategies were also questioned when reports of aggressive marketing emerged. This led to government regulations to ensure equity in edtech sales. Startups are reminded by these incidents to strike a balance between growth and transparency and ethics.
Startup Mistakes: Lessons From India’s Startup Landscape
From Snapdeal to GoMechanic, India’s startup landscape offers many lessons. Founders must balance ambition with responsibility. Financial prudence, governance, compliance, strong team culture, and customer trust form the foundation of long-term success
Also Read: Indian Startups Secure $102.93 Million in Weekly Funding Boost.
