"The value of an idea lies in the using of it." - Thomas Edison
While I have written about a few successful firms, the economy is also littered with several failures. In this article, we look at some of the much heralded firms that had great ideas but yet failed and perforce had to shut shop due to the 3 Cs (Capital, Culture and Competition).
Finance is the lifeblood of a business and it is a necessary condition for a business’s success as is demonstrated by the following case:
This firm was founded by Mr Srikanth and Mr Narsimha who sought to create a platform that aimed to link manufacturers and transportation services by creating ways and means of comparing and contrasting prices and services. This was considered revolutionary when the firm was conceived leading to greater fanfare. The company was initially able to raise funding of Rs 1 Crore but subsequently could not raise further funding leading to its demise.
The failure of Ezytruk shows that a company may have the right business model, a pragmatic idea and a visionary team but without capital it simply cannot succeed. In this specific case, Ezytruk was able to raise seed capital but it faltered subsequently. The logistics sector itself is red hot as there are many players who are actively raising funding but Ezytruk’s still could not do so, thus leading to its closure.
It is critical that the senior management team create a culture that is devoid of conflict and if it fails to do so, then one will suffer the fate of the following enterprise:
This Bengaluru-based company was established by Mr Mohit Kalra in 2014. Coinsecure went to earn the distinction of becoming one of India’s fastest growing online bitcoin exchange platforms. But ironically (given its name), Coinsecure became insecure as it was exposed to a hack that led to the misappropriation of BTC 438 (equivalent to $3.3 Million) forcing its closure.
Soon after the incident a culture clash erupted within the company resulting in its implosion. Even though this incident transpired in 2018, security issues continue to afflict the bitcoin industry even today. Moreover, this unfortunate incident reveals how senior management clashes within the firm can lead to a messy situation, which undermines the very existence of the company.
A firm might have a great idea that can generate sufficient demand but if the competition is brutal (as it is in India), then the establishment will implode as shown by the following case:
This food delivery organization was set up in 2016 by Mr H Garg, Mr R Wadhwa, Mr R Verma and Mr Y Garg in Noida. This firm claimed that its online subscription model would enable it to deliver 36,000 orders on a monthly basis. A founder purportedly declared that their delivery fees were a whopping 50% less on a comparative basis relative to rivals. Despite all these claims, Mr Needs was eventually forced to shut down operations.
Though no reason was given for this unfortunate step, it is believed that the intense rivalry in this sector particularly the presence of Big Basket may have precipitated Mr Needs’s closure. This failure is an illustration of how competitive pressures may hasten the demise of firms that nevertheless enjoy strong demand for its offerings.
Capital, culture and competition are the three critical factors (based on the aforesaid cases), which determine a firm’s destiny. It could be argued that capital is now abundant but the fact remains that after the next market correction occurs such money may not be freely available.
Moreover, the issue of culture continues to be of paramount importance and firms do need to ensure that integrity and dignity are maintained while still achieving growth and profitability. Finally, in an intensely competitive marketplace it becomes imperative that firms learn to position themselves distinctively so that they can compete and indeed win the race.
The absence of one or more of these ingredients in the recipe will result in disaster!