MamaEarth is falling, Zepto is deceiving, Snapdeal is forgotten, Byju’s self-sabotaged, and Ola is flaming-just like their own vehicles. Are they redefining the future or writing the ultimate “How not to do Business” Playbook?
But what’s typical between these start-ups? Disillusionment. In a world obsessed with tales of overnight success, start-ups have become the ultimate “Heroes” of our times. Founders are celebrated as visionaries; their companies are hailed as disruptors. But behind the glossy headlines and flashy valuations lies a far darker narrative, one that is backed by evidence. According to recent data by Exploding Topics, around 45% of start-ups don’t survive the fifth year (Exploding Topics), whereas another report states that 90% of Indian start-ups fail within the first 5 years (Counsel India). These sobering numbers highlight the harsh reality that many of these so-called heroes struggle to survive in the competitive market.
In this article, we uncover the layers of hype of unsettling truths of modern start-up culture. What we find might challenge everything you believe about the ventures of today’s business world.
The Start-up Hype Culture
According to Daily Brief, once celebrated for its eco-friendly ethos, Mama Earth is now struggling with ₹19 crore losses. From preaching sustainability to piling up unsold stock, the brand proves that saving the planet is easier said than done. The founders leveraged clever PR strategies to boast about their new-age brand and “repetitive” product lines, capturing Gen Z’s attention as the brand’s go-to “sustainable” choice.
However, after launching 122 products (double the industry average of 61) (Daily Brief), Mama Earth bit off more than it could chew. Distributors were overwhelmed with unsold goods, confusing consumers of what the brand stood for. Mama Earth tried to be a jack of all trades and became a master of none. From their niche onion shampoo to whatnot! Adding to its woes, 35-42% of its revenue goes to influencer partnerships and digital ads, far above the industry average.
The “V” Game
Regarding start-ups, the headline-grabbing news is the “V” game: Valuation, Valuation, Valuation! High valuations make start-ups more appealing to venture capitalists. Founders prioritize raising funds over building a viable and profitable business model. They chase expansion strategies rather than improving their business model like WeWork, which focuses on global expansion without a sustainable business model. They aggressively spend on hiring and scaling without ensuring steady revenue growth, creating a high burn rate. We believe start-ups chase valuations to create a perception of success and attract more funding.
Consequently, Byjus went from teaching students algebra to giving start-ups a crash course in downfall. Financial mismanagement, reckless decisions, inconsistent funding, mounting debts, data breaches, false advertising, and pushy sales tactics turned this unicorn into fallout. Byjus laid off over 1,000 employees in June 2023, another 400 in August, and slashed 500 more jobs by April 2024 (IIPA), serving as a prime example of a masterclass no one asked for but everyone’s learning from.
Many founders aim for an early exit after tasting success, driven by an “I wanted to start something new” mindset. Is it because the skills it takes to run a company are different from the skills it takes to start one? This leaves employees worried about their future and struggling to adapt to the new culture, leading to dissatisfaction and burnout, as seen in the case of SnapDeal. Once valued at $6.5 billion (ET), Snapdeal moved away from the spotlight, and people don’t even remember it! From taking immense pride in its investor base of Ratan Tata, SoftBank, eBay, and Nexus Venture, Snapdeal fell hard. The company focused too much on over-expanding its portfolio and found itself on the brink of closure due to the unsuccessful acquisition of 11 companies, including FreeCharge, only to sell it at a loss of $340 million (ET). India’s second-largest e-commerce became a front-row audience of boardroom battles, investor drama, and a botched-up Flipkart merger. A “snapped deal” between Flipkart and Snapdeal hurt the investors after Flipkart marked down the company’s valuation by 85% ($950 million) (Quartz).
Toxic Work Culture: When Hustle Becomes Toxic
Behind Zepto’s CEO’s virality and charm lies a troubling truth about the company’s toxic culture. As per an anonymous Reddit post, the employees face 2 a.m. meetings since “The CEO cannot wake up early” and endure 14 hrs per day of work, as per Times Of India. The employee also mentioned fake PR campaigns and canceled yearly appraisals, highlighting the company’s toxic environment. Zepto also uses manipulative checkout practices (charging higher prices from customers with expensive smartphones above Rs. 30,000), including dark patterns like hidden charges and exploitative prompts like “No, I don’t want to save” for “Zepto Pass” add to customer distrust.
Missing the Mark: Start-ups without PMF
In start-up culture, there’s a widespread misconception that launching a start-up is a fast track to fame and fortune, which lures young aspirants to start a start-up. They don’t realize that a business isn’t built on buzz alone, it is made from recurring orders. It is about focusing on being product-market fit (PMF). A low-quality product doesn’t attract customers. Companies that fail to deliver quality and transparency quickly lose the trust of their consumers. Similar to OLA, whose motto seems to be “If there is no complaint registered, there is no complaint.” The company has faced significant backlash for allegedly resolving 99.1% of consumer complaints by deleting or marking them as resolved without addressing the underlying issues (Economic Times). Concerns about vehicle safety have also grown, with multiple incidents of OLA vehicles catching fire, which raises concerns about the company’s transparency and accountability.
From IPO Disaster to Regulatory Fallout
Paytm’s big stock market debut in 2021 turned into a disaster when its shares crashed by over 27% on the first day, wiping out ₹1.17 lakh crore of investors’ wealth in just 27 months. (CNBC). Paytm Payments Bank faced regulatory heat from the RBI over data storage issues, improper verification, and allegations of sharing customer data with Chinese entities. Barred from onboarding new customers, it suffered a significant blow to its credibility, exposing the risks of poor compliance in India’s payment banking sector.
With fuss over products, PR over profits, and chaos over clarity, it’s no wonder most start-ups fail rather than take off. The modern start-up frenzy is a “gold rush for fool’s gold,” where entrepreneurs chase valuations and fame only to realize they’ve sacrificed innovation and sustainability for short-term gains. Rabbits (start-ups) are quick and agile and aim for rapid growth but make high-risk decisions, leading to poor strategies. Meanwhile, turtles (traditional businesses) are steady but less prone to failure. An excessive number of start-ups are trying to mint the same idea. Ultimately, all the bubbles burst!
Written By- Dr. Jinal Sameer Shah, Nandan Sanghvi & Mansi Bharani
