As 2016 draws to a close, Flipkart, the country’s most valuable internet start-up, is courting the dividing line between success and failure. It once commanded an eye-popping $15 billion valuation, but repeated markdowns threaten to push it down. Marquee investors like Morgan Stanley and Vanguard are lowering the value of their holdings, as India’s e-commerce poster boy, continues to burn cash and book losses, with no sign of profitability.

Flipkart is taking comfort citing lower valuations as just theoretical, but for outsiders, the move comes disappointingly ahead of its plans to hit the market. Sadly, other unicorns like Ola and Snapdeal are in the same boat, even as competition from bitter rivals Uber and Amazon is fierce, while promising ventures like Peppertap and Zomato sank without a trace. Investors are partly responsible for this. In the mad rush to invest, viability was overlooked.

Incidentally, this is the case not just in India, but also in Silicon Valley, the revered start-up hub. Take for instance, Theranos, that promised medical tests with just a drop of blood. The who’s who of investors flocked to it, making its founder Elizabeth Holmes the world’s youngest self-made female billionaire on the Forbes list, only to be dethroned for misleading investors. Her net worth sunk, while the firm is now facing federal investigations.

For Indian start-ups, lower valuations signal correction amid concerns over an impending bubble burst. Driven by market sentiment, entrepreneurs are going back to the drawing board to rationalise costs and discover the path to profitability. With start-ups flush with funds and daily cash burn rates steep, investors seem to have pushed the pause button. According to CB Insights, funding in the second quarter plunged to $583 million from nearly $3 billion in late 2015. This is not to say it’s all downhill for Indian startups. Failures are equally integral to success and if what goes up comes down, the same holds true for the opposite.

Source: The New Indian Express