Anand Mahindra explains in a tweet why 90% of startups fail

Industrialist Anand Mahindra in a tweet said that in a country where more than 90% of all startups fail within the first five years, many had no chance of surviving at all in the first place.

“Poor risk management and one-off circumstances are also to blame for the failure of many startups,” Mahindra tweeted while adding that despite these troubles, many struggling startups have viable business models and “good tech” on their side. “That grey zone is a fertile field for large companies to plough,” he wrote.

Mahindra Logistics has recently acquired the troubled logistics tech unicorn Rivigo. Mahindra Logistics is buying Rivigo Services Private Limited’s B2B express business for Rs 225 crore.

Anand Mahindra’s claim is being backed by a 2017 IBM-sponsored study which stated that as many as 90 percent of Indian startups fail in the first five years.

In talking about the “grey zone for large companies to plough,” the chairman of Mahindra Group was likely referring to the acquisition of startup Rivigo’s B2B express business by Mahindra Logistics. His tweet came as a response to a Twitter user’s post about Rivigo’s valuation in 2019 – the year it became a unicorn – and the “incredible buy out of such an asset.”

Anand Mahindra had earlier tweeted about the acquisition. He said that he admired Rivigo’s startup business model. “Unfortunate that it encountered challenges. We’re buying just the Express business, but happy to keep its legacy alive,” he wrote, calling the deal “evidence that enormous value lies in the synergy between new age startups and large companies.”

His tweet had led to a discussion about startups and how sustainable their business models are.

Responding to Anand Mahindra’s tweet, one person said all a startup needs is an idea and some people who can fund it. “You are on an unsustainable business model but through investments as founders, you are making money. In the end, sell it, cash out and walk away,” the Twitter user wrote.

Rivigo became a unicorn in 2019 when it was valued at $1.05 billion. However, the next three years were challenging for the startup amid an economic slowdown.