India’s dot-com bubble bursts, freeing up cheap talent

India's big start-up boom is now running out of steam and a company called Tracxn Technologies is compiling a 'deadpool' list of fading or dead start-ups.

A resident receives a delivery from a Gojavas parcel agency staff, which handles Jabong products in Ghaziabad, India. Pradeep Gaur / Mint via Getty Images

In the past few years, India experienced its biggest-ever start-up boom, with entrepreneurs founding thousands of companies. Now the country is getting its own version of a dot-com bust.

In the latest sign of the downturn, a Bangalore-based company has put together India’s first Deadpool list, a catalogue of dead or dying start-ups similar to a US website created in the aftermath of the internet bubble. The US site, set up in 2000, was a parody of Fast Company and chronicled the dot-com collapse. Also known as the dot-com deadpool, it shut down in 2007.

The India list, compiled by Tracxn Technologies, identifies nearly 800 fading or dead start-ups in almost every segment of technology. Investors, recruiters and larger companies looking to pick up talent or technology assets on the cheap pay a subscription fee to Tracxn for the list and other research. The site isn’t available to the general public. “The Deadpool list is a sign of the times,” says Neha Singh, a co-founder of Tracxn.

The US site, meanwhile, gave people a forum for discussion as venture money dried up and start-ups crashed. Laid-off employees skewered their bosses for incompetence and selfishness. The site’s founder, Philip “Pud” Kaplan, fuelled the conversation with black humour and merciless corporate obituaries.

India is now seeing venture investments slide after surging to a record US$8.9 billion last year, according to the research company Preqin. The pace dropped to $2.7bn in the first two quarters, the London firm says.

The boom pushed the number of technology-enabled start-ups in India to more than 19,000, according to the Ministry of Finance. The Deadpool list shows that, besides the innovative players, there are scores of copycat companies. “You can’t be the 50th online laundry operation and hope for success,” says Ravi Gururaj, the founder of QikPod, a Bangalore-based parcel locker start-up backed by Accel Partners and Foxconn Technology Group.

Tracxn identifies candidates for the Deadpool by tracking multiple metrics including shrinking team size, suspended operations and declines in user traffic. The list was introduced a couple of months ago and is growing. “There are the dead and then there are the walking dead,” says Mr Gururaj.

This month, the e-commerce portal AskMe said it would suspend operations, leaving 4,000 scrambling for jobs. The site’s parent, GETIT Infoservices, had raised about $300 million from investors, including Malaysia’s Astro Entertainment Networks, but it hit a cash crunch and hasn’t been able to raise additional capital. Kiran Murthi, the chief executive, didn’t respond to requests for comment.

PepperTap, a hyper-local grocery started in Gurgaon, got more than $50m in funding and expanded to nine Indian cities. But as funds dried up, it cut jobs and then shut down in May, less than two years after its launch. Its two co-founders did not respond to requests for comment.

Sahil Baghla raised $1.1m for his start-up Bluegape from investors including Times Internet, the digital arm of India’s largest media company, the Times of India Group. Last year, the start-up unveiled a mobile content platform app called Murmur that quickly gained popularity. Revenue was a challenge, however, and it closed earlier this year.

Even for those that have gained significant market share, success is not guaranteed. The India fashion site Jabong.com raised money from Rocket Internet and AB Kinnevik and gained enough traction for a valuation near $1bn. But with the downturn, Jabong was squeezed and sold to the country’s largest online retailer, Flipkart Online Services, for a mere $70m. People in tech circles have begun to use the verb “jabonged”, meaning, to sell your start-up far below its peak valuation.

Girish Mathrubootham, the founder and chief executive of cloud-based customer service provider Freshdesk, says he sees the Deadpool list as an opportunity to acquire start-ups and technologies at reasonable prices. “We have made six acquisitions and are just initiating the process for our seventh,” says Chennai-based Mr Mathrubootham. “Dying and regenerating is healthy for any ecosystem.”

The list is also fertile ground for hard-to-find talent. Kiran Karthikeyan, a vice president at a Hyderabad-based start-up called Xploree, says there are benefits to hiring from dying companies. “Those who’ve worked in failed start-ups are risk-takers. They are invaluable additions to a start-up team,” he says.

“In Silicon Valley, failure is a celebrated thing,” says Ms Singh, an alumnus of Stanford University who worked with Sequoia Capital before setting up Tracxn. “Risk-taking is newly becoming an acceptable choice in India.”

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