2 Reasons Why Finomena Startup Failed
Nobody ever wants to fail in his or her life. In fact, everyone desires to be more successful, but that doesn’t happen all the time.
Finomena which was established by Riddhi Mittal and Abhishek Garg in 2015 as a platform to help Indian borrowers particularly those with low creditworthiness avail small loans for buying electronic devices such as laptops, smartphones etc. One could easily borrow the amount that ranged from 3000 to 300000 Indian Rupees.
Riddhi Mittal, a Stanford University alumni and Abhishek Garg, an IIT Delhi graduate had met through a mutual friend. They began to conversate in a causal way about the issue of non-availability of small loans to majority of Indians with low credit score. Eventually, they decided to solve this problem by launching a platform that would give Indian users the access to small ticket loans.
The progress of Finomena was well underway. However, suddenly in December month of 2017, media outlets aired the news that Finomena has shutdown its operations. The fintech startup, unfortunately, died just after two years. But, there must be one or some reasons that caused Finomena to die. Well, after a half day research, i came to know that the following two reasons was responsible for the death of Finomena:
High cash burn
Cash burn, a term that refers to the use of money from cash reserves for meeting the expenditure requirements of a startup, generally on a monthly basis. It is normal to burn cash to meet the monthly startup expenses. However, when a startup burns more cash than needed, its reserves start to dry up. When you don’t have enough reserves to carry on your operations, you are left out with no choice other than raising more funds.
Finomena was caught in the similar situation. The startup had no reserves left for working capital. Though the startup approached investors for funding, but unfortunately it didn’t find any investor who could show interest. We needed working capital badly to keep going on as a result of high cash burn, however, there was no one out there to help us, said Finomena co-founder Abhishek Garg.
The second reason that caused delay in the progress of Finomena was the high competition from rival companies like ZestMoney, Cashcare etc. Unfortunately, Fenomina didn’t have a strategy that could differentiate its services from those of its competitors.
Startup owners are advised to have as much control as possible while burning cash reserves and develop a unique strategy of differentiation.