Online grocery store, Shopveg shuts shop due to lack of funds [Expectation mismatch with the accelerator?], one of the first online fruits-vegetables and groceries stores in Mumbai, (read our previous coverage), shut shop earlier this month for lack of funds.

To give you a quick recap of their journey so far, the startup was part of VentureNursery accelerator program and as per the founders of ShopVeg, the accelerator had committed to provide seed money but weeks after the pitch, the investor associated with the accelerator backed out citing reasons that the total amount requested fell short while gathering from the investors. Three weeks after the pitch day, they were also told that they should rather approach private equity players without raising a seed round (another startup, Oravel who was also part of the same program recently raised funding from VentureNursery angel investors.]

A case of expectation mismatch?

We asked VentureNursery for more inputs, but we believe that this could be a case of expectation mismatch. The startup probably was expecting a sureshot funding, which accelerators do not commit to (we have reached out to VentureNursery for official statement on this issue, which they will share later). Having said that, most of the accelerators have been selling ‘get funded’ part as part of their pitch to startups.

VentureNursery’s Apoorva Sharma mentions that they are just an accelerator and provide mentorship. All companies under the program are given a chance to meet angels and put their business plan forward, and are never committed an investment.

ShopVeg: Current status

The ShopVeg website is still operational. However, after you create an order and proceed to checkout, it tells you that you have not chosen a delivery slot though there is no option to chose one. A notice displayed on the same page says that the company has paused operations for some time.

This is perhaps an attempt to retain at least a few of their existing customers hoping they will be back in the game soon. The ShopVeg team was working on a complementary product that would have changed the way people shop online, but looks like those plans too have to be stalled with this.

Anannya met with a different experience though. She was able to place an order and checkout, but received an email saying her order has been cancelled, with no reference to pausing operations:

The food and grocery market in India is estimated to be around $343 billion in size out of which a large segment is unorganized (read: Report: The Online Grocery market in India). One major challenge in running such an operation is the ability to maintain quality of goods and the cost of logistics. One obviously needs very deep pockets. To expand in each city, some online grocery retailers have had to spend around $5 million.

Startups: Beyond Product market fit

Beyond product market fit, there are several other reasons startups fail, lack of funds being one of them. Being low on capital is one thing, but being promised by an investor and the startup having spent time, effort, and money, and then the investor backing out certainly discourages startups.

Startups, on the other hand, should not bank on accelerators for funding. Accelerators can, well, accelerate the process of getting funded but cannot promise one. I can recall a very famous dialog from The Matrix that suits it:

I can only show you the door. You’re the one that has to walk through it.

Moreover, fund raising is like a sales process – shit happens and you don’t call it done unless money reaches the bank. But then, totally depending on one prospect is a huge risk as well.

What are your thoughts on this whole issue? Do Accelerators need to play down the funding part?

[With inputs from Anannya Debnath.]

Also see: THE list of Accelerators and Incubators in India.

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