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Anand Mahindra on why 90% of all startups fail

In a country where more than 90% of all startups fail within the first five years, many had no chance of surviving at all in the first place, says industrialist Anand Mahindra.

October 04, 2022 / 05:28 PM IST
Mahindra Group chief Anand Mahindra.

Mahindra Group chief Anand Mahindra.


In a country where more than 90% of all startups fail within the first five years, many had no chance of surviving at all in the first place, says industrialist Anand Mahindra, whose Mahindra Logistics is acquiring the troubled logistics tech unicorn Rivigo. Poor risk management and one-off circumstances are also to blame for the failure of many startups, Mahindra tweeted this afternoon, adding that despite these troubles, many struggling startups have viable business models and “good tech” on their side.

“Over 90% of all startups fail,” tweeted Anand Mahindra – his claim being backed by a 2017 IBM-sponsored study which stated that as many as 90 percent of Indian startups fail in the first five years.

“Many had no chance of survival in the first place. But many fail because of one-off circumstances or because of poor risk management,” Mahindra, 67, continued, adding: “Yet they had potentially viable models & good tech. That grey zone is a fertile field for large companies to plough.”

In talking about the “grey zone for large companies to plough,” the chairman of Mahindra Group was likely referring to the acquisition of startup Rivigo’s B2B express business by Mahindra Logistics. His tweet came in response to a Twitter user’s post about Rivigo’s valuation in 2019 – the year it became a unicorn – and the “incredible buy out of such an asset.”

Mahindra Logistics is buying Rivigo Services Private Limited’s B2B express business for Rs 225 crore.

Anand Mahindra had earlier tweeted about the acquisition, saying that he admired Rivigo’s startup business model. “Unfortunate that it encountered challenges. We’re buying just the Express business, but happy to keep its legacy alive,” he wrote, calling the deal “evidence that enormous value lies in the synergy between new age startups and large companies.”

His tweet had led to a discussion about startups and how sustainable their business models are.

Responding to Anand Mahindra’s tweet, one person said all a startup needs is an idea and some people who can fund it. “You are on an unsustainable business model but through investments as founders, you are making money. In the end, sell it, cash out and walk away,” the Twitter user wrote.

Another countered this argument by saying that no one made money as “Rivigo was valued 2000 crore 3 years back.”

In 2019, Rivigo became a unicorn valued at $1.05 billion. However, the next three years were challenging for the startup amid an economic slowdown.
Moneycontrol News
first published: Oct 4, 2022 05:26 pm