A quick Google search of the word ‘Deadpool’ will throw up several results of the Ryan-Reynolds superhero movie. However, a deeper search will include links to startups that are struggling to stay afloat at the deep end of the business pool.
As the name suggests, deadpool indicates start-ups that aren't doing well and are in the throes of death. The reasons for their imminent or definite demise could vary—it could be difficulty raising funding, rifts between founders, non-compliance with regulatory practices, and the list goes on. But there is a reason why deadpool start-ups are suddenly in the news.
According to the latest report by research group Tracxn, 1,514 start-ups ended up in the ‘deadpool’ in India last year. This is a drop of 73% from 5,640 start-ups in the previous year. As of 2024, only 1 Indian start-up was ‘deadpool’ in the country, a number that stood at a whopping 4,424 in 2021.
Some start-ups that have publicly declared that they are deadpool include Zipgo, Niki, GramFactory, Crejo.Fun, FoodyBuddy, CherryTin, FrontRow, and Crater.Club.
In an earlier interview with Outlook Start-up, Dhianu Das, co-founder of Agility Ventures, mentioned that the reason why companies end up in this dubious state is because they often lack a definite strategy. At times, entrepreneurs raise more money than they expect. Das further said, “They generate revenue, sometimes breaking even, but not enough to generate a return for investors.”
While highlighting the trend in deadpool start-ups, in an earlier interview with Outlook Start-up, Pratip Mazumdar, partner at Inflexor Ventures, said, “When capital is abundant and easy, start-ups raise funding without working out if there is a need for it. This bloated cash balance incentivizes some companies to engage in unsustainable business models.”
He mentioned that once the funding is done, these start-ups cannot sustain their business operations. He said, “Quite a few are expected to face challenging times, especially in sectors such as edtech, virtual events, and the Kirana-tech space.”
Pressure is another thing that affects start-up founders. According to Mazumdar this leads to the valuations of many start-ups running ahead of their business fundamentals. "Founders who could not achieve a clear product-market fit (PMF) incurred bad capital allocation decisions exhibited by unrealistic spending to drive short-term customer acquisition, incurring unnecessary costs in terms of operations, headcount, and resources. When the markets inverted, some found themselves without enough runway," he said.
Tracking The Dead
In 2016, Bengaluru-based Tracxn started compiling a list of start-ups that closed in the past 18 months due to a lack of funds or an inability to make a profit. These earned them the moniker of deadpool start-ups.
In an interview with Hindu Business, Abhishek Goyal, founder of Tracxn, said that the decision to create a 'deadpool' list came as a response to requests from corporate firms and venture capital firms. They intended to either 'acqui-hire' talent from struggling companies or assist them in developing products like their existing ones. Tracxn monitored companies founded after 2011 during the early stages of funding activity for this activity.
Skirting the deadpool comes positive news for the country’s start-up ecosystem, underscoring how it has matured over the past few years.
Founders are shunning vanity metrics like inflated valuations and are leveraging resources like data-driven insights that will help them achieve unit economics on the back of robust business models. Moreover, they are leaning on the experience of their peers and professional consultants to better navigate emerging entrepreneurship.
