How Investors Reshaped the Startup Landscape in 2023

By Sunil Sonkar
2 Min Read
How Investors Reshaped the Startup Landscape in 2023

In 2023, investors in the startup world became more selective, leading to significant consequences for many startups. A total of 34,848 startups faced closure or were on the brink, a considerable increase from 18,049 in 2022, out of the 100,000 registered startups in India.

Surprisingly, even companies with millions from top investors had to shut down. Reasons varied from an ever-changing regulatory scene to economic challenges, failure to find the right market fit and financial wrongdoing.

ZestMoney, once valued at $450 million, faced a notable shutdown in 2023. Despite raising over $130 million, an acquisition deal falling through led to their downfall. ZestMoney 2.0, their turnaround plan, failed to take off due to increased scrutiny from the Reserve Bank of India (RBI) on buy now pay later (BNPL) businesses.

Gaming startups faced challenges too when a sudden 28% Goods and Service Tax (GST) hit online real money gaming in September. Companies like Quizy, MPL-backed Striker and Fantok closed down and caused layoffs. Pillow, a crypto investing platform, shut down due to challenging regulatory hurdles.

Anar, a B2B startup backed by Accel and Elevation, shut down in November due to constant changes in their business model and low customer retention. FrontRow, an edtech startup, returned unused capital to investors, realizing their model didn’t work as expected.

GoMechanic, backed with over $50 million, faced a downfall due to overstated revenues and fund mismanagement. The company admitted to errors in judgment and financial reporting. This incident led to investors demanding stricter due diligence processes. Mojocare, another healthcare startup, faced a similar fate, overstating revenues to meet growth targets, prompting investors to demand returns.

Investors predict more shutdowns in 2024, but with capital becoming harder to access, the hope is that the quality of companies will improve.

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