How Failed Start-Ups Are Handling Investor Money

Investmint, a signal-based trading startup, ceased operations due to business model issues. Its aim is to return investor capital if acquisition plans fail. Several start-ups have returned the capital to investors after their failures; read more here. 
How Failed Start-Ups Are Handling Investor Money

Investment, which is a signal-based trading and investment start-up, has decided to halt its services. This is because the company couldn’t come up with a reliable business model, as per a report by Entrackr. In October 2022, the company raised $2 million in a seed round led by Nexus Venture Partners, with participation from other angel investors. 

While the company had decent traction with substantial money left from the last fundraise, the team reportedly couldn’t translate it into monetization. Founded in February 2022 by Aakash Goel and Mohit Chitlangia, Investmint is used to assist users in arriving at investment decisions and managing wealth with data-backed signals.

Now, the company is looking for acquisition opportunities with wealth management companies. If the acquisition talks don’t materialize, the start-up will reportedly return the capital to its investors. However, today the discussion isn’t about investing. It’s about start-ups that fail, and some of them return the money back to the investors. 

Failure of start-ups

A 2017 study in collaboration between the IBM Institute for Business Value and Oxford Economics highlights that 90 per cent of start-ups fail in India. Even after having a viable model and good technology, poor risk management is one of the reasons for start-ups to fail, said industrialist Anand Mahindra in a post on X (formerly Twitter). 

Additionally, poor customer service, legal disputes, and financial mismanagement are some of the other reasons for the failure of start-ups. Some Indian start-ups that shut down in 2023 include Bluepad, Slash, Wetrade, Anar, Belora Cosmetics, Fipola, and others. 

B2B networking platform Anar shut down in November 2023. The start-up's founder, Nishank Jain, had said that they would return the money to the investors. Jain explained that the decision to shut down the platform was due to a low retention rate, insufficient value creation, and an inability to adequately address the needs of sellers. 

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Similarly, another start-up, Bluepad, aggregated content in vernacular languages for Indian users. Despite raising Rs 1.8 crore in a pre-seed round in 2021, Bluepad shut down in April 2023 due to a lack of strong market demand and reliable long-term monetization. As per Inc42, the company’s co-founder, Sanjyot Bhosale, said that they had returned the remaining money to the investors. 

Returning money to investors

After a failure to find traction in their original business plans, fashion start-ups Fashinza and Virgio decided to return most of the capital that was raised by them to their investors, as per a report by the Economic Times. Both start-ups are backed by investors such as Accel, Prosus Ventures, Alpha Wave, and others. 

Additionally, in April this year, AI-driven software startup Nintee, founded by Paras Chopra, shut down. Chopra stated that most of the funds raised by Nintee remain unused and will be returned to investors in the coming weeks. Chopra is also the founder of Wingify, a New Delhi-based website testing software provider that has been bootstrapped since its inception. No investor wants their start-ups to fail.

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However, if a start-up is failing and decides to return the money to the respective investor, that seems like a way forward for the latter. Additionally, another aspect of returning money to investors is acceptance. Acceptance for the investor that their investment wasn’t worthy and acceptance for the start-up that they couldn’t sustain, as per Ken.

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