Those businesses that associate with today’s technology are silent killers. A very large percent of these startups has been taken over by their much larger counterparts or they burn to the ground. Yes, the reality is that harsh and intimidating.
These sort of dead-ends is the result of poor planning as well as mismanagement. So how do we go about solving this problem?
12 acquisitions in 7 years
The e-commerce website Snapdeal, one of the largest in India, has made about an approximate of 12 acquisitions. This has occurred over the span of the past seven years, all this data verified by Crunchbase, the global data platform.
Very similarly, the electronic e-commerce website, Letsbuy, as well as Appiterate, mobile marketing automation provider, were acquired by Flipkart. Flipkart is another one of the biggest e-commerce websites in India.
Another example, a start by the name of Urbanspoon, a US-based food ordering app, by the very well-known Zomato.
Why do startups get shut down?
But even with all these acquisitions, why do startups get shut down? The answer to this question is due to the strategic objective. So when a company is bought, the decision is to let it grow or die. And all this depends on the foresight of an entrepreneur.
Possession from a growth perception can be de-cluttered under four main categories:
- to kill the competition
- to acquire technology
- to acquire talent
- to acquire business or domain expertise.
Acquiring for technology is possibly among the most widespread acquisition deal types where technology is incorporated into a variety of business processes such as logistics, finance, marketing, product discovery etc.
Research and development division
Another example; reasonably priced, online fashion marketplace Voonik was backed by Sequoia India and has already acquired half-a-dozen start-ups in the span of the past four years. Its acquisition strategy spans across all kinds of acquisitions. In the month of August 2015, it acquired Trialkart – a virtual dressing room with image intelligence capabilities that became part of Voonik’s research and development division.
In the same way, it acquired online salon-booking app Styl for its talent, who had developed a huge user interface and user experience design. But in both the cases there was absolutely no value in the product or business for Voonik, that’s why they were shut down.
From a broader perspective
Looking at it from a broader perspective, while Jabong and eBay India continue to exist as separate brands under the Flipkart Group, their days seem to be numbered because, from a cost-benefit analysis perspective, Jabong and eBay India won’t be able to scale up to the level of Myntra and Flipkart respectively.
So unless Jabong and eBay India had a strong brand recall (which they don’t), the businesses would’ve been kept alive.
Apart from brand recall, the next major point is scalability. This is a system, which has the capability to perform and cope with the increased workload as well as the pressure.
So, shutting down start-ups aren’t just poor planning decisions. There’s more than what meets the eye and the key to having a successful startup is the right planning.