India’s startup ecosystem has witnessed rapid growth, producing many billion-dollar unicorns. However, valuation alone doesn’t guarantee success. Several Indian startups, despite reaching massive valuations, collapsed due to poor financial management, unsustainable business models, or external market conditions.
This list explores nine high-profile Indian startups that once thrived but ultimately failed, offering key lessons for entrepreneurs looking to build sustainable businesses.
1. Byju’s – From Ed-Tech Giant to Financial Crisis
Founded in 2011 by Byju Raveendran, Byju’s revolutionized online education in India. With a massive push in digital learning, strong investor backing, and acquisitions of companies like Aakash Institute and WhiteHat Jr., Byju’s became India’s most valued ed-tech startup at $22 billion in 2022.
What Went Wrong?
- Aggressive expansion and expensive acquisitions drained financial resources.
- Reports of misleading sales tactics and high student loan burdens damaged credibility.
- A lack of transparent financial reporting led to investor distrust.
- Funding winter and revenue decline post-pandemic worsened its financial situation.
Lessons:
- Sustainable business growth is more important than fast expansion.
- Transparency and trust with customers and investors are crucial.
- Businesses must have strong financial discipline to survive downturns.
2. Hike Messenger – The Failed Attempt to Beat WhatsApp
Launched in 2012 by Kavin Bharti Mittal, Hike aimed to create an Indian alternative to WhatsApp. Backed by SoftBank and Tencent, it became a unicorn in 2016, valued at $1.4 billion.
What Went Wrong?
- Failure to differentiate itself from WhatsApp.
- Despite adding stickers, privacy features, and a payments system, it couldn’t retain users.
- High operational costs and no strong monetization model led to losses.
- In 2021, Hike Messenger shut down.
Lessons:
- Competing against global tech giants requires a unique value proposition.
- User acquisition is important, but revenue generation is key for survival.
- Scaling without profitability is risky.
3. Droom – The Overhyped Automobile Marketplace
Founded in 2014 by Sandeep Aggarwal, Droom aimed to revolutionize the online automobile marketplace in India. It reached a $1.2 billion valuation in 2021, riding the e-commerce wave.
What Went Wrong?
- Despite market growth, profitability remained elusive.
- The company struggled with trust issues in online vehicle transactions.
- Failed IPO plans in 2022 signaled deeper financial troubles.
- Competition from OLX and Cars24 pushed Droom out of the race.
Lessons:
- Profitability and strong business fundamentals matter more than high valuation.
- Consumer trust is crucial in online transactions.
- Startups must adapt to market shifts and competition.
4. Dunzo – Hyperlocal Delivery Gone Wrong
Founded in 2014, Dunzo gained massive popularity for quick deliveries. Google-backed investments fueled its expansion, making it a leader in the hyperlocal delivery space.
What Went Wrong?
- Over-expansion without profitability.
- Cash burn was too high, leading to unsustainable costs.
- Heavy competition from Swiggy Instamart and Zepto.
- Founder exits and massive layoffs in 2024 signaled an unstable future.
Lessons:
- A strong unit economics model is necessary for long-term sustainability.
- Funding should support profitability, not just growth.
- Operational efficiency is key in high-volume, low-margin businesses.
5. Koinex – When Government Policies Kill a Business
Launched in 2017, Koinex was India’s fastest-growing cryptocurrency exchange, attracting millions of users.
What Went Wrong?
- Regulatory uncertainty in India led to operational struggles.
- Banking restrictions made transactions nearly impossible.
- In 2019, Koinex shut down, citing legal challenges.
Lessons:
- Regulatory clarity is crucial before scaling a business.
- Government policies can make or break industries.
- Startups in sensitive sectors must plan for legal changes.
6. PepperTap – The Grocery Startup That Burned Too Fast
Founded in 2014, PepperTap aimed to be India’s Instacart, offering hyperlocal grocery deliveries. Backed by Sequoia Capital and Snapdeal, it raised $50 million and expanded aggressively.
What Went Wrong?
- Negative margins made operations unsustainable.
- Logistics costs exceeded revenue per order.
- Competition from BigBasket and Grofers crushed its market share.
- In 2016, PepperTap shut down due to mounting losses.
Lessons:
- Low-margin businesses must focus on scale and efficiency.
- Operational costs should not exceed revenue growth.
- Competing with well-funded rivals requires strategic differentiation.
7. RoomsTonite – The Hotel Startup That Faded Away
Founded in 2014, RoomsTonite aimed to be India’s last-minute hotel booking platform, competing with OYO and MakeMyTrip.
What Went Wrong?
- No strong differentiator from bigger competitors.
- High customer acquisition costs.
- Lack of scalability led to business closure in 2017.
Lessons:
- Niche ideas need long-term scalability.
- Branding and trust matter in the travel industry.
- Competing with established players requires innovation.
8. Dazo – The Food Startup That Couldn’t Survive
Founded in 2015, Dazo (formerly TapCibo) was one of India’s first curated food delivery platforms.
What Went Wrong?
- Thin profit margins in food delivery.
- Unable to compete with Zomato, Swiggy.
- Operations shut down within a year.
Lessons:
- Food delivery is a tough, high-competition market.
- Scalability and brand positioning matter in F&B startups.
- Pricing models should ensure sustainable profits.
9. Frankly – The Social Media Startup That Got Buried
Launched in 2013, Frankly aimed to be an Indian content-sharing platform, competing with global social networks.
What Went Wrong?
- Lack of a unique selling point.
- Couldn’t monetize its user base.
- Eventually shut down due to lack of funding.
Lessons:
- Monetization strategy must be clear from day one.
- Competing with giants requires a strong differentiator.
- Building a platform alone isn’t enough—revenue streams matter.
Final Takeaway for Entrepreneurs
What Can We Learn From These Failures?
- Valuation is NOT business success—profitability is.
- Expansion without financial discipline leads to collapse.
- Adaptability is key—markets and trends change rapidly.
- Customer trust, strong business models, and scalability matter.
Building a startup isn’t about hype—it’s about creating real, long-term value. Entrepreneurs should focus on sustainable business models, financial discipline, and smart market positioning to ensure success.
