Nearly 25% of the tech startups launched in 2012 have shut shop; what's ailing the ecosystem?

10 Dec, 2012

Nearly a quarter of the 379 technology products companies that went live in 2012, were shut down, mostly in Bangalore, primarily because they failed to raise funds and collect dues from their customers, according to a study compiled by the startup incubator Microsoft Accelerator India. A total of 87 startups closed shop in CY2012 till date.

The study also shows that the number of startup launches has come down from 519 in 2011 to 379 this year.

Bangalore registered the highest number of startups launches over the past five years, recording 591 new technology companies, followed by Delhi-NCR with 237 and Chennai with 203 launches. But the IT hub of India also saw the highest number closures, with around 70 shutdowns, followed by Delhi-NCR with 35 and Mumbai with 25 company closures.

The study was compiled, based on face-to-face interactions with the founders of 65 per cent of the startups and also from secondary data. However, the closure data had been entirely based on face-to-face interactions.

The study also reveals that the e-commerce segment accounted for 33 per cent of all new tech entities in 2012, followed by the B2B vertical (24 per cent) and consumer internet segment (12 per cent). The mobile apps segment accounted for 10 per cent while SaaS companies accounted for 8 per cent of the startups. Other segments accounted for 13 per cent of the new tech startups.

Among the startups that shut down in 2011, around 49 per cent were only six months-to-a-year-old while 31 were less than six-month-old. As much as 20 per cent of these were one or 2-year-old companies. Only 9 per cent of the first-time-failed entrepreneurs launched yet another company while 61 per cent of the first-time-failed entrepreneurs started working for larger companies. The remaining 30 per cent started working for other startups.

(Edited by Sanghamitra Mandal)