The summer of VC funding is here, and it’s cooling down. In the year After a stellar run in 2021, VC funding dried up significantly in the first half of 2022. 2021 saw investments of 3.8x compared to China’s 1.3x. (1) We used to hear news of VCs funding startups almost every day. Crazy fun It was one such startup that raised $3 million led by Matrix Partners India, 021 Capital and many others. (2) More on this company situation later, but first, let’s discuss what’s happening in VC funder circles.
2022 VC funding summer
The lens of danger is often distorted, attitudes become prejudiced, and Growth rather than profit, prescribes investment strategies when capital is abundant to pursue startups. It also creates a sense of FOMO, which refers to investors’ feelings of wanting to miss out on an opportunity and therefore investing more quickly. (3)
As venture deals piled up, capital infusions did not differentiate business quality, peer comparisons increased, tech-savvy youth were motivated to take advantage of opportunities, and more individuals left traditional businesses to create startups.
As a result, an incredible number of new businesses have been established. When you decide on the ever-increasing epidemic-digital pace of companies, you have the necessary ingredients to open trades. There was a huge demand for money, which led to rounds of funding, and startups demanded all-time high valuations.
How VCs suffered due to arbitrary funding
The water in the pool suddenly stopped flowing. The flow of capital in India-focused capital funds is restricted for various reasons, most of which are related to conditions at the international level, while some are local.
ProfitIt has never been done as a statistic, in the recent past Be the focus of extra attention. The quality of funded start-up companies and the quality of due diligence procedures followed by venture capital firms are now in question.
Concerns have been expressed about the founders’ desire to spend a lot of money to buy private wealth and their extravagant lifestyle, which has led to the deterioration of corporate governance standards.
But with the US quadrupling its profits a year, the global economy is mired in wars and invasions, and VCs are becoming more cautious. (4)
Many Indian startups failed and had to close their shutters. Krijo Fun was just one of the casualties among them.
Crejo Fun had to close
Crejo received funding from Matrix Partners. Amid the ongoing economic slowdown and funding drought, Indian startup Crejo Fun has emerged as the latest to shut down operations.
After extracurricular activities, the founder of an educational technology startup held a town hall meeting to inform employees of their decision to suspend business operations.
The employees announced that the founders of the company, Ankit Agarwal and Vikas Bansal, have decided to close the business due to lack of finances and further opening of schools.
The new company had between 170 and 200 employees on the payroll at any given time, including full-time and part-time employees. According to the sources, when schools started going back after the epidemic, there was a sharp drop in the enrollment of children for the platform.
Krijo is not a fun success story.
Bansal, co-founder, confirmed the new information. The organization stated that it has decided to stop its heavy activities. Although they had a lot of positive customer feedback and the schools continued to grow after they opened, they ran out of money.
They tried to raise more money for two months before closing, but were unsuccessful due to winter activity funding.
They have refunded all the money paid to customers who purchased their services.
They said that they have already upgraded 90 percent of their employees in other jobs and are working to establish the rest. They gave their July salaries to all their employees. In addition, they also have some intellectual property, which they were trying to sell to get back some of the investors’ money.
Even if the startup fails, there is an important lesson for all startups and VCs. People with ideas know exactly what to do. But it is also important to know what activities to avoid. Analyzing case studies helps us learn these things.
More about the Crejo Fun Foundation
Fun was founded around 2020 by IIM Bengaluru veterans Bansal and Agarwal. It was an online platform that offered extracurriculars to help young people discover what they like and want through creative education.
According to their website, the new venture offers a variety of classes including yoga, chess, dance, public speaking and arts and crafts. The prices for the various units were starting from Rs. 8,000 to Rs. 27,000.
Lessons learned from the failure of Crejo Fun
When the company started, the pandemic was in full force. People were still sedentary and moved to online learning modes. The founders of Crijo Fun and their investors thought of this as an opportunity to start up, but soon realized that it probably wasn’t as sustainable as they thought.
Indian parents trust offline sites more when restrictions are lifted. The temporary bubble of online growth for ed-tech companies soon burst.
The start-up company received $3 million in pre-seed funding from Matrix Partners and 021 Capital last year. Additionally, angel investors such as Kunal Shah, Sumer Nigam, Ankit Nagori and Sujeet Kumar participated in the investment round.
The edtech business made Rs. 19.3 million revenues in 21. During the same period, start-up costs totaled Rs. 1.1 crore, resulting in a loss of Rs. 93 defect! He was a non-starter. Not only Crejo Fun, but other similar ed-tech startups have faced the same fate.
The collapse of the edtech startup industry
Bengaluru Educational Technology Company Learn moreHe has been in business for two years and has decided to stop his business. (5) This decision was made, as in the case of Crejo Fun, due to the lack of funds and investors’ confidence in continuing education after the pandemic.
SuperLearn was a webinar-style after-school learning platform founded in 2020 by Bhatia and Ricky Gupta. The website catered to children aged 3 to 13 and offered a range of life skills, hobbies and extracurricular and co-operative activities.
“Not only VCs but even parents seem to have seen too much edtech. With massive funding in the space, Indian parents have fallen victim to various companies trying to sell some product or the other. Out of the ordinary, the first casualty was online classes. Seeing a drop in the number of children learning in our classrooms. We started. We shut the company down a few months before we even knew a single pillar. We returned whatever money we left to our investors,” says Kunal Bhatis, co-founder of SuperLearn, accurately describing the ed-tech scene in India. (5)
And soon, in June 2022, Udai Edtech Startup has ceased operations and laid off all its employees.
India’s unicorn ed-techs like BUJUS and UNACADEMY have also seen their losses widen year on year as companies lay off employees and pressure incumbents to become profitable.
Conclusion
His authority is clear. In addition to growth, the companies must also think about profitability. It is advisable to conduct a proper market research with the upcoming financing and avoid any temporary situations (like the covid epidemic) that may affect their business when they want to expand.
